The AssetDash Podcast: The NFT Loan Market With Sharky

Solana Phone Podcast Title Image

What is Sharky?

(0:09) Matias: What is up, everybody, welcome to the AssetDash podcast. Today, we have Sharky, super excited about this project. I think what they're doing is really going to revolutionize the NFT space and, and they're solving a really core problem. So we have Rea and Anton, who are two of the founders of the company. To get things started, which one of you want to take, what is Sharky and, and go into details about the problem that you're solving.

(0:31) Anton: Hey, thank you for having us. I think Rea should take it.

(0:36) Rea: I’m Rea. So Sharky is a decentralized lending platform and it allows you to use your NFT as a collateral, which brings liquidity to your JPEG. Something that I think a lot of people are very excited about is that, they see a new mint going on, they see a new financial opportunity, and they're saying that they're illiquid, but they're rich in JPEGs. And this now allows them to access that without having to paper-hand, which protects all of our bags. 

(1:05) Matias: Yes, and I was really excited about this. So I came across Sharky at Solana Hacker House and ended up throwing a small angel investment in a full disclosure there as well, because I, I see the problem that they're solving. There's a huge liquidity problem, obviously in NFTs. I think the loan component of NFTs, that segment is only going to grow. We're still in the first innings in NFTs in general, but from a liquidity standpoint, I think we're inning zero. So I guess like to start, what does Sharky do differently from a loan perspective, compared to the other players in the marketplace?

(1:43) Anton: Yeah. Good question. So I think the, Several sides of this. One, the liquidity is instant for borrowers. So when they come to Sharky, you can take out a loan literally in like 3 clicks and people really like that experience. Two, we have orderbook model for lenders. And I know it's a complicated technical term, I guess. But what it means is that lenders can put effort and turn that into profits. And it's kind of like a layer one. We call it layer one protocol solution because it's a super set of, like, liquidity pools and similar kind of approaches. We can manage liquidity on somebody's behalf and turn it into passive income or we can allow somebody to come to Sharky and kind of like trade actively and make more and I think that's a big differentiator for lenders. Other platforms make you choose, like either you're doing super manual or you kind of like doing super passive and we can and in between, combining the two.  NFT stays in your wallet, also important, so you don't lose access to Discord. You don't lose benefits, like air drops, whitelist in exchanges and all that. Yeah, did I miss anything?

(3:08) Rea: I was going to say that when lenders come to the platform and lend on Sharky, they make all of the profit. 

How Can You Receive Instant NFT Loan Liquidity

(3:15) Matias: Yeah, so I wanna go into detail from like a user experience perspective, you know, what does it look like if I want to go and borrow, and then if you can just give that same, you know, narrative, what does it look like if I want to go and lend, how are those two user experiences, what do they look like?

(3:29) Rea: Yeah. So when a user puts NFTs in their wallet, comes to the platform, they connect their wallet and we instantly show them what are the offers they're going to get for the NFTs in their wallet. So they'll see, they click on borrow. They see all of their NFTs and the current best offer for each one of them, they can click on the borrow button and it shows them the NFTs and that collection that they own. And they can actually just take out a loan right there, one click and it's in their wallet. And then to that effect, the NFT also stays in their wallet and it doesn't actually go into an escrow which is really great. Yeah, that's the borrow flow. When they finish taking out the loan so that after they click confirm, the page will show “add to calendar” and we're actually rolling out with notifications very soon. But this allows the borrower to be a lot more responsible. We're really really excited about how low our default rates are. Because that means that we have really responsible borrowers and we create a really good user experience, so that people can actually track when they have to pay back their loan by. Currently we have fixed term loans, so that's two weeks for you to like, play with the money and then pay back your loan.

(4:43) Matias: And then on the borrow side, it's on a collection by on the, well, I guess on both sides, it's on a collection or collection basis. So neither side is really taking into account the rarity. You're basically just taking a bet on what you think the floor may be.

(4:58) Anton: Exactly. Yeah. So it's not, we're not trying to address like a rarity problem. We're trying to address problems, like, I need a loan, like right now, how can I get it? I'm okay with that not being accurate, like, valuing my precious NFT which is like super subjective anyway. So yeah, I think about liquidity pool, so like, we'll call it order books per collection. 

