Loans
Last updated
Last updated
Loans are one of our newest uses for our liquidity funds (as of Jan 2023). Using sharky.fi we are able to provide liquidity to those seeking loans. For those not familiar with sharky.fi, it's a peer-to-peer loan site for NFTs. Anyone can seek loans and anyone can provide loans. Loans typically are either 7 day or 14 day loans, with an APY of 120-360% depending on the collection. This usually results in an interest rate of roughly 2% for the 7 days.
To start, we set a budget of 150 SOL and started providing loans (mid Dec 2022). We will be compounding the interest we earn by providing loans with the interest earned. This should lead us to 150-200 SOL profit in our first year. It easily could be much more, but occasionally loans will default (not get paid back). When a loan defaults, you get the NFT they provided as collateral. This is where we plan to increase the value of $MILK. There are two scenarios where we receive an NFT as collateral. The first being the loan defaults on purpose and the floor price of the NFT dropped below the loaned value. The other being that the loan defaults because the user doesn't have the funds to repay or forgets to repay. Depending on the reason why it defaults will affect the strategy for how we maximize value off of the default. The projects we are choosing to loan on are generally quite stable and conservative. However, in the case the floor price has a significant drop and the loan defaults on purpose, we will be operating at a loss. In most cases we will just sell the NFT at a loss, and continue loaning. If a loan defaults and the floor price is higher than the loan value, we will list the NFT to recover the value of the loan, plus a slight profit. This profit will be used to buy $MILK and remove it from circulation. Depending on the state of the loan account (amount of SOL) and the value of the defaulted NFT, we may raffle it off to maximize the value of it. The primary goal with our loan account is to have another sustainable revenue stream that is bringing in $MILK to raise the value. By focusing on low risk loans we will be able to retain a steady profit, which we can invest in $MILK. To follow our loans and sales, you can see all the transaction for our loan account here: 7tSw88wBwHftti2oss7f8sXinjmqgcp9cmu6Kv4g2sDi
