OpenSky Finance has revolutionized the liquidation mechanism to protect borrowers, lenders and the lending protocol.
OpenSky Finance is the first NFT lending protocol to eliminate price-based liquidation for peer-to-pool loans.
As long as the borrower takes action to repay or modify (i.e. extend) the loan during the 2-day grace period when the loan matures, they will maintain control of their pledged NFT.
In the rare instance of the borrower failing to take action on time, the NFT loan will be repaid by the OpenSkyDAO and the NFT will be transferred to the OpenSkyDAO Treasury where it will remain as an investment until OpenSkyDAO members vote on how to dispose of the acquired NFT assets.
The Bespoke loan liquidation mechanism is very straightforward. A borrower makes a Bespoke NFT loan offer and a single lender funds the loan using their pool deposits.
If the borrower does not repay the loan back to the lending pool when it is due, the NFT will automatically be transferred to the Bespoke lender’s wallet by the OpenSky smart contract. This process works very similar to NFTfi. OpenSky Finance will send repayment reminders to minimize the risk of forgetting to repay the loan on schedule, but the borrowers are ultimately responsible to manage their loans to retain ownership of the pledged NFTs.