P2P NFT-collateralized lending

Use your NFTs as collateral to borrow ALGO instantly, or put your ALGO to work lending against a whole collection. Loans are peer-to-peer and fully on-chain — downbad never custodies your assets.

The idea

A lender posts a collection-wide offer: “I'll lend X ALGO against any NFT in this collection, for D days, at R% interest.” A borrower who holds a qualifying NFT accepts the offer to get the ALGO instantly, locking their NFT as collateral until they repay.

Repay the principal plus interest before the deadline and your NFT is returned. Miss the deadline and the lender can claim the NFT instead — that's the lender's downside protection, and your maximum loss as a borrower is the collateral.

Borrowing against your NFT

1Find an offer

Open the Lending tab on a collection page (or the global Lending page) to see open offers. Each shows the loan amount, interest rate, and term. The best offer is the largest amount available.

2Accept the loan

Pick an offer and choose one of your qualifying NFTs as collateral. The ALGO is sent to you and your NFT is escrowed in a dedicated on-chain loan account.

3Repay before the deadline

Repay principal + interest any time before the deadline to get your NFT back. Repaying early costs the same flat interest — there's no penalty, but no discount either.

Interest is a flat amount for the whole term, not an annual rate. “10% for 30 days” means you repay 110% of the principal, whether you repay on day 1 or day 30.

Lending your ALGO

1Create an offer

Choose a collection, how much ALGO to lend per loan, the term, and the interest rate. Your offer can be filled repeatedly while your deposited balance covers it.

2Earn interest on repayment

When a borrower repays, you receive principal + interest, minus a 10% marketplace fee charged on the interest only (never on the principal, and never on a default). That fee is split between the marketplace the offer was created on and the one the loan was taken out on. The capital then revolves back into your pool to fund the next loan.

3Claim collateral on default

If a borrower doesn't repay by the deadline, you claim their NFT. You set terms you're happy to own the collateral at.

Your offer is pinned to a snapshot of the collection taken the moment you create it: it matches only the NFTs that exist then. NFTs minted later can't be borrowed against it. To cover new mints, post a fresh offer. This is what protects you if a collection's creator wallet is ever compromised — see Risks below.

Risks

Borrowers: if you don't repay in time you lose the collateral NFT. The loan amount and interest are fixed up front.

Lenders: on default you receive the NFT, which may be worth less than the loan if the floor price drops. Only lend amounts you'd be comfortable owning the collateral at.

Lenders — fake collateral: a real concern with collection lending is a compromised or malicious collection creator minting a worthless NFT that looks like it belongs to the collection, borrowing against it, and walking away. downbad blocks this: because every offer is locked to a snapshot of the collection's existing NFTs (see the tip above), an NFT minted after you post your offer simply can't be used as collateral against it.

The contracts are non-custodial and have been extensively tested, but smart-contract risk always exists. Don't lend or borrow more than you can afford to lose.

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