How NFT Power Investors Are Leveraging NFT Loans

(5:20) Matias: Then, on the loan side, I guess, what type of characteristics are you seeing from the users today? I guess one general assumption would be people going to the platform and trying to take out a quick loan to participate in another mint, do you think that's a user activity that's becoming, you know, very popular or, or is there other things that you're seeing in the marketplace that the average NFT investor may not be privy to?

(5:46) Anton: Great question, we actually, like, we'll be starting private alpha groups to share more and more of this insight. This is primary area of research. Like why are people taking loans? Like why, what are they doing with those loans?

(6:05) Rea: First of all, I just think that's really, really fascinating to me because it's a much more high conviction play when you're taking out a loan to do something with that money. You're not just like, okay, I have some spare cash laying around. You're like, actually I'm willing to bet on this. So then you take out a bunch of loans and we've seen, you know, whales hit the platform and like they'll take out 15 loans at the same time on a blue chip and then they go and - we actually just go watch and we go whale watching on Sharky. And it's really fun because we're like, okay, which floors are they sweeping today? So like, I think that even though there are many use cases for instant liquidity, I think one of the primary ways that people are finding out about Sharky, because they're sharing Sharky to their alpha groups about the secret sauce that they're using to like, be able to make big plays. They're minting and they're sweeping floors on dips. So I think people are making a lot of profit using Sharky because they can actually just multiply their profits.

(7:05) Matias: That's super interesting and I'm curious to see how that trader community around the platform starts to develop.

(7:10) Anton: Yeah, for sure. And we, we also seen use cases like, people trying to arbitrage. They would tick out a loan from one collection and provide liquidity to another one, if it has higher APY, because our APY rates are different per collection. Yeah. And sometimes in use cases like when they probably would not make a successful trade, but a time comes to repay a loan. We have like mostly 14 day loan loans and seven days for, like, younger collections and newer ones. So they would like, take out another loan and they repay their old one.

(7:45) Matias: That's really interesting. And what collections are you seeing the most activity on?

(7:151 Anton: Heads down Okay Bears, as of last month. SMB are going strong, Famous Foxes. I would say those are like, top three and everything else is kind of like, variable. Like it's surprising, but it's kind of, it's not like a, just uniformal, stays similar, it's like sometimes it spikes and Degen Apes would come and take out lots of loans and sometimes they would stay quiet for a week, so it's kinda like where community, I guess, influenced. 

(8:17) Matias: And I'm seeing a 260% APY here on Okay Bears. Where is that coming from?

(8:26) Anton: That is demand and supply driven. So the more of orders or like offers available in the pool, the lower will be APY, but the higher demand, the higher will be APY. So kind of like when liquidity drains and goes to zero, APY grows to incentivize more lenders, like to provide that liquidity. We're working on kind of like, you know - a lot of platforms use static utilization curves when it's just like, let's say manga markets, when pool goes above 70% utilization, it starts growing rapidly. Our approach is more complicated. One of the Rea's ideas, it's kind of like a velocity based, if it makes sense. So there is a time element to it. If we see lots of offers being taken like rapid succession or like quickly, maybe upcoming mint, like hype mint is coming up. So APY will also grow to incentivize higher profits for lenders.

(9:27) Matias: And is there a plan to have some sort of liquidity mining type component around there at some point?

(9:33)Rea:  We haven't called it liquidity mining, but it would be similar. We'll be able to take larger LPs and be able to manage funds so, effectively, the same thing.

Outages On Solana

(9:42)Matias: Amazing. And now I wanted to get your thoughts too, on, you know, the space in general. More particularly, there's been Solana outages as of late. What are your thoughts on those general outages? Do you still see a long term path where these things get solved and then how has it affected the platform and, and the user experience, if it has?

