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Chainlink NFT Floor Price Oracles
As crypto's first cross-margin NFT lending protocol, ParaSpace absolutely requires accurate NFT Floor Price data resistant to market price manipulation. ParaSpace is proud to be the first crypto protocol to use Chainlink's NFT Price Oracles as a core enhancement and safety-focused primitive for NFT borrowing and lending.
Chainlink has long been the market standard-bearer for accurate, unbiased, and manipulation-resistant price oracles for Aave, Compound, and many other blue-chip DeFi and crypto protocols. According to Chainlink's Transaction Value counter, their oracles have enabled over $6.7 Trillion in transactions. Chainlink was nonetheless somewhat surprisingly absent from NFT pricing.
Chainlink Labs partnered with Coinbase to produce and release their first NFT Floor Price oracle feeds, and in doing so solved a clear problem for ParaSpace and NFT-Fi protocols. While NFT Collection Floor Prices are far from perfect as a measure of a specific NFT's value, our own research underlines why we lean on NFT Floor Prices as the foundation for NFT Borrowing and Lending.
Chainlink's decentralized network powers the oracles which use Coinbase's NFT pricing algorithm. And the algorithm tracks all NFT transactions across major marketplaces, eliminates outliers, estimates the current floor prices, and ultimately updates oracle pricing across Chainlink's network of decentralized nodes.
ParaSpace seeks to be the destination for NFT-Fi, focused on permissionless borrowing and lending and many future use cases for the widest range of users. To be truly decentralized and permissionless our NFT borrowing and lending protocol should use unbiased and highly-accurate NFT pricing resilient to price manipulation. And indeed we have enthusiastically adopted Chainlink's NFT Floor Price oracles to help ensure users get the fairest and most accurate pricing estimates for their NFT assets.
Chainlink's oracles use Coinbase's NFT pricing algorithm which at launch is a closed-source and proprietary system. But ParaSpace has received assurances that, consistent with ParaSpace's web3 ethos, the Coinbase team will open-source and make available its methodology for evaluating NFT collection prices in short order.
We believe transparency is a critical feature for all of DeFi and crypto more broadly as this ultimately ensures users can do trustless and permissionless transactions with their own assets.
Coinbase's Floor Price algorithm produces a conservative predictive estimate for an NFT Collection's Floor Price which is most often below the Floor Price reported across major marketplaces. This is by design: their algorithm looks at real on-chain transaction data across marketplaces to predict the true floor price.
ParaSpace corrects for the consistently-low Floor Price to ensure fairness to borrowers with more more liberal (i.e. higher) Collateral Factors and Liquidation Thresholds. If the Floor Price estimate is consistently
below the commonly-used Floor Price, we can adjust the CF to make the same-size loan with the simple equation:
As an example, we have measured the Bored Ape Yacht Club 'adjustedFloorPrice' to be an average of 16.7% below the commonly-measured floor as reported by NFTGo's API. We correct for this by changing the existing 0.40 CF to 0.48 with the above formula. We of course have to modify the Liquidation Threshold using the same formula—the
goes from 0.8 to 0.96.
Users can easily see ParaSpace's smart contract code in order to confirm their transactions are carried out exactly as expected, and indeed ParaSpace has likewise focused on smart contract audits to help users gain an unbiased third-party check on the safety of the protocol. Users can further examine Chainlink's documentation for its NFT Price Floor oracles and soon Coinbase's open-sourced algorithm for the same.
Users need not trust ParaSpace or any centralized actor to value their NFT's: Chainlink's decentralized network powers NFT Collection Floor Price oracles.