Hello AAVE Community! OpenSky Finance is a decentralized liquidity protocol for NFT lending that builds on top of the AAVE ecosystem. We are applying DeFi Money Legos to financialize the NFT market to unlock the massive value waiting to be put to work. For example, we recently received a grant from Rarible DAO to integrate their Indexer and Timed Auction features into our dApp. We would like to apply for an AAVE Grants DAO grant to help us fully integrate with AAVE’s money market as a core component of our NFT lending dApp.
We have already made significant progress on building our dApp and have a website and working product on the Rinkeby testnet (https://test.app.opensky.finance).
Here are the milestones for the project if our grant application for 15,000 USDT or AAVE equivalent is accepted:
Milestones 1: Swapping money market from previous smart contracts with Compound to new AAVE protocol smart contracts
Overview of how OpenSky lending and liquidation works:
DeFi users can search for their favorite NFT market(s) on OpenSky and join by depositing their crypto into the selected pool. If they can’t find a suitable NFT to back, they can create their own lending pool in permissionless fashion. The crypto will be passed directly through to AAVE where it will generate passive income for the DeFi users even if the NFT owner never borrows from the pool.
After a pool has attracted sufficient liquidity (Total Value Locked or TVL), the NFT HODLer can stake his or her NFT into the pool and borrow up to half of the TVL for a fixed period of time.
If the loan matures and the borrower has not yet repaid the principal and interest, we will classify the loan as ‘overdue’, and after a short grace period to allow the borrower to settle the loan and late fee, we will use Rarible’s ‘Timed Auction’ feature to liquidate the overdue loan. If the auction fails to produce a bid greater than the borrowed balance, we will fractionalize the NFT using Fractional.art and share the ‘fractions’ proportionately with the lenders.
Why should AAVE Grants DAO fund the AAVE x OpenSky integration
- Shared Vision
AAVE DAO and OpenSky Finance share a grand vision for a DeFi future: Everyone, anywhere, at any time should be able to freely lend, borrow, and earn benefits from digital assets.
OpenSky is an NFT lending protocol that builds on top of and expands the AAVE ecosystem to offer an integrated lending and borrowing solution for NFT HODLers and DeFi Users.
To reiterate, we plan to send all OpenSky crypto deposits to AAVE which should add a substantial amount of TVL to the AAVE protocol. Moreover, some OpenSky NFT HODLers will be introduced to DeFi and AAVE by taking out a loan and using the money for DeFi activities. Plus, we think that NFTs are eventually going to be a major component of DeFi and this cooperation will give AAVE a way to become even more dominant in both the fungible token and non-fungible token borrowing and lending markets.
OpenSky Finance Benefits
From OpenSky’s point of view, we know our DeFi users will feel very confident to deposit large quantities of crypto into our lending protocol knowing that AAVE has a strong Lindy effect and has been battle-tested against hacks. Also, it will be easier for us to attract attention to our product by highlighting the name-brand DeFi Money Legos we will connect and integrate with, such as AAVE, Rarible, Fractional and Uniswap.