# papr-An innovative NFT lending protocol

By [dAn](https://paragraph.com/@gmallnight) · 2022-11-28

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**TL, DR**

•papr provides $papr token for WL's NFT Lending demand

•The papr adjusts the Target of $papr to control $papr's supply and demand, thereby affecting the mark price of $papr

•**The providers of Lending Liquidity are $papr's Traders.**

•The instability of $papr's Mark Price brings the instability of debt

• **The essence of the papr protocol is a generalized NFT debt issuance model, $papr is a general debt token**, with two prices of Target and Mark

Brief Intro
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papr is an NFT lending protocol, borrowers get the air token $papr which is minted by protocol (not USDC/ETH)

### Instant borrower liquidity

Actually, papr provides an NFT debt issuance model, $papr is the debt token. The liquidity and mark price of $papr is supported by $papr's Traders in Uniswap.

![](https://storage.googleapis.com/papyrus_images/67e9968bff0cd6a9955d10023f7e5b0637944dff1985c3e9573be249c7fe7013.png)

### Two Prices

$papr has two prices, Target and Mark Price.

Mark Price is determined by market supply and demand, which is the real-time price on Uniswap.

Target Price is the price controlled by the protocol, and papr controls Target to adjust the borrower's debt and interest.

![](https://storage.googleapis.com/papyrus_images/ff62e545b42a186dfe672a20e890db787faa722cc13eb2ae0b58f7d572272e36.png)

### Some Key Formulas

Maximum Borrow Amount= Collateral\*maxLTV/Target

Debt = borrowed $papr

Interest=price of $papr upon return/price of $papr upon lending-1

### Dynamic Adjustment

**papr will control debt and interest by changing Target, and then control the supply and demand of $papr, affect the Mark price of $papr, and try to maintain Mark=Targe.**

If Mark<Target, means that the market demand for $papr is small, and borrowers are motivated to buy $papr to repay debt, demand for $papr increases. Meanwhile, papr will increase Target, and $papr max borrow amount will decrease, supply of $papr decreases. **$papr Mark price increases.**

If Mark>Target, means that the market demand for $papr is greater, papr will reduce the Target, borrowers could get more $papr, the market will circulate more $papr, the supply of $papr will increase, and the **Mark** **price of $papr will fall.**

Conclusion
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• This mechanism is innovative. It is essentially a general debt issuance model. $papr is a general debt token. It is $papr’s Traders that provide liquidity and funds for Lending

• Not P2P, nor P2Pool, but **P2 $papr Traders**

papr improves the capital efficiency of NFT lending, but it also brings some problems

• Although papr can affect Mark Price through Target, Mark Price is a real-time transaction price, and its fluctuations bring about **debt instability** and risks for liquidity providers

• **Not isolate the risk of different Collections**

• Heavy reliance on $papr's Traders to provide liquidity

• It is difficult to maintain the Mark price of $papr

• **No stable expectation.** It’s not clear who gets the interest profit and who loses

Risk
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• Debt Changes Risk

• Oracle Risk

• Liquidation Risk

• Collateral Risk

• Bad Debt Risk

I like this idea, it's creative. It's too early, let's stay tuned.

Just my own opinion, current info is little.

[https://backed.mirror.xyz/8SslPvU8of0h-fxoo6AybCpm51f30nd0qxPST8ep08c](https://backed.mirror.xyz/8SslPvU8of0h-fxoo6AybCpm51f30nd0qxPST8ep08c)

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[https://twitter.com/dAnxBuidl](https://twitter.com/dAnxBuidl)

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*Originally published on [dAn](https://paragraph.com/@gmallnight/papr-an-innovative-nft-lending-protocol)*