Lending Pond

A decentralized lending and borrowing platform where borrowers list Cardano NFTs as collateral for an ADA loan and lenders choose which loans they want to fund.

Lending Pond, also just called Pond, is a peer-to-peer lending marketplace that allows Cardano NFT holders to unlock the value locked up in their NFTs by locking those NFTs up as collateral for loans. The whole process is done via smart contract and NFTs are locked up in the smart contract for the specified amount of time once the loan is issued. If the loan is not repaid in time then the lender automatically has the NFT collateral deposited in their wallet.

If you list your NFT on Lending Pond, join their Discord and sign up to their bot, you'll get notified as soon as your loan request is fulfilled! Meaning you can put your new ada to work immediately.

How Lending Pond Works

Borrowers on the Pond protocol can only list NFTs from approved projects. These borrowers, looking to unlock the value locked in their NFT, create the loan offer around their NFT, setting the interest rate, duration of the loan, and the payment time frame.

Lenders can view these NFT collateral offering, along with the terms of the requested loan, on a liquidity page and select which, if any, they want to fund. Each loan has a colored “Send Loan” button beneath it and the color is indicative of how collateralized the loan is. Green buttons indicate a highly collateralized loan, i.e. the borrower is requesting much less ADA than the prospective market value of the NFT collateral, and yellow and red buttons indicate loans where the borrower is looking to borrow closer to the full amount of the value of the NFT offered up as collateral.

Once a loan is granted the NFT is locked in a smart contract for the allotted amount of time and the loan is sent to the borrower. The loan and interest then need to be repaid to the smart contract, in full, prior to the end of the loan’s term to unlock the NFT. Upon doing so the loan and interest are sent to the lender and the NFT is returned to the borrower.

If the borrower defaults on their loan then the NFT is sent to the lender's wallet and they get to keep the NFT.

Fees

A 2% fee of the loan amount is charged to the lender and they send this, along with the loan amount, when funding a loan.

In order to participate as a lender on Lending Pool lenders must be verified holders of a Pond partner projects.

Industry

DeFi

Lending Protocol

Lending Protocols

Lending protocols in the DeFi world allow people to loan or lend money in a peer-to-peer manner, i.e. without the banking middleman. These loans are secured by the lender over-collateralizing the loan and the terms of the loan being managed in a smart contract. This gives the unbanked or those who have poor credit the ability to take loans, and it gives those with excess capital the opportunity to provide loans in a secure and trustless manner, and to earn income from them.

Over-collateralization means that the person receiving the loan locks up more than the value of the loan to secure it e.g. if they want to loan 100 they must lock up 150. How much they over-collateralize the loan by, and which tokens they use as collateral, depends on the platform. Some platforms only accept stablecoins, and other accept a variety of crypto assets. Typically, an individual uses one asset for collateral and takes a different asset as their loan.

An important factor in all loans is the interest rate and the length of the loan. These vary greatly by lending protocol, and loans can have fixed interest rates and periods, or infinite periods with interest rates that fluctuate throughout the loan period, fluctuating based upon the utilization rate of the pool of funds the loan was drawn from.

Importantly, the receiver of a loan is expected to maintain a certain ratio of collateral to loan, meaning that if the value of their collateral drops below that of their collateral to loan ratio, they need to add more collateral to keep the required balance. If they don’t keep up the collateral ratio they face liquidation and the loss of their collateral.

To "become the bank" those with idle tokens can deposit them into a lending protocol and earn from the interest derived from the loans their tokens are used to facilitate. Usually this deposit requires a lockup period of a certain length of time. Often, the longer the lockup period the higher the percentage return for the depositor.

How Lending Pond Works

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