Leverage Borrow and Repay

The core of the borrow of the NFT still adopts the conventional over-collateralisation model, where:

$$V_{collateral} \ge \frac{V_{loan}}{liq\_thld}$$

where $V_{loan}$ and $V_{collateral}$ represents the value of the loan and collateral respectively, and $liq\_thld$ denotes the liquidation threshold (in percentage) of the collateral defined by the platform.

However, as the value of the NFTs are quite high, we allow the user to under-collateralise their borrowing through a flashloan through Parallel money market. See diagram below for details.

Chart 1: Leverage Borrow

Similarly, when the user wish to close the position, a flash loan is used to fulfill the action. See diagram below.

Chart 2: Leverage Repay

Note here the exact amount of proceed from sale of the NFT (in the case of leverage borrow) and that of borrowing required to purchase the cheapest NFT within the collection is known, as we access the secondary orders (i.e. bids) the floor prices (i.e. minimum ask price for buy-now) that are available on Parallel NFT marketplace.