I think this would be a really good idea if it were possible. Unless I am mistaken the tokens themselves is not what generates yield, its the KYC account. This means just getting the ASA would not mean you would start to generate yield, meaning its pointless to borrow.
That being said I would love some magic way to make it work.
This would be very beneficial and useful for Lofty tokens holders, which would also incentivize using Algofi… As a long time user of both Algofi and Lofty, being able to borrow against my tokens would be a game changer for me. It would be amazing if the rental income could pay off a portion of the loan as well
The thing that worries me is a reliable pricing mechanism that will allow on chain determination of token price. Without this the protocol maybe left with bad debt. Also there is the whole transferability of tokens. I don’t think it’s possible to transfer token ownership with KYC and lofty in the loop. Without decentralized token transfer it may not be possible to liquidate an account that uses lofty tokens for collateral which is also bad for the protocol. If these two things can get sorted out I’ll be all for lofty as collateral.
essentially what nmadon65 said. there would need to be a way to liquidate those tokens in a fast and reliable way since liquidations have to happen really fast, especially when people start using flash loans to liquidate people where the liquidations has to be executed in one block
This is a very interesting idea, but I feel it needs very careful study. It seems worth exploration, but I can’t say at this point if it is practical or advisable without more study. I would definitely echo Don and Lobo’s concerns about reliable and fast pricing and how to support decentralized transfer of tokens that come from a KYC account based environment- in order to allow for liquidations. I suppose the collateral factor could be set to zero, but then we need a good answer as to why bring them. I think Kob’s instincts are right in seeking some dialogue with Lofty founders.
In TradFi we can use a loan in order leverage a real estate investment and improve the yield.
Also in TradFi, it is possible to borrow (often with competitive rates) against some assets (lombard credits and so on).
Of course it is natural to expect that DeFi will eventually offer such option and using Lofty tokens on Algofi would be an essential step.
However, I see several issues that need to be discussed (some of them have already been pointed out but I prefer to repeat):
The value of Lotfy tokens is around 25M USD. Even with the ability to borrow only 50% of the value of a token that means this could dry out all available USDC and Algo liquidity on the v2.
In order to be used as a collateral Lofty tokens must be immediately tradable on-chain with a fiable oracle price. At the moment this is not the case since the 2ndary market for Lofty tokens is centralized (only approved wallets can trade there) and it is not clear to me if it is even on chain. There is also no real way to determine the actual value of a token atm. Using the Housecanary estimate is not a solution as many properties sell below that price, while the price of the second market can easily be manipulated.
There should be a way to ensure that rent are still being distributed while the token is deposited as a collateral and that the rent goes to the liquidator if liquidation happens.
Could an AMM like Algofi’s swaps or Tinyman be used as an oracle? If the collateralization factor was sufficiently low that could account for the liquidity risks of using an AMM as an oracle. Maybe even a dynamic collaterlization factor that sets it to 0 if liquidity in the AMM falls too low.
Honestly, would vote against this. LOFTY should just refi those properties and provide liquidity that way through governance on their platform, KYC on Algofi makes it a mess, HARD PASS for listing lofty tokens here.
Yes, they are. Lofty is introducing governance on their platform, so in the future the tokenholders of the properties can vote to refianance their properties at 50% LTV and take out tax free loans that way and have lofty be the intermediary. Keep lofty tokens off this platform, the KYC is problematic.