Inside Chainlink's new CryptoPunk oracle š
Chainlink's built a CryptoPunks "floor price" oracle for NFT lending protocol JPEG'd!
Metaversal is aĀ Bankless newsletterĀ for weekly level-ups on NFTs, virtual worlds, & collectibles
Dear Bankless Nation,Ā
What if you could easily lend and get credit against your CryptoPunk without selling it?
And what if decentralized oracle network Chainlink built āPunk price feeds, so the aforementioned lending process could be permissionless and trustless?
Here, cue in JPEGād: a new Chainlink-powered NFT lending protocol thatās aiming to bridge the gap between DeFi and NFTs!
First JPEGād is setting its sights on CryptoPunks, but Chainlinkās on-chain oracle for āPunks floor can be replicated and expanded to other NFT projects, so this will be a big thread to watch going forward.Ā
Letās see what the interesting meldās all about in todayās Metaversal šĀ
-WMP
š Sponsor:Ā Immutable X ā Scaling Ethereum and NFTs!
First, what is JPEGād?
This weekend a group of anonymous builders introduced JPEGād, an NFT lending protocol, to the world. Their proposed mission? To provide a new DeFi primitive called non-fungible debt positions, or NFDPs, for the cryptoeconomy.Ā
In this way, you can think about JPEGād as akin to MakerDAO but for NFTs. Instead of opening up a collateralized debt position (or Maker Vault as theyāre called now) with ETH or ERC-20 collateral to draw out stablecoin loans, JPEGād users will be able to do so with NFTs starting first with CryptoPunks.Ā
As the JPEGād team explained in their announcement post:
āUsers will deposit their Cryptopunks into a smart contract and be able to mint a synthetic stablecoin, PUSd, effectively giving them liquidity on their punks and able to earn yield in DeFi. This transforms cryptopunks from static investments, into yield-earning products. The protocol will be managed by a governance token, JPEG, that will oversee, administer, and change parameters to the protocol.ā
Enter the Oracle
The Chainlink oracle network, that is.Ā
The JPEGād devs already confirmed last week that Chainlink was building a ācustom price oracleā to track the CryptoPunks floor in ETH, so we knew a unique price feed was on the way. Now weāve gotten a better look at how itāll work thanks to a new post published by JPEGād today. In short:Ā
Zooming in a bit, hereās how the process will work:
CryptoPunks secondary sales take place, upon which āPunks floor prices (the lowest-priced Punks at any given time) continuously fluctuate.Ā
Chainlinkās custom-built oracle will track āboth sales and floor prices to create a blended price that will be used to value floor āPunks.ā The ensuing valuations are Time-Weighted Average Prices, or TWAPs.Ā
The oracle will also aim to disregard all outliers, e.g. rare CryptoPunk sales, wash trades, etc. Accordingly, it will play a foundational role in ensuring the JPEGād āPunks marketplace stays solvent and in facilitating liquidations as needed.Ā
The big picture takeaway? This JPEGād + Chainlink collab points the way to a future where many NFT collections will be securely priced on-chain and thus be more readily usable as DeFi collateral š§ Ā
āWe believe Chainlink will set the standard for on-chain NFT pricing,ā as a JPEGād spokesperson told Metaversal today.Ā
Whatās next?
Like I mentioned previously, JPEGād is starting but not ending with CryptoPunks. The protocolās builders plan to expand to other popular NFT projects like Art Blocks, Bored Ape Yacht Club, and beyond in the months ahead.Ā
As such, each of these integrations will require bespoke decentralized price feeds too, so Chainlink has the opportunity to keep doing one of the things it does best: making smart contracts smarter at the increasingly teeming crossroads of DeFi and NFTs!
Action steps
š° Read āIntroducing JPEGād: DeFi Meets NFTsā by JPEGād
šø Read āHow to get a loan on your NFTā by Bankless
š Read āHow to value NFTsā by Bankless
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Not financial or tax advice.Ā This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
Disclosure.Ā From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See ourĀ investment disclosures here.