(10:03)Anton: I mean, obviously like it's, it's bad. Everybody is suffering. Like it's going to take every platform because we need to come up with workarounds for users to - and users tend to, not all of them, but misattribute the problem, like, “Hey, I cannot repay my loan, am I going to lose my NFT?” Like they start seeing this as Sharky's fault, which is a really difficult position to be as a business, because it's not anymore, like, a pet project. We have people putting real assets on the line. So yeah, we, we came up with quite a few, like security measures, like when Solana is really down and like underperforming, we're trying to extend long terms or disabled foreclosures and help users in Discord, kind of like to make sure they feel safe. They can still repay loans after Solana is up, like transactions are going through. But there's definitely challenging situations. So I'm trying to help, like anywhere I can. It's a complicated problem they're trying to solve. It's super, it's super impressive. Like I think nobody in the world would solve those types of problems. But differently a challenge.

(11:23)Rea: So anytime you have, like, users on both sides where you're not just like, as a company able to say, well, okay, we'll do like a loan forgiveness or something like that or a extended grace period, because you also have a lender on the other side for whom it might not be fair. So I think anytime that you have a situation like that, you just have to consider a UX that accounts for both and for us right now. I think lenders have actually been really understanding when we say that “Solana is down, people can't repay their loans. And we're going to extend the grace period.” They've been actually just very understanding, which is cool.

(11:56)Matias: Amazing. It's just like a unique position because the NFT community on Solana it's top tier, right? I think the, the engagement and the, the energy, I think to start this on any other platform, but Solana would be difficult because you're able to tap into that community excitement. With that in mind though, is there plans to go multichain for Sharky or is the goal to be Solana specific?

(12:18)Anton: I think multichain as an experiment. We recently applied for near grant, like, depending on how that goes, we'll try to prototype its growing chain, like even younger than Solana. Considering heavily Ethereum, there is, there is more competition in Ethereum but also a bigger market. And in my mind, like borrowing and lending, it's not “winner takes all”. There always will be competition. There always will be a competent product. You can always compete by like interest rates and financial models and optimizing, like more and more. So it's definitely a consideration, but first we want to mature. We're one of the best players in Solana. Our product works really well. And a lot of - we get out the field like, oh, user experience is amazing, which is what we focused. And Rea and I are like, almost embarrassed. We’re proud in a lot of ways of what we've built and what the team has built, but like, you know the bar is really high. So we still have a long way to go to deliver what we believe is like really good experience.

(13:25)Matias: That's super interesting. I think one of the, the components with the different chains is you're going to still run into issues. Each one has its own kinks, right? So with Ethereum, it's generally the gas fees, is what people complain about. Solana has like this really good mix where you don't have the high gas fees and, and you do have this major NFT community, right. Even flipping Magic Eden. I mean, Magic Eden flipping OpenSea as of late with transactions. So what are some things that you can share upcoming for Sharky? Like, where would you wanna see the platform over the next few months and what are some of the items that you're focused on?

(14:01)Rea: So we are going to be dropping an NFT and that's really exciting. That's about as much as the Sharky community knows, we haven't revealed too much about it. Everyone knows that because we're a loan platform, we're obviously going to have utility. But I think what we're going to be doing is going to be very different. Actually challenging a lot of the ways that people think about and NFT that they hold and what are the reasons for holding. So that's something that I'm ultra excited by. If you haven't seen it on our platform, we have reward points, so they're called Sharky points. Things that you can - if you're transacting on the platform today you're earning and these points help you get into the white list. And if you earn enough points, you can actually get the NFT for free. So people are really excited. They're racking up points. And it's one of the ways that we reengage with our users. Really reward them for their loyalty and reward them for just continuing to transact with us. 

(14:52)Matias: Amazing. And then, from launch to now, I know you've mentioned that you've seen the volume continue to uptake. Is there a particular reason why you think that's happening? Is it just more adoption or more interest that that's taking place and more people finding out about the platform? Has there been certain iterations based off of user feedback that you think is leading to that?

(15:11)Anton: I think it’s both for sure, Yeah. It's like on, on the borrower's side, I think it's mostly like people learning what borrowing feels like. We were first, uhm, I guess we were first to provide this experience, like, instantly lent. There was like another platform - yeah, go ahead.

(15:37)Rea: We're the first to provide instant borrowing and right after we were the first loan protocol in the world to provide escrow free lending - sorry, borrowing. So they are also able to not only get their money instantly, but not lose sight of their collateral. And then, I think on the lender’s side, we also made some improvements. That's what drove up lender adoption. We started including lender tooling so that they could look at the order book, look at the current loans, anticipate using that. The whole point of the order book is price discovery. So each lender's contribution helps the lender economy as a whole. And then on top of that, now, we don't take any fees from the platform. So lenders just, like, come to Sharky and they make money and they know that everything they make goes back to them.

