Drops Integrates Chainlink Price Feeds to Secure NFT-Backed Loans and Margin Trading
The Drops team is pleased to announce that we have integrated Chainlink Price Feeds on Ethereum mainnet to support our NFT-focused DeFi ecosystem. By integrating Chainlink’s market-leading decentralized oracle network, Drops ensures that loans are accurately and securely priced against various cryptocurrencies or stablecoins. Our initial integration supports the following Chainlink Price Feeds on Ethereum: WBTC, ETH, USDC, ENJ, UMA and additional stablecoins.
We selected Chainlink because it’s the most widely-used and time-tested oracle solution in the blockchain industry, already securing tens of billions of dollars for leading DeFi projects. Chainlink Price Feeds source high-quality price data using decentralized oracle networks that have a strong track record of performance during extreme network congestion and market volatility. Additionally, Chainlink Price Feeds are very easy to integrate, as they have an extensive suite of pre-made decentralized oracle networks already running live on Ethereum, Polygon, and other leading blockchains.
Securing Our NFT-Focused DeFi Ecosystem With Chainlink
Drops is a DeFi ecosystem that specializes in improving the fungibility of NFTs by unlocking their liquidity. Our protocol lets users deposit NFTs to receive dNFTs — a synthetic version of their NFT that they can fractionalize and stake in our pools to earn protocol fees. We also offer Margin NFT and Loan products, where users can deposit their NFTs or stablecoin assets as collateral to borrow dNFT LP tokens and earn fees in our Vaults.
Drops is using Chainlink Price Feeds for all major collateral assets involved in Loan positions. Chainlink Price Feeds provide us with precise and up-to-date price data for all supported non-NFT assets. Through Chainlink Price Feeds, we can reliably determine the maximum borrowable quantities of ETH and Ethereum-based tokens (such as stablecoins) against a user’s NFT-based collateral. The same Chainlink Price Feeds will also be used to monitor the loan-to-value (LTV) ratio of users to ensure it’s maintained throughout the duration of the loan.
All collateral and borrowed assets in the Drops protocol must be valued fairly and efficiently at all times — yet this is no easy task in highly volatile crypto markets. Having accurate price data protects borrowers and lenders alike, guaranteeing the stability of loan positions and the fair management of any necessary liquidations for undercollateralized positions. However, blockchains do not natively generate aggregated price feeds, thus requiring an oracle to fetch it off-chain and bring it back on-chain.
After reviewing different oracle providers, we chose Chainlink because it’s the most provably decentralized and precise source of on-chain price data available in our industry. Some of the notable features of Chainlink Price Feeds include:
- High-Quality Data — Chainlink Price Feeds source data from numerous premium data aggregators, leading to price data that’s aggregated from hundreds of exchanges, weighted by volume, and cleaned from outliers and wash trading. Chainlink’s data aggregation model generates accurate global market prices that are resistant to API downtime, flash crash outliers, and data manipulation attacks like flash loans.
- Secure Node Operators — Chainlink Price Feeds are secured by independent, security-reviewed, and Sybil-resistant oracle nodes run by leading blockchain DevOps teams, data providers, and traditional enterprises. Chainlink nodes have a strong track record for reliability, even during high gas prices and infrastructure outages.
- Decentralized Network — Chainlink Price Feeds are decentralized at the data source, oracle node, and oracle network levels, generating strong protections against downtime and tampering by either the data provider or oracle network.
- Reputation — Chainlink provides a robust reputation framework and set of on-chain monitoring tools that allow users to independently verify the historical performance of node operators and oracle networks, as well as check the real-time prices being offered.
As the Drops ecosystem expands to yield farming via Vaults, it will become increasingly important to optimize the stability of all collateralized positions across the protocol. Chainlink Price Feeds provide such stability, as well as the ability to scale the number of assets we support and scale our oracle security as it rises in TVL.
“Integrating Chainlink’s decentralized price oracles not only helps us uphold the solvency of the protocol by ensuring full collateralization at all times, but it accelerated our go-to market time by being able to quickly connect to live, time-tested price feeds on Ethereum and Polygon,” stated Darius Kozlovskis, Founder of Drops.
Chainlink is the industry standard oracle network for powering hybrid smart contracts. Chainlink Decentralized Oracle Networks provide developers with the largest collection of high-quality data sources and secure off-chain computations to expand the capabilities of smart contracts on any blockchain. Managed by a global, decentralized community, Chainlink currently secures billions of dollars in value for smart contracts across decentralized finance (DeFi), insurance, gaming, and other major industries.
Chainlink is trusted by hundreds of organizations, from global enterprises to projects at the forefront of the blockchain economy, to deliver definitive truth via secure, reliable oracle networks. To learn more about Chainlink, visit chain.link, subscribe to the Chainlink newsletter, and follow @chainlink on Twitter. To understand the full vision of the Chainlink Network, read the Chainlink 2.0 whitepaper.
Drops brings DeFi-style infrastructure to NFTs, adding much-needed utility to idle NFT assets. Users can leverage their NFTs to obtain loans and earn real yield, reducing the opportunity cost of holding NFTs long-term.
This Drops infrastructure will become increasingly important as we witness the rise of “financial NFTs” — an expansion of the space beyond digital artwork into more tangible financial instruments.
Drops will offer gasless transactions and a smooth user interface by leveraging the layer-two platform Polygon, enabling fair and frictionless participation for all users.