Create a Drops AMO


Jason Stone


Create a Drops AMO and authorize up to $1m worth of liquidityto be distributed across the following Drops pools:

Pool Frax market Frax amount
Pool 1: Large marketcap Bluechip NFTs

Fixed borrow rate 22%, 2x kink at 80% utilization

0x03e1eb147ab39d744565ca1cec4b03106d21fa92 400,000
Pool 2: Small cap NFTs

Fixed borrow rate 36%, 2x kink at 80% utilization

​​0x140128b2e6562713051df4858ff52f26795b8920 50,000
Pool 3: Medium cap NFTs

Fixed borrow rate 26%, 2x kink at 80% utilization

0x0039fec5e1d91741e251d82d9e83859c8e79013d 50,000
Pool 4: Artblocks collections

Fixed borrow rate 18%, 2x kink at 80% utilization

0xf00de3d44228856b2ca1d4550c2eacba153daca7 100,000
Pool 5: Mutant cartel and Yuga labs collections

Fixed borrow rate 22%, 2x kink at 80% utilization

0xfb0fceb2f620009c7e29f9e770ab7cf1d7956ecc 400,000

Background and Motivation

Drops ( protocol is a web3 money market that supports NFTs as collateral. Their goal is to solve inefficiencies in the peer2peer NFT loans model by enabling seamless, composable liquidity. The protocol follows the peer2pool lending model and uses Chainlink oracles for NFT floor prices. Each lending pool is a fork of Compound with support for ERC721 assets and the code is audited by PeckShield.

Drops has several isolatated lending pools each consisting of NFTs that can be used as collateral and tokens that can be supplied and borrowed. The pools are segregated based on the risk profiles of the NFTs. Collateral value is determined by the floor price of the collection (queried from Chainlink oracles). Prices are updated every 24 hours and are based on the floor TWAP.

Borrowers can get up to 40-75% loan against their collateral value. Interest rates are calculated algorithmically based on the utilization rate of an asset. Loans have no expiry date and can remain solvent as long as the user does not exceed the borrowing limit.

To safeguard LPs and avoid bad debt Drops implements an open liquidation system similar to that of Aave or Compound, i.e. anyone can liquidate an underwater position by buying the NFTs at a discount to the floor price.

Since 2022 NFT backed loans have reached 660MM borrow volume. Creating a Drops AMO would allow the protocol to mint FRAX backed by over-collateralized debt in the form of NFT assets which would open FRAX to a new area of NFT finance.


For: Create a Drops AMO and authorize up to $1m worth of liquidity to be deployed across Drops pools.

Against: Do nothing.

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