Pi-NFTs serve as collateral in the lending and borrowing ecosystem on Aconomy, providing a secure and valuable asset to back loans. Here’s how the process works:
Selection of Pi-NFT as Collateral: Asset owners or Borrowers who need instant liquidity or funds can choose to use their Pi-NFT as collateral when seeking loans. The borrower selects a specific Pi-NFT from their collection to serve as collateral for the loan.
Proposal Submission: Borrowers submit a loan proposal, which includes the loan amount, annual interest rate (APY), loan duration, and expiration date. These terms are presented to potential lenders for review.
Lender Review: Lenders interested in providing loans review the borrower’s proposal, including the details of the Pi-NFT collateral. They assess the collateral in relation to the requested loan amount and the proposed interest rate.
Offer and Agreement: Lenders can choose to make an offer to the borrower based on the proposed terms. This offer includes the loan amount, interest rate, and duration. Alternatively, lenders can create custom offers with terms tailored to their preferences.
Acceptance or Negotiation: Borrowers can accept the lender’s offer, negotiate the terms further, or choose a custom offer. Once both parties agree on the terms, a lending agreement is established.
Loan Disbursement: After the agreement, the lender disburses the loan amount to the borrower, who then receives the funds for their intended purpose.
Collateral Security: Throughout the loan term, the Pi-NFT collateral remains securely locked or escrowed. It serves as a guarantee for the lender that they can recover their loan amount in case of borrower default.
Loan Repayment: Borrowers must repay the loan, including interest, within the agreed-upon duration. Failure to do so may result in the lender claiming the Pi-NFT collateral to cover the outstanding debt.
Collateral Release: Once the borrower successfully repays the loan, including all interest and fees, the Pi-NFT collateral is released back to the borrower, marking the loan agreement as fulfilled.
Default Resolution: In the event of a default, where the borrower cannot repay the loan, the lender can claim the Pi-NFT collateral as compensation for the unpaid debt. The lender can then sell or retain the Pi-NFT.
In this way, Pi-NFTs act as tangible and valuable assets, providing security and trust in the lending and borrowing process on Aconomy. Borrowers can access needed funds, while lenders have the assurance of collateral, creating a balanced and secure lending ecosystem within the NFT marketplace.