(16:20) Anton: Yeah. I was trying to say, like, borrowers are still learning. And we see people asking questions and, like, assuming they can, you know - it's a borrower initiated flow. They can come and it's like  “Hey, how can I deposit my NFT so I can get the loan?” And I'm like, Oh, it's vice versa, you can just like, come and take out the loan, you don’t need to -

(16:41) Rea: Yeah, they're kind of like, “How long do I have to wait generally for a lender to accept my offer?” We're like, no, no, you accept the offer and you take out the money right now.

(16:50) Anton: And another confusion aspect, like, which is - I mean confusing in a good way, like surprising. That NFT stays in the wallet, users are trying to ask like, well, wouldn't I be able to like, just trade it or sell it on Magic Eden and - no, it's frozen. And so, this very little understanding of the concept of frozen NFT, so that's a new check, I guess, a new approach. So it's that familiarity with that it's still growing. I want to see the future of, like, staking platforms and other like protocols to doing this, escrows or noncustodial or whatever the term for that.

(17:34) Rea:  I would say, in general, we're innovating a lot in this space and that's also one of the reasons why we have to be Solana first before other chains even catch up in technology that allows us to do this. And Solana is really built for utility. So we're going to really hit home runs on utility first.

(17:49) Matias: That's amazing. And then how do you see this playing out with staking? Is there even a way now for NFT stake to also be able to, you know, put it out for, for a loan, how does that work? 

(17:59) Anton: So there are really interesting protocols. Like what Cardinal team has developed, for example the open source, like staking protocol. And I think it's a really good one because it also allows you to keep an NFT in your wallet while you're doing staking, but doesn't allow to list on marketplaces and transfer. We're planning to integrate with that, we're planning to kind of like, well, if it's frozen for stake and you can still borrow and lend on Sharky; primarily borrow. But it's complicated because this, the market for staking protocols is very diverse. A lot of teams build their own staking because it's just easier to fork some open source like tools and provide custom functionality, even though, like, most of them don't have custom functionality, but, you know, engineers. It's like, I wanted to be flexible. So I'm going to do my own thing. But I think it's going to be huge; first collection that will partner with us to provide those borrowing and staking at the same time for their users, that, I think, that's a huge utility. 

(19:04) Matias: And, in general, with the current crypto bear market that we're currently experiencing, it looks like Solana NFTs at least are not in a bear market. Not at all, yeah. So on, on your side, I guess, what are you seeing from the Sharky perspective on the bear market and then NFTs, in particular?

(19:27) Anton: Yeah, I mean, just like you said, we’re betting on Solana as a team, as a company, so like we - all the loans are in Solana, it's not in USDC. So on Solana is on Solana, in absolute terms, platform is growing really quickly, loan volume is growing, activity and like, it seems like there's this community that's not impacted by bear market and I think it's true. We see the evidence of that, you know.

(19:53) Rea: Maybe inspired by the bear market when the bear market happens, everyone buys NFTs.

(20:00) Matias: Everyone buys NFTs as a hedge. And I think what's really interesting too, is that the core community that's here, they're becoming those early adopters of Sharky and you really want that motivated, excited base to really, you know, kick things off and, and grow the platform. Where would you like to see the platform in a year or two years and where do you think NFT loans as a whole? Like what, what form do they take on in the marketplace from like a big picture perspective?

