Zumer AMA with CRE8R DAO
Primer: SY Chan is the CEO of Zumer Protocol, an upcoming liquidity protocol for the NFT market. They are pioneering a novel credit and liquidity risk management mechanism. Get the inside scoop in their AMA with CRE8R DAO here.
Team
Who is SY Chan?
SY Chan is the CEO
Originally from Hong Kong. Currently based in Taiwan
Background in banking and venture capital
Got an MBA from MIT Sloan
Is a hardcore gamer
Spent 2-3 years in crypto startups. An early investor in Aave and Compound
Favourite NFT project is Azuki
Team
Most of his team is based in the US
Has a flat organization even though he’s the CEO
Have four co-founders
One of his co-founders, Mike, used to be a professor in history and art. He is their spokesperson and helps them to connect with different creative communities in the US
His other 2 co-founders are talented devs who have contributed to other DeFi protocols
Any VC Backers?
Outlier Ventures is one of their early investors
Draper, Binance, and Polygon invested in them
Is involved in Binance Chain’s incubation program
VC investors account for 5% of their tokenomics
Zumer
What Is Zumer?
It’s a liquidity protocol that allows NFT owners to use their NFTs as collaterals to borrow a loan against their holdings
Offers buy now, pay later (BNPL) options for NFTs
Happens on the app
Different payment methods are offered to NFT buyers
The protocol will lend users the funds to purchase the NFT upfront. The user will then pay back the loan over 6 - 12 months
Why Would Somebody Use NFT Loans?
Have done a lot of customer interviews. A lot of people wanted such a product
For example, people do not want to sell their Bored Apes. They want to improve their capital efficiency with the liquidity they get from collateralizing their NFT
This injects more liquidity into the NFT market
Reminds him of the 2018 crypto winter — no new liquidity entered the space. This eventually led to the creation of DeFi
For US investors, using NFTs to borrow loans does not trigger a tax event. This helps them to get liquidity
Origin Story of Zumer
Last year, Mike was working on an NFT project called Free the Mouse DAO, a Mickey Mouse-related IP NFT
The Mickey Mouse IP will be in the public domain in 1-2 years’ time
Mike hired him as a columnist
After a few months, they realized that there are no liquidity protocols for NFTs
Started Zumer to address this problem
Why Is The Project Called Zumer?
It’s based on Sumer, one of the earliest civilizations that invented consumer loans
Decided on Zumer because Z is the mirror image of S
It also sounds like Zoomer, which refers to the new generation
Relationship Between Zumer And Sumeria Labs
Sumeria Labs is the operating entity that’s owned by the 4 co-founders
They are going to build different tools to support the ecosystem, including an NFT wallet that allows the NFT owners to access different sources of liquidity
How Zumer Works
What Is Zumer’s Unique Value Proposition?
There are 3 types of protocols:
Peer-to-peer model matching lenders to borrowers. This model is not scalable
Pooled models aggregate capital from different lenders into a pool. The protocol underwrites the credit risk and good risk management is required
Their model, which is based on banking models from the real world
They securitize the lending amount into a safe pool and a high-risk pool to segregate the different risks based on the investor’s risk appetite
For Lenders
Stake your NFT into their lending pool. In return, you will get an NFT certificate pointing to the NFT you deposited
Borrowers can borrow up to a certain percentage of the value of the NFT. They are able to select the duration of the loan as well
Each month, they have to pay back a certain percentage of the loan. They have to pay back the entire loan by the end of the term. Otherwise, the protocol will liquidate their NFTs
The percentage of interest depends on the risk level of the project
Blue chip projects have a lower interest rate as their price volatility is lower
Have another product for high-risk lenders who want to take on default risks and price volatility
When NFTs are liquidated, sometimes there might be losses. These losses are absorbed by high-risk lenders
For Borrowers
There are 3 risk tiers:
Low risk: 60% of Loan to Value (LTV)
Medium risk: 50% of LTV
High risk: 40% of LTV
Examples of medium-risk projects include Doodles and Bored Apes
Examples of high-risk projects include Moonbirds and Azuki
LTV is determined by the past 6 months of price volatility:
Low risk: single-digit price volatility
Medium risk: Between 10 - 15% price volatility
High risk: Greater than 15% price volatility
Initially, the different tiers will be selected by the team. Eventually, it will be handed over to the DAO
Liquidity Provider (LP) Pool
Users can stake to earn income from the protocol
At first, it will only support Ethereum. Subsequently, they will support Polygon
NFTs
What Are Some NFTs That They Think Will Be Popular With Their Protocol?
Bored Apes and crypto gaming projects
Instead of renting from gaming guilds, scholars can use their buy now, pay later function to acquire gaming assets first and pay back the loan later
This helps the gaming project to decentralize ownership of the game
Does Zumer Support 1 Of 1 NFTs?
They are looking at it. It requires a different pricing model
For NFT collectibles, they are working with a price oracle called DIA
DIA has just developed decentralized NFT price feeds
For 1 of 1 NFTs, they are not able to use a decentralized method. They would need a hybrid model for pricing
Price Oracle
Working with DIA
Have talked to Chainlink. Waiting for Chainlink to decentralize their products
DIA’s oracle gets its price feeds from LooksRare, OpenSea, and a few other smaller marketplaces
Liquidations
How Do Liquidations Work?
They only have 1 criteria — failure to pay back your interest and your principal
The protocol will take over the NFT from the smart contract and put it up on their marketplace to start an auction
The highest bidder will get the NFT after the auction period of 2-3 days
Their target audience is bargain buyers looking for defaulted NFTs
Initially, auctions will be settled in ETH. Will be expanding it to other currencies and chains
As NFTs Can Sometimes Be Illiquid, How Are They Going To Prevent Price Manipulation?
When they spoke to different oracle providers, these providers also thought of different live scenarios to prevent manipulation
They take the longer-term moving average instead of the spot price
This causes a price delay to prevent a forced liquidation scenario
During the liquidation process, they allow a grace period for NFT owners to redeem their NFTs
Zumer Insurance
A product that is provided for borrowers to extend the grace period
Insurance costs 1-2% of the loan values. It extends the grace period for another 24 hours
Community
Any Names For The Community Members?
Community members are called Zumerians
Currently working on the DAO design
Will be dropping their protocol NFTs, with each NFT having different roles and benefits
Decentralization Plans
Working towards a DAO
Need to implement community education as their risk model is different from existing DeFi protocols
Created a new role called the underwriter to assess the price volatility risk
In the future, token holders will decide the interest rate of the protocols. However, it requires a lot of investor education
Have just set up their Discord and Telegram
Will have a soft launch in September
Security
Their smart contracts are being reviewed by CertiK. It will be done by early September
Looking for a second auditor
Will be launching a bug bounty program at some point
Tokenomics
It is in the pipeline and it depends on the market conditions
Earliest would be in Q4 this year
Join their Discord and give them feedback on their UX. Users might get an airdrop
Will be using ZUMER as the ticker symbol
Adopting a Curve-like model:
Stake to get voting tokens
Voting tokens have voting rights to help decide the interest rates, which NFT projects to work with
Roadmap
Soft launch in September
Launching their protocol NFTs in Sep/Oct
The full launch of the protocol and the token in Q4 this year
Expanding into Polygon and other chains early next year
Your staked positions will be denoted as NFTs instead of fungible tokens
Multi-Chain Plans
Currently talking to Avalanche
Happy to talk to anyone who’s building their own Metaverse ecosystem
Will be starting with EVM-compatible chains first
How Can People Get Involved?
Join their Discord and Telegram
They are looking for early supporters to provide feedback on their products
Open to discuss partnerships and hiring as well
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