Lending for NFTs: Explained
Introduction
JewelSwap needs lenders to deposit EGLD into the lending pool, in order to offer NFT Loans and NFT Mortgages to borrowers. Let's go over how lending works from a user's perspective.
Lenders will receive attractive APY for lending their EGLD to borrowers that use the NFT Loans or NFT Mortgage feature. Rewards are being collected for 30 days (known as an epoch) and paid out after the epoch ended. After the epoch ended, lenders will receive their relative share of the generated rewards. The user can choose to either compound (also known as reinvest) his rewards, or claim/withdraw the earned EGLD.
The shown APY on the Website is calculated based on the rewards accumulated during the epoch.
Because the rewards are only distributed after the end of the epoch, it is important to note that the lender has to stay in the lending pool until the epoch has ended. Otherwise, the lender will not receive any rewards for the ongoing epoch.
Lock time
Furthermore, once you deposit EGLD into the lending pool, your deposit is subject to a 21 days lock. If you deposit any amount of EGLD, you cannot withdraw those EGLD for 21 days. After the 21 days passed, you may withdraw them, but be aware, withdrawing your deposit before the end of the epoch means you will earn no rewards for this epoch.
Compounding/Reinvesting your EGLD rewards will not reset the lock, but depositing more EGLD will reset the lock.
Withdrawing
Withdrawing is possible as long as there is enough unborrowed and available liquidity. Or in other words: You can withdraw once your lock is over and if there is enough EGLD in the lending pool that hasn't been borrowed by anyone yet.
Even though only 10% is borrowed for example, the available liquidity might be lower due to Algorithmic Market Operations. In high withdraw scenarios, available liquidity might be lower, which can lead to users being unable to withdraw until loans have been paid back or EGLD from the AMO module have been unstaked and put back into the lending pool. Please also read the documentation about the AMO module to learn how it works.
During times of low available liquidity, you might need to wait another 24 hours, or a few more days before you can withdraw. JewelSwap is committed to enable users to withdraw as fast as possible, when they demand to do so, but due to open loans and the AMO mechanism, a low wait time can occur.
Rewards / Fees
70% of the borrowers interest fees go to the lending rewards Pool, while the other 30% goes to the protocol.
Managing Risks in Lending EGLD
JewelSwap relies on lenders to deposit EGLD into the lending pool, enabling the platform to provide NFT Loans and NFT Mortgages to borrowers. While lending offers the opportunity for attractive rewards, it's important to acknowledge potential risks, including the possibility of bad debt.
If you want to learn more about the risks involved in lending your EGLD for NFT Loans and NFT Mortgages, you should also read the other pages in the documentation. By understanding how NFT Loans/Mortgages work, you can assess the risk for yourself.
Lenders should be aware that despite the potential for rewards, there is a risk of borrowers not repaying their loans, leading to potential bad debt.
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