(20:32) Anton: I think eventually two things will happen. Market will become less volatile. That will probably take a few years given the trends. And then we'll start seeing longer, I guess like safer loans, like not necessarily longer duration, it's already possible to do like indefinite duration. But we will see more and more kind of like, loans that are like close to value, like 70, 90% of collateral and you can take those loans for a couple of months and not worry about liquidations if price drops or anything like that and we'll see markets starting competing on interest rates. Because ultimately that's how you've been borrowers. The better risk model wins, kind of, and we'll see more and more. And I see custom loans and instant loans here to stay. I think there will be a combination of those in the market. I don't think liquidity like ours, like instant liquidity platforms, like, replace peer-to-peer marketplaces. And I don't think peer-to-peer marketplace replaces what we've built. I do see a lot of synergy and like maybe emerging, a combination of both. We have some ideas that are still in sealth, like, how to combine, you know, how to make borrower-initiated flow more exciting for lenders than peer-to-peer marketplaces, for example. And we will start seeing, I think, liquidation mechanisms for defaults, even though our default rate is really low right now. All markets, I think, naturally go through cycles and there will be an NFT market crash at some point of some form and a lot of industries will lose their value and there will be, or some collections will rack, something will happen. Some liquidation cycles will be there. And there's a lot of innovation that needs to happen in liquidation form as well. ‘Cause ultimately we don't want protocols like us to just go to the marketplace and, like, lease NFTs below the floor and lower the floor for collections. That's not what we do. And yeah, there's that, that area where companies will be built around liquidations, we've already seen this on Ethereum.

(22:51) Matias: Do you see a world where people are getting their NFTs appraised in a way, kinda like a house and getting like a professional person to put a value on it and then going and doing the loan process that way?

(23:03) Anton: Oh, yeah, that already is working on Ethereum because there are so many, like really, really high pricing fees that are literally more expensive than houses, even in like most expensive cities. On Solana it will happen that, you know, when market expands and if you just become more and more valuable, that is a natural consequence, I guess. But we've seen more and more right now, experiments of what I call it, like social slash crowdsource appraisals. When there's clever ways to, like, put NFT on the market and create micro economy incentive systems, like, for community to appraise it almost like auctions. We do this, like, with order books, but there's other mechanics, for example, to discover prices. 

(23:50) Rea: I actually think that the lending order book is a much more surefire way to appraise than what you currently see as floors, ‘cause the floors can be arbitrarily high. It could be manipulated. And you generally, when you look at the floor, you actually try to look at transaction history at Magic Eden to see if that people actually have been buying and selling at that price. And sometimes you'll see that there are transactions below that price, and that's just like what people are listing it at. Whereas with lending, people are actually putting money up. They're locking in liquidity for that. So that's a much stronger signal and we're going to soon be able to use loan ceilings as another price sort of signal instead of just relying on floor price.

(24:31) Matias: And it's going to help with price discovery in the process, which is really cool.

(24:34) Rea: 100% yeah.

(24:36) Matias: And then one more question. I honestly probably should have started with this, but I know both from the Slack ecosystem initially, right, as you were working together on a Slack project. How did you both get into cryptos and NFTs? And what was that aha moment when you decided “I wanna do this full time”?

(24:53) Anton: Yeah, I came just like, as in - I was into, like, Ethereum and Bitcoin kind of like as an observer, investor, I had some prototypes on Ethereum, but never built a company like anything serious. Then in July a friend sent me white paper and like “Hey, check this out like that. That's a cool, cool technological chain.” So I read white paper, I listened to podcast, was like Anatoly describing the thought process about Solana architecture, kind of like the vision. And I'm very, in that sense, I'm very intuitive person. To me it made sense like just general thinking and differences in like positioning in the market and technology and like focus on developers. It was important for me to hear that the chain and Solana foundation and Solana labs, like, care about engineers first and trying to bring more and more engineers - and that's how platforms succeed. And then I got into NFTs, my first - I guess like my first reaction was, I didn't get it. That seems strange. But clearly that's the basically huge part. I don't understand why people are trading and investing on those, but I want to understand. Took me about a month to kind of like come up with an explanation of what NFTs are that my parents understood. And then I realized like on Solana, there are no financial products when at least in November, there were none. And lending is just one of the natural things that happens, like when the market becomes more and more efficient, like, lending allows for additional leverage. And in crypto, you can create like multiple layers of that. So yeah, that, that was the thinking like, well, I want to build something for NFT space because it's exciting and emergent, like the coolest tech, the newest technology. And financial products seems like a good challenge.

