The Vinci lending protocol is a pool-based money market with NFT assets as collateral. NFT holders can deposit their NFTs on the Vinci platform as collateral to take out loans, meanwhile money lenders will earn yields by providing liquidity.
The lending protocol relies on three types of stakeholders which all benefit from Vinci:
Lender: Lenders earn safe and stable yields by providing liquidity in the protocol. Lenders deposit loan assets into lending pools in exchange of interest bearing tokens - vToken. vTokens are used to keep track of the funds they have deposited as well as any interest earned. Lenders can withdraw their deposit and yields at any time by burning the vToken and receiving the loan asset.
Borrower: Borrowers obtain liquidity from the protocol by depositing their NFT as collateral instead of selling them. Borrowers need to deposit NFT assets into the lending pools before borrowing, and they will receive the corresponding wrapped NFTs (vNFT) for redemption. Then borrowers can take out loan assets and owe platform a fixed amount of interest bearing token - vDebtToken. Borrowers can withdraw the NFT collaterals anytime as long as these NFTs are not actively being used to borrow.
Liquidator: Liquidators monitor the pools and carries out the liquidation process when a borrower's health factor has fallen above the liquidation threshold due to their NFT collateral value not properly covering their loan/debt value. Liquidators repay loans and take the NFT collaterals at a discount price.
In the following pages, we will dive a bit more in-depth in the Vinci lending protocol and explain in more detail how some essential bricks of the protocol work.