Add a Dash of Spice to Nouns DAO

NounsDAO NounsDAO Proposals
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Add a Dash of Spice to Nouns DAO

TL;DR

It’s clear that with Nouns, community comes first.

Spice brings Nouns DAO a unique opportunity to benefit their community and increase their longevity.

Nouns DAO’s impressive treasury should be looking into sustainable ways to earn yield and support their vibrant community via NFT Finance. DeFi is great, but competitive returns can be generated using NFT-native solutions.

Spice Finance is the answer.

By supplying Nouns DAO with a means to earn, Spice can increase the longevity of the organization via healthy and sustainable native $ETH yield.

Spice could then help Nouns DAO set up their own community vault. This would allow the DAO to choose NFT lending parameters, including specific collections. For example, allowing for vaults that benefit Nouns only.

A yield-generating vault by a community, for that community.

Why Spice

Spice is a suite of DeFi protocols that help depositors and treasuries access NFT finance products. By combining appraisal, lending, and cross-exchange aggregation, Spice aims to be the one-stop solution for new avenues of yield from NFT-backed loans.

The Vision

Spice is building the financial infrastructure for a permissionless and decentralized metaverse where NFTs represent the vast majority of value. Spice will do this by bringing scaled liquidity solutions to NFT lending marketplace and by merging DeFi with NFTs.

How Spice Works

Lending Aggregator

Spice is built to simplify; aggregation is key due to highly fragmented NFT Lending markets.

Spice aggregates two main types of NFT lending protocols: (1) Lending pools and (2) P2P loans.

Lending Pools (price-based liquidation)

Lending pools with price-based liquidations use marketplace-specified oracles to determine loan amount and liquidation thresholds (structurally very similar to P2Pool lending systems in DeFi like Aave or Compound).

  • Variable Interest, which is based on pool utilization, is accrued continuously.
  • Once the amount borrowed exceeds the oracle price times the liquidation threshold set by the marketplace, the marketplace takes custody of the defaulted borrower’s collateral (NFT) and lists it for liquidation, typically on a fixed length auction within the protocol’s UI itself.

P2P Loans (time-based liquidation)

Loans with time-based liquidations have a fixed interest rate and a set maturity date determined by borrower and lender negotiation.

  • If the interest and principal is not paid by the maturity date, Spice’s Vaults will take custody of the collateral and list it for liquidation, typically through simultaneous listings on Blur, OpenSea, X2Y2, and LooksRare.

Vaults

Prologue Vault

Early this year, Spice released a collection of 555 unique NFTs that served as keys to the most competitive lending vault in NFT Finance, the Prologue Vault.

The Prologue Vault is the first live Vault on Spice, as such owners of Prologue NFTs will always be some of the most important individuals to the protocol. The Prologue Vault gives depositors immediate exposure to diversified NFT lending yields across the industry.

The Prologue Vault runs a medium-risk lending strategy optimized from several months of live market testing and continuous live updates.

Current Stats:

  • Strategy Uptime: ~2 months
  • TVL: 395 $ETH
  • Historical APY: 16.97% (rewards in $ETH)

Prologue Leverage

Prologue Leverage is an exclusive feature in Spice’s platform where Prologue Holders can:

  1. Take out loans against their Prologue Vault position
  2. Loop those loans back into their Prologue Vault position

This can be accomplished all in one transaction to increase position size and boost real returns from the Prologue Vault.

If the Nouns community decides, they can take this risk-on approach to enhance yield capabilities.

Community Vaults

Spice has big plans for the NFT Finance ecosystem. We envision a world in which every NFT Community or DeFi project interested in NFT exposure is set up with their own permissionless lending vault.

What can that bring to the table?

A few things:

  • Creative exposure to NFTs
  • Support for community-led borrowing markets
  • Clean, simple to understand $ETH yield
  • Potential airdrop exposure to lending protocols

Creative NFT exposure and airdrop exposure go hand-in-hand. Want to be exposed to the broader NFT market but don’t want to risk holding illiquid assets? Supply liquidity to loans. Want to be the first in the door using & accumulating the tokens of various lending protocols? Be our guest.

Likewise, supporting community borrowing markets + clean $ETH yield go well together. This gives you the opportunity to create robust market activity for your collection and earn attractive returns. Furthermore, the additional benefit of allowing other community members to join in supplying liquidity is an added bonus.

Proposal

Here’s the deal.