(26:58) Rea: Yeah. From my perspective, I just, I've always wanted to build something in FinTech. And I realized that this is actually not something that just is fun to build, but it's also something that's necessary for NFTs to have financial staying power. They aren't really an asset until people start treating them like a real asset. And this actually gives the NFTs is the ability to grow beyond what their natural sailing would've been if they were just JPEG that people collected for fun. And this gives 'em that component of liquidity and we're going to see a lot of like, new abstractions built on top of this, that free up even more and allow you to speculate even more on their value, which I think is like super cool. My entry into this space actually was as an advisor in some DeFi NFT and gaming projects, both on Ethereum and Solana and learning from a lot of my crypto teams in this way, I was just blown away with how much they were learning. And naturally I just actually wanted to go into a space where I didn't know very much about and then pick up and just like completely run, dive super deep. 

(28:03) Matias: Amazing, Well, I'm super bullish on Sharky and I think NFTs now it's really just getting started. I was listening to a punk six five to nine podcast, and he had a really good line where he stressed that NFTs are crypto's consumer moment. And, and I really feel that way. You're seeing whole new people get into NFTs that never had interest in Bitcoin, never had interest in Ethereum or DeFi tokens. And it kind of makes sense. I think there's two components. One, you have the imagery component of people actually liking the art, but two, you have the community component and we're starting to see NFTs become digital memberships, which I think is super cool. But even when you look at the fact that there's not these FinTech and finance tools for NFTs, there's actually, I think a lot of compression in the market from like evaluation standpoint, you know, you take doge, doge still has, I think what a multibillion dollar market cap. You can look it up real quick. Pretty sure it does. but the market cap of Solana and monkey business is 32 million, right. And, and I think a big part of that is the fact that you don't have tools like the loans, like the ability to borrow, like the, you know, fractionalization, it hasn't gone like mainstream yet. You have to buy one and, and when you can only buy one, you don't have those liquidity options after that. It cuts out a lot of the potential; people who can participate. And now these tools like Sharky are starting to come to the forefront and I think that's going to change it. And yes, doge: 10 billion market cap. Solana monkey: 32 million. So I think we're super early and I think what Sharky's doing is fantastic and it's a huge step in the right direction, especially for an NFT community like Solana, which is extremely active and engaged. So keep crushing it. I'm sure the AssetDash investors and users on the platform are going to love this. We have a huge Solana NFT community, right. As users on the, on the app. And yeah, looking forward to, to getting this out

(30:00) Rea: I think that there's one additional thing that you might be excited about. We have lenders coming over from Ethe and moving Ethereum into Solana so that they can get some exposure to the Solana blockchain and the Solana NFTs before they're like ready to like dive right in and, you know, invest in the rate that they sweep floors at. That's pretty, pretty immense. But first they were, they were using Sharky as an educational tool to learn about the NFTs and the volatility.

(30:26) Matias: And that that's a great way to do it. Good first step. I guess one more question on that. Why do you think Okay Bears was that project that was able to really bridge the gap there? Is there anything in particular you saw that I guess drove the Ethe people over to Solana? ‘Cause I feel like that was a turning point.

(30:43) Rea: I think one: OpenSea came to Solana and I think that already brought awareness and two, I think the Okay Bears founders were already like thinking about this as their avenue. I think that they were already well connected in Ethereum. They knew how to advocate for Solana NFTs to the Ethereum crowd. They knew what kind of art to provide to catch their eye. And they knew the meta that was on Ethereum, that would be like easily catching on. I think a lot of the Ethe whales were not really quite used to Solana NFTs being utility based. I think they were like more used to the branding meta, right. And so they came to Solana, they saw the art that they liked and they saw they started buying some Okay Bears and they started buying more Okay Bears. And I think that really is what drove the price up. Whereas if they knew more about Solana utility, then like, I think they would've kind of spread out a little bit more, but I think they're starting to get more aware about that.

(31:36) Anton: Yeah, I definitely agree. I think it's - right now, we're in the age of brands for NFTs. Age of utility is coming. I don't think it will replace brands. It'll be additive. And recently I went to a dinner when I heard Okay Bears’ founders talking to others, I didn't have a chance to talk to them because I was talking to other people. But I actually heard that question. Somebody asked, like, why do you think your project was so successful? And I think they responded something like, “Well, we didn't know it's going to be so successful. We focus on brand building, but it like 10x our expectations, so.”

Get the latest product and management insights.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.