Draft to increase BAYC collateral rates

Draft to increase BAYC collateral rates

Simple Summary

It is proposed to increase the collateral ratio for Bored Ape Yacht Club (BAYC) collateral from 40% to 50%.


This proposal includes the following elements:

  1. Increasing the collateralization rate of BAYC can improve the utilization of depositors’ funds.

  2. The relationship between collateral rates and liquidation auctions.

  3. The effect of increasing collateral rates on BendDAO?


BendDAO is a peer-to-pool model NFT lending platform, and the Protocol uses the over-collateralization method to provide services to both lenders and borrowers.

At the initial stage of the Protocol’s creation, in order to correspond to the systematic risk of NFT, so the Protocol set the collateralization rate of NFT at 30-40%, i.e., the collateral value of 100E NFT can borrow 30-40 ETH.

Such a collateral rate setting served to stabilize the protocol in the early stages of development, but a collateral rate of 30%-40% also resulted in relatively low asset utilization for both lenders and borrowers.

As the development of the NFT market becomes more and more mature, the stability of blue-chip NFT is also increasing, so I propose to increase the collateral rate of the leading NFT project BAYC from the original 40% to 50%, the purpose of doing so is to further improve the asset utilization rate of both lenders and borrowers, within the scope of risk control, to provide maximum benefits for both lenders and borrowers.

Risk Analysis

Let’s look at the floor price of BAYC in the last 3 months, the highest price was July 10, 98E, and the lowest price was August 19, 62.89E.

Based on Health Factor = (Floor Price * Liquidation Threshold) / Debt with Interests, we can calculate.
80% Liquidation Threshold remains unchanged, and the impact of different collateralization rates on the liquidation trigger when collateralized at the highest price of 98E.

  1. 40%:borrowed 98E X 40% = 39.2E, liquidation price: 39.2E/80% = 49.00E.
  2. 50%:borrowed 98E X 50% = 49.0E, liquidation price: 49.0E/80% = 61.25E.
  3. 60%:borrowed 98E X 60% = 58.8E, liquidation price: 58.8E/80% = 73.50E.
  4. 70%:borrowed 98E X 70% = 68.6E, liquidation price: 68.6E/80% = 85.75E.
  5. 80%:borrowed 98E X 80% = 78.4E, liquidation price: 78.4E/80% = 98.00E.

Different collateral ratios affect the price at which liquidation is triggered. When the collateral ratio reaches 80%, the liquidation price is the current price and the collateral will be liquidated immediately after collateral.

The lower the collateral ratio, the longer the liquidation trigger period, and the higher the collateral ratio, the shorter the liquidation trigger period.

The lowest price in the past three months was 62.89E, and neither 40% nor 50% collateral ratio triggered liquidation, which shows that the risk of 50% collateral ratio is not much different from 40%.

The liquidation trigger price for a 60% collateral rate is 73.5E, meaning that a 25% drop in the price at the time of the collateral will trigger liquidation. After the collateralization on July 10, the liquidation will be triggered on August 17 at a floor price of 71.69E, with a 37-day period.

The liquidation trigger price for a 70% collateral rate is 85.75E, which means that a 12.5% drop in price at the time of the collateral will trigger liquidation. A collateralization on July 10 will trigger liquidation at a floor price of 85E on July 23. If collateralized on August 16 at a floor price of 75.5E, liquidation will be triggered on August 19 at a floor price of 62.89E for a period of 3 days.

As you can see, a collateral ratio that is too high can lead to a mortgagor on the verge of liquidation. 60% is, relatively speaking, in a relatively safe range, and 50% is not much different from 40%.

Effect to BendDAO

Increasing the collateralization rate of BAYC from 40% to 50% would increase the asset utilization of BAYC borrowers in BendDAO by 25%, and the funding utilization of lenders would increase accordingly.
Subsequently, we can also evaluate other blue chip NFTs to determine if there is room to increase the collateralization rate.
This will have a very positive effect on the whole BendDAO ecosystem and the revenue of the protocol will go to the next level.


The above is a draft for community members to discuss. After the discussion forms a consensus, I will prepare a formal proposal and then submit it to snapshot for voting.

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I am going to ask more people to join this discussion, thanks for your proposal.

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I think this is a great suggestion, after reading your analysis I completely agree …

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Completely agree with this proposal and feel like we should put this to a vote. Feel like we should not try to restrict people from taking maximum amount of loan value that they feel comfortable with. Personally feel that all the current collateralization rates are too low and would love to see this increased across the board. We are leaving money on the table and are restricting users of the platform to take the amount of collateralization they want.

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In a bear market, increase collateral rates is not a wise choice.
I remember there are some professionals in the community who can give better suggestions @ Alex_Cenit

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Some reference info from nftfi history of BAYC loans between 2022.4 ~ 2022.8

All loan number : 275
Average LTV: 65.17%
Defaulted loan number: 9
Defaulted rate: 3.2%
Average repaid Loan period: 20.4 days

From the overall view of market, it seems the defaulted rate is acceptable with up to 60% LTV for BAYC.



Even though the prices seem to have stabilized it is important to compare how many loans vs sales there are currently in the market.

The amount sales lately have been ~ 70 sales last week and 800 Listed.

Meanwhile the amount of active loans (aproximate numbers):
~ 306 loans in BendDao
~ 13 in Jpegd
~ 5 wing finance
~ 30 loans taken nftfi in the last month
and other players

Being honest, it is hard to make this kind of assessment with out running proper simulations to really measure potential risks, but the amount of debt that there is over this collection is high enough to cause us some troubles. Especially when it is ~x5 times the amount of weekly sales and being a bear market.

My personal understanding of collateralization rates is that:

  • NFT collateralization rate does not affect the success rate of liquidation.

  • The parameter that affects the liquidation success rate is the liquidation trigger threshold, i.e.: the space between the liquidation price and the floor price.

  • NFT collateral rate will affect the liquidation trigger period.
    too high collateral rate,high asset utilization, but will lead to premature liquidation trigger;
    too low collateral rate, low capital utilization, will lead to liquidation will not trigger,
    both cases will affect the user experience.

Sales in marketplace is quite different from bluechips in BendDAO, collection offer for thoese bluechips is more than 80% of the foorprice which is the thershold of liquidation in BendDAO.

And those NFTs in BendDAO better than the floorprice? we don’t need to worry about liquidity for them.

It’s quite different risk model for BendDAO and defi like aave, and in BendDAO, the first bidder get max(0.05 * debt, 0.2eth) as return if the NFT holder repay the debt in 24 hours.

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first bid reward(0.05 * debt )獎勵過高,31個first bid 債務都是40ETH以上,投機者只要掌握時間點擊多次(31×40=1240 1240×0.05=62ETH 足夠多數量的藍籌能觸發清算就有巨大的利益)就可以取得first bid 的獎勵,對於擁有BAYC籌碼多的貪婪投機者容易誘發操縱市場,因為 first bid 成本很低只要足夠數量的ETH可以重複的點擊first bid ,但是高於債務且“標得”藍籌NFT錢包裡的ETH只能使用一次

you know what, Frankelin lost money in this mass liquidation. First bid bonus happened only if the NFT holder repay half of the debt to keep it.

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In this incident, in addition to paying off half of my debts, I also paid an extra 2.5449ETH at the same time
(23.0049-20.46(half debt)=2.5449ETH)
how to distribute after 2.5449ETH entering BendDAO?

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It went to the first bidder of your ape, BendDAO benefits 0 from the auctions.

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bendDAO has no yield here! What a bad deal