Spice would like Nouns DAO to:

  1. Deposit 500 $ETH into their choice of:
  • The Prologue Vault (via the acquisition of a Prologue NFT)or
  • The upcoming Flagship Vault
  1. Strike an official partnership with Spice Finance

In return, Spice will promise to:

  1. Deliver amazing ETH yields, derived from NFT-native sources, to the Treasury
  2. Guide Nouns through the process of constructing a Community Vault
  3. Co-market Nouns as an official Spice partner

How This Proposal Would Benefit Nouns

By entering into this agreement, Spice can provide a better native $ETH yield than some of your current strategies.

For example:

A little while ago, a proposal was passed for the Nouns DAO Treasury to deposit 5000 $ETH into Lido.

At today’s LSD rate of ~5%, that is ONLY 250 $ETH in rewards.

Nothing to scoff at, but Spice can do better.

We can generate the same rewards with approx. 1,500 ETH

Our proposal could deliver 1/3 of the Lido rewards, with 1/10 of the budget.

Plus, you are supporting NFT-native protocols and bringing incredible future opportunities to your community.

Nouns would also be plugged into Spice’s vast network of NFT Finance partners.

We could help broker partnerships for Nouns with many of the big players in this industry.

Conclusion

We would love to see healthy discourse around this topic as we believe that discussion will lead to the correct determination for the project.

We can be readily available to answer any questions here on the forums, and would be amenable to taking a call with the Nouns DAO team if they see fit.

Thanks so much for reading all the way through, we’re here to make sure Nouns can keep delivering incredible advancements in the NFT industry!

Important Links:

Docs: https://docs.spicefi.xyz/

dApp: https://www.spicefi.xyz/

Twitter: https://twitter.com/spice_finance

12 Likes
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Interesting proposal. Spice delivering better rewards in real yield than the other protocols can benefit Nouns DAO’s treasury. NftFi is a less untapped sector and this will be a great exposure for both the parties. Also this opens Nouns DAO, opportunity to partner up with huge line of Spice’s partner protocol that are involved in the NftFi space. Both Spice and Nouns DAO will reap the benefits.

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Long-term Prologue holder, have been really impressed with the Spice team so far and their delivery. I feel as though this partnership could open a lot of doors for both projects and help NounsDao to find a more bespoke way of getting the most from your treasury. Particularly interested in how the community vaults could be developed in partnership and think this would be a great thing to explore.

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Definitely a very capital-effective high-rewarding way to manage the treasury!

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spice is the best NFTfi protocol out there, great proposal

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I think this is a very good proposal for multiple reasons:

  • More liquidity for the NFT space as a whole
  • Support for an incredible lucrative NFT lending start up
  • Efficient way to earn more compared to the previous strategy

So for me this definitely is a YES to the Spice Finance and Nouns partnership.

2 Likes
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Great proposal and a great partnership!

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It’d be a win-win collaboration between both protocols. Spice Finance team have delivered vault strategies with steady returns, this could be a great opportunity for Nouns DAO community to get some exposure in the evolution of NFT Finance.

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Great Proposal and great team @ Spice Finance.
Win-win is what we need to go for in this space…

1 Like
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I’ve heard of Spice but never used the platform.

I’m assuming you’re able to reward users in $ETH (vs. a native token) through the APR earned through borrowing? If this is the case, does Spice generate income through the same means and rewards are distributed between the spice team and lenders?

Also, what strategies does Spice have in place to avoid accumulation of bad debt?

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Hey LowHash!

Great questions, we appreciate the feedback.

ALL rewards from Spice are distributed in $WETH! When a user deposits into the vault, they are rewarded with $WETH from the borrower interest like you stated. Spice does not currently take any fees from the Prologue Vault, but it may do so in the future on; this is subject to change and we will inform all depositors well in advance prior.

On to your second question - Spice runs on automated strategies that calculate the probability of bad debt and rebalances accordingly across P2Pool marketplaces (we are the only Lending vault that uses both P2P & P2Pool).

Here are a few of the strategies:

  • Parameters can be set to reduce risky loans, ones that have high LTV or long durations, reducing the probability of bad debt.
  • If a P2P loan were to default, Spice uses a Dutch Auction via Reservoir integration to sell off the collateral at optimal prices, across all NFT marketplaces.
  • Spice employs a leading appraisal system to reduce risk vs. relying solely on floor price.
  • For any loans originated directly through Spice, there is the flexibility to apply price-based liquidation vs. time-based liquidation if that makes sense for all parties involved.

Let me know if I can answer anything else.

1 Like
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Any further thoughts on this proposal Nouners?