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P2P NFT Lending Introduction

Kyoko's P2P NFT lending testnet platform was officially released in March 2023

Kyoko aims to become the first decentralized, dual-rate NFT lending protocol that supports multiple NFT collections, providing a comprehensive solution for liquidity issues in the NFT market.
Users can participate in the protocol either as depositors or borrowers. Depositors provide ETH liquidity to the market and earn passive income, while borrowers can obtain loans by using NFTs as collateral.
Kyoko's key differentiator is that it offers lending pools for a wide range of NFT collections, rather than limiting itself to blue-chip NFT projects. This ensures greater inclusivity for NFT owners, making the platform accessible to a broader range of participants.
To ensure the safety and security of its users, Kyoko Protocol will undergo audits and security checks. The platform is completely open source, which means that anyone can interact with it using a user interface client, API, or directly with the smart contracts on the Ethereum network. This allows for the development of third-party services and applications to interact with the protocol, enriching the overall user experience.
Kyoko welcomes everyone to join its community Discord server, where both the team and members of the community are available to provide assistance and support in understanding and utilizing the platform.

What Problem Is Kyoko Solving?

Kyoko has identified three significant challenges facing NFT financialization protocols:
  • Lack of scalability: Currently, only blue-chip NFT collections that have achieved strong price consensus are accepted as collateral. This limits the potential pool of eligible borrowers and the overall scalability of NFT lending platforms.
  • Lack of market liquidity: Long-tail or niche NFT assets continue to be impaired by poor liquidity, resulting in unfulfilled demand for lending services in the NFT market. This situation presents a significant obstacle for NFT owners seeking to access liquidity through lending protocols.
  • Capital inefficiency for NFT collections: Many NFT collections have low trading volumes and demand, leading to poor price discovery, difficulty in fair asset valuation, and muted transaction activity across the market. These factors present challenges for NFT owners looking to leverage their assets for liquidity.

What Is the Kyoko Solution?

To address these challenges, Kyoko has implemented the following solutions:
  • Expand inclusivity: Kyoko allows for a wider range of NFT collections to participate in the lending protocol, providing greater inclusivity and scalability. This approach ensures that the platform is not limited to blue-chip collections and can cater to a broader range of NFT owners.
  • Improve lending risk control: Kyoko's lending risk control model employs two key risk variables – time-based liquidation and health score liquidation – to minimize lending risk exposure. The time-based liquidation system sets a time limit for borrowers to repay their loans, after which the collateral is automatically liquidated. The health score liquidation system evaluates the overall health of a borrower's portfolio and may trigger liquidation in the event of a decline in portfolio health. This approach helps to construct an effective and diversified risk evaluation mechanism, providing a safer and more reliable lending platform for NFT owners.
By expanding inclusivity and improving lending risk control, Kyoko is able to provide greater accessibility, liquidity, and scalability for the NFT market. This approach helps to overcome the challenges currently facing NFT financialization protocols, making it easier for NFT owners to leverage their assets for liquidity.

How to Use the Kyoko Protocol?

To interact with Kyoko Protocol, you can choose to participate either as a lender or a borrower. As a lender, you can deposit your ETH into the platform and earn passive income based on the market borrowing demand. This is a simple and straightforward way to interact with the protocol.
As a borrower, you can deposit multiple types of NFTs, including blue-chip and emerging NFT collections, as collateral to borrow ETH. This enables you to unlock the value of your NFT assets without having to sell them. The amount of ETH you can borrow is based on the value of your NFT assets and the loan-to-value ratio of the lending pool.
It's important to note that interacting with the protocol requires transaction fees for Ethereum Blockchain usage. These fees depend on the network status and complexity of the transaction. It's recommended to factor in these fees when using the platform, as they can vary depending on the level of network congestion and the gas fees set by the user.

What Are the Risks of Using Kyoko's Protocol?

It's important to acknowledge that no platform can be considered entirely risk-free, and Kyoko is no exception. The risks associated with the Kyoko platform include smart contract risk (the risk of a bug within the protocol code) and liquidation risk (the risk of collateral liquidation).
However, every possible step has been taken to minimize the risks as much as possible. The Kyoko protocol code is public and open source and independent security audits have been conducted by third-party experts to identify and resolve any vulnerabilities. Additionally, the lending risk control model employed by Kyoko aims to minimize the risk of liquidation by setting a time limit for loan repayment and evaluating the overall health of a borrower's portfolio.
While there are inherent risks associated with any lending platform, Kyoko has taken significant steps to minimize these risks through open-source protocol code and a carefully designed lending risk control model. It is important for users to conduct their own research and fully understand the risks before interacting with the platform.

Scams and Phishing Attempts

It is important to be aware that Kyoko does not have any downloadable mobile application available. If you come across a mobile app claiming to be Kyoko, it is likely a scam and should be avoided.
It's also worth noting that Kyoko will never ask for your seed passphrase. Seed phrases are private keys that provide access to your crypto wallet, and should be kept confidential at all times. If you are asked for your seed passphrase, it is likely a scam and you should not provide this information.
Kyoko also never advertises on any social media or search engine. If you come across any advertisements claiming to be from Kyoko on these platforms, it is likely a scam or phishing attempt.