Moon Capital Portfolio-Themis.Exchange

Since the release of smart contracts on Ethereum, DApp development has become matured, with developers creating 10.7 million smart contracts in 2020, increase 55% from 6.9 million in 2019. Remarkable DeFi protocols such as Uniswap, Compound and Yearn were created on Ethereum, and with the development of Layer2 bringing further improvements in performance and efficiency, the future exploration and innovation of Ethereum in decentralized finance will create a huge derivatives market.

The imagination brought by DeFi’s innovation has made the concept of NFT hot again, and the market has gradually accepted the governance of all kinds of native assets, as more NFT native assets are created. Providing governance for native assets in terms of trading, liquidity, lending, collateral, voting, etc. will be an important development trend.

What is the Themis Protocol?

Themis Protocol is a Layer2 native crypto trading platform that uses historical NFT transaction data to provide collateralized lending of NFTs.

Themis Protocol can easily access the asset prices in UNI-V3 and use them as a basis to provide collateralized lending of the appropriate value, which will execute NFT withdrawals when the user defaults, thus ensuring the safety of the lender’s principal. This solution can also provide UNI-V3 market makers with leverage tools and access to the Vault pool.

Themis’s NFT collateralization scheme is no longer limited to the liquidity expectations of the inner-loop collateralization and new output token but provides normal collateralized lending. For risk diversification, the risks and returns of each post-collateralization segment are expected. Asset prices for collateralized lending on Themis will be more stable, creating a whole new pool of incentives through Token’s incentive and forfeiture rules.

Themis Protocol uses a simple risk control model. The risk is spread across the governance by assessing the three elements of liquidity, safety and profitability of the assets to protect against systemic risk.

Figure 1: Themis test product interface

Themis Product Matrix

- Lending pools: independent lending markets, flexible rates, long/short leverage, or create your own market.

- NFT collateral: Authorize the address where you keep your NFT to see how much credit they can get for you

- Auction:Browse NFTs being auctioned, or post new NFT auctions events

- Farming:Use the corresponding LP-Token or SP-token to participate in Yielding Farming

- Liquidation:Assist in clearing smart contracts, pay fees and receive bounties.

Token Distribution

$TMS is Themis’ platform-native governance token, with a total of 800 million tokens. 58.25% of the tokens will be used for community incentives.

Themis enables the community driven platform governance by sharing 100% of the revenue to TMS token holders. Users can receive Themis’ revenue share by staking TMS, including but not limited to: NFT sales revenue, data usage service fees, and platform fee revenue.

The specific allocation of $TMS tokens are as follows:

Figure 2: Token distribution chart

A New Challenge — How to Calculate the Collateral Value of NFT

Peer-to-peer protocol directly facilitate collateralized and unsecured lending between market participants. When this format was initially applied to NFT lending, there was no information parity between lenders and borrowers, which directly led to significant costs for both parties. P2P lending proved to be inefficient in a decentralized network. Instead, decentralized lending protocols, such as Compound and AAVE, are currently used to create pools of funds and algorithmically calculate interest rates based on changes in the supply and demand of assets. Vendors and borrowers of assets interact directly with the protocol to earn or pay variable interest rates, which would be more efficient. The difficulty lies in solving the problem of pricing NFT assets and the criteria for lending funds.

This means that the protocol needs to be able to obtain a price for the collateral and there are only two basic ideas for obtaining a price.

  • Obtain prices through publicly available transaction records.
  • Get the price by calculating the value of NFT itself.

The feasibility of mortgages is predicated on the premise that the value of the collateral is always higher than the value of the lending funds. Obviously, path 1 cannot guarantee the relationship between price and value, while path 2 has a limited number of solutions, and these limited solutions can be roughly divided as follows:

  • Financial attributes are obtained by splitting the useful life of NFT.
  • Its value is determined by rigid exchange with other protocol.
  • Compensation for possible liquidity risk incidents through governance tokens.

The right to use the NFT in a split collateral must be auctioned or otherwise traded when the collateral is liquidated, at which point the distribution of proceeds by right of use would be an act of benefit sharing. Even in the real world, splitting ownership of a collection to be auctioned may be illegal in most jurisdictions. New tokens created by splitting ownership have potential security concerns and therefore are not considered.

