Author/s - William X (Gradient and Debt DAO Founder), DeFi Ted
Summary
Paragons should tap into the utility provided by Abacus Spot’s oracles by leveraging Gradient to borrow against their NFTs, in addition to providing support in critical areas – including liquidity.
The Abacus Twitter can be found here.
Abstract
Paragons currently holds a number of unique assets that requires a specific pricing model to find a true fair valuation. These assets are currently only yielding from expected $PRIME returns at this stage.
Motivation
Abacus with their spot pools aims to provide an ongoing price oracle for these assets and in tandem with Gradient, Paragons can unlock the liquidity within these NFTs to increase yields.
Gradient Protocol is a protocol looking to bring a new dimension to the intersection of finance and NFTs.
Their first major product will be “Loans,” a Collateralized Debt Protocol (CDP) based protocol which provides loans which leverage the locked liquidity in Abacus spot as collateral.
We’ve modified Aave v2 smart contracts to suit this particular use case, and are looking for support in launching over next 1-2 months.
ParagonsDAO being a seeding supporter of Gradient while benefiting from the use of the protocol would make this a great partnership for the DAO.
Specification
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Paragons DAO should bundle the two “First Son of Mars” NFTs into one NFT and then deposit it into Gradient Protocol, which would then issue a loan to the DAO in the form of nftETH, a liquid token pegged 1:1 to the price of ETH.
A) Given the early stage of Abacus Spot and the lack of complexity around staking, Paragons should also be prepared to lock liquidity into the corresponding pools as a means of encouraging pricing.
B) Since the “First Son of Mars” NFTs aren’t directly deposited into Gradient, they can still potentially be staked for Prime rewards
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Paragons DAO should also aim to provide the liquidity support needed to seed ETH into Gradient smart contracts, 160 ETH (~500k USD) for a duration of 30 days.
A) Given that a comparable service (NFTfi) offers 40-50% APY on NFTs, we would expect to be offering (unincentivized) 20-30% APY to borrowers in our closed alpha period, while also guaranteeing a high degree of security since the loan will be overcollateralized with ETH in the corresponding Spot pool.
B) Later, Gradient is looking to transition to nftETH, an ETH pegged derivative, and we’d like the option to move this liquidity to a Curve pool/Uniswap.
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Gradient would like to apply for a 50k USDC grant for the purposes of operational expenses.
A) It will be used for the following purposes
i. 20k for frontend development by an external dev shop
ii. 20k for a Code Arena Contest
iii. 10k for another audit, and miscellaneous costs (e.g. mainnet deployment) -
Run a Gradient Strategy
A) This is a vault type product which will allow both retail LPs to access Abacus spot pools and the Paragons Treasury Council to efficiently direct funds within Abacus spot, with a focus on Parallel Assets.
More details here:
(https://www.notion.so/Gradient-Strategies-public-8e6e6b5f20b5491db7e2609743b9899b)
Rationale
Potential areas for future collaboration:
- Providing tokens to incentivize LPs to participate for strategies
- Bundling bunches of lower value Parallel NFTs into another NFT and leveraging Gradient to securitize this meta NFT and potentially developing a retail oriented savings product
- Collaborating on developing out a “Buy Now Pay Later” solution for the Paragons DAO ecosystem.
- Generating yield from the secondary liquidity created from leveraging Gradient
Pros:
- A high yet low risk rate on idle ETH within the Paragons Treasury
- Unlocking a wide range of possibilities for the intersection of NFTs and Defi
Cons:
- Smart Contract Risk with Gradient (mitigated by audits)
If you have any questions, or would like to know more, this is our Discord and this is our Twitter.
Copyright
Copyright and related rights waived via CC0.