The price of rigid payments in other protocols, such as UNI-V3’s LP vouchers, is more easily tracked. It is also now generally accepted that governance tokens are used to compensate for possible risk events. Thus, NFT lending is based on a composite like form of NFT protocol that is rigidly redeemable, where the assets held in the protocol have a collateralization factor ranging from 0 to 1. The liquidity and value of the underlying assets determine the size of the collateralization factor. The sum of the collateral multiplied by the collateral factor equals the amount the user can borrow. When a user is determined to be insolvent, a liquidation process is executed to redeem the lender’s principal and interest through a third-party rigid payment. When the third-party rigid payment fails to redeem the principal and interest, additional governance tokens in the reserve pool are redeemed through the act of selling into the liquidity pool.

So when the user authorized NFT is read, Themis protocol scans at least 3 blocks (to prevent lightning lending attacks) to obtain approval of the asset price bound in the third party protocol platform, and once successful, TokenHub will mark the price relationship of that NFT to the bound asset to obtain an offer. Based on this quote, the lending process will be executed.

UNI-V3 NFT as a collateral in Themis

Guarantee the Rights of Users — Liquidation and Liquidators

If the value of an account’s outstanding debt exceeds its ability to repay, it can be partially repaid at the current market price minus a liquidation discount; this eliminates the risk of the protocol. If a user’s funds are in repayment crisis, the liquidation process can continue.

Any Ethernet address with borrowed assets can invoke the liquidation function and exchange their assets for the borrower’s SP-Token collateral. Since users, assets and prices are all included in the Themis protocol, clearing is executed effortlessly and does not rely on any external systems or orders.

  • Basic Liquidation: In Themis’ basic liquidation process, when a bad debt occurs, the bad debt goes to the liquidation list and the liquidator pays a fee to execute the liquidation, while the liquidator receives a certain TMS bonus from the reserve pool. The first step of liquidation is the flow of bad assets to the auction block for a 48-hour Dutch auction at the initial price until the NFT price drops to the collateral rate to execute a sale liquidation or reserve liquidation.
  • Reserve liquidation: The Themis protocol continuously adds TMS to the margin pool during its operation. When the margin pool needs to be liquidated, TMS is sold to the market in exchange for the lender’s principal, at which time the liquidity provider may incur an unstable loss. However, the liquidity provider can also receive liquidity mining rewards by pledging the corresponding LP-Token.
  • Liquidator: The liquidator is an important role to assist the platform in manual liquidation. Since the protocol cannot be automatically cleared, a liquidation list will be generated for bad debts, and the liquidator can clear the list and get TMS from it, but the liquidator needs to pay the Gas fee by himself, besides, the gained TMS reward can be accumulated.

No Middle-price Earning — A Bold Business Model

Themis Protocol will distribute 100% of all revenues to TMS holders in full, and users can receive these revenues by staking TMS, including but not limited to spreads and commissions received by the platform from each market segment, profits earned by the platform from NFT sales, and revenues earned by the platform from advertising, prophecy machines, and other data interface services.

This bold decision by Themis is to increase the activity of the whole platform, to make users more voluntarily participate in the platform, to make a good foundation for the later governance, and to prevent users from abandoning the platform due to the lack of participation and insufficient benefits.

Why We Chose Themis

For the traditional lending market, whether it is AAVE, Maker or Compound, they are unable to participate in this metaverse war as for the current technology. Due to this gap that Themis was born, which solves the problem of lack of liquidity of some NFTs and provides a new way of thinking — NFT lending, which open a new door for the construction of the metaverse. asset lending. Themis is compatible with ERC 721 and ERC1155 standards asset-based lending.

This is an architecturally innovative because only by supporting such a standard, the lending protocol can change from being applicable to only the currency to being applicable to commodities that store more information. Similar to pledging gold to borrow silver, which becomes pledging a house to borrow gold, there is more information in a commodity like a house. For example, the location, new and old, surrounding facilities. If you look at it from the perspective of the metaverse explosion, it will be an important financial infrastructure for building the metaverse in the future.

About Moon Capital

Moon Capital is a cutting-edge investment firm focused on blockchain and cryptocurrency. Moon Capital portfolio includes, Woo Network , Litentry, Subsocial Network, Bifrost, DeepDAO and some other high-quality projects.

Twitter: https://twitter.com/RealMoonCapital

Medium: https://medium.com/@MoonCapital

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Moon Capital is a cutting-edge investment firm focused on blockchain and cryptocurrency.

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Moon Capital

Moon Capital

Moon Capital is a cutting-edge investment firm focused on blockchain and cryptocurrency.

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