TL;DR
- Paragon’s mission is to unleash the true value of NFT technology and the communities that form around it.
- The Platform: Non-collateralized and fully permissionless peer-to-peer financial agreements for fungible and non-fungible tokens.
- The Collection: An NFT project that incentivizes cross-community collaboration and participation — while having a little fun :).
Initially, we set out to create a “better” NFT rental solution. At the time and still today, NFT rentals could be clunky, require collateral, or require an enormous amount of development work to interact with Dapps (Decentralized Applications) and other applications at scale.
The rental platforms of today partially solved the issue, but in doing so, added 1 of 3 unnecessary points of friction.
- Wrap the NFTs for increased security, adding development work
- Collateralize rentals to de-incentivize defaults, or
- Use an escrow contract to either hold collateral or the NFT during the rental process
The issue here is you either have to post collateral, often more than 50% of the asset’s value, or do rentals on a very small scale with a few counterparties that can integrate your new ‘wrapped’ version of the NFT. Both require significant effort (and agreement) on the part of the individual collections that want to incorporate rentals.
We flipped the script!
Paragon built a safe ecosystem where NFTs can be freely transferred between rental or buy-now-pay-later counter-parties, with no collateral, no escrow wallet, and no wrapper.
*If you are confused about what a wrapper is, think about it like an NFT inside another NFT*
Let’s dive a little further into what this really means for NFT holders. First, what is the basic issue at hand? On the blockchain, you can’t lend someone an asset as you would in the real world because there is no centralized party to ensure both parties uphold their end of the agreement. Unlike renting a car, where stealing the car (which you physically could do pretty easily) would result in heavy negative financial and social incentives (i.e. fines and jail). On the blockchain, if you have it, you have full ownership rights and no physical, financial, or social incentives to prevent foul play.
Utilizing collateral, you can make it work, but if you have the option to use no collateral and the same rate, everyone will take that. Additionally, NFT pricing is too variable and not well enough defined for rates to get even close to reasonable without risking it all as a company. This is why the current NFT leasing, BNPL, and other NFT financing platforms have high rates if the real NFT is transferred.
Next is escrow contracts. Escrow wallets are used on various occasions and have well-defined use cases as well. The issue here is an escrow is meant to hold something entrusted by a third party, where neither side of the transaction has the sole ability to take hold of assets in the escrow. Can you guess the issue here? That’s right! The whole point of blockchain is to eliminate the need for centralizing actors with too much power. There is a time and place for centralization, but we at Paragon believe peer-to-peer agreements shouldn’t require an intermediary, or two, or three, or 10…
Finally, using a wrapper enables the NFT to be transferred to another individual with new rules and approvals that relate to the wrapped NFTs contract. While this adds a layer of security, it can lead to some issues as well. With wrapped NFTs, you need to understand and deploy new contracts for every protocol or standard you interact with, and at scale, this is a nightmare. With the growing number of NFT contract standards and constantly evolving product offerings, wrapping hinders the ability to facilitate transactions at scale, while increasing the cost per transaction and adding unneeded steps to an already clunky user experience.
Throughout the early days of Paragon, then called “Gotcha” (lol, a story for another time), we were focused entirely on rental. As we pieced together the early versions, we soon realized we had something that not only enabled safe and scalable NFT rentals, but a game-changing product for Buy Now Pay Later of NFTs and tokens alike.
With the ability to recall an NFT or an allocation of ERC-20 tokens based on a pre-determined agreement between two parties, we are able to eliminate third-party credit risk.
Take Klarna or Affirm, they enable users to buy goods in installments(BNPL). At the point of purchase, they purchase the item from the seller at full price and enter a debt agreement with the purchasing party. In this case, Klarna and Affirm have binding agreements with the individuals to pay them, but cannot manually or automatically receive the installments, therefore taking a large amount of credit risk at any given time.
Following? Let’s run through some more specific examples.
Let’s say Johnny wants to buy a Crypto Punk using Paragon’s BNPL product over 6 months. The leasing party enables equal payments and Johnny will have to pay 1/6th or about 17% of the value at the point of purchase, at which point he receives the Punk in his wallet for immediate use. In a month Johnny will need to pay his second installment. If Johnny pays all of his installments, he will be the true owner of the Punk. If Johnny decides to default on any of the payments, he will lose all previously paid installments AND the NFT will be transferred back to the original owner.
— You may be asking, how can I ensure he/she isn’t going to send my NFT elsewhere? Paragon is able to filter malicious transactions, such as sending the NFT elsewhere or sending it to a burn contract, if the NFT is currently in a financing agreement.
Now imagine a user holding multiple NFTs that give access to an IRL event or some other perk that they cannot attend or utilize. With Paragon, they will list their assets for short-term rentals and extract value, directly increasing the value proposition for an entire portfolio.
On the other hand, non-holder users are able to use Paragon to rent an NFT, thereby gaining access to an NFT-gated experience that may cost upwards of $100,000 outright.
For those of you who have participated in guilds or know of them, Paragon democratizes the ability for users to create, manage and monetize guild management systems with in-game assets across a variety of games.
For example, Kaitlyn is an NFT whale and Bored Ape Yacht Club enthusiast. Ahead of the recent Sewer Pass mint, Kaitlyn devised a plan. She planned to acquire 10 passes and rent 9 of them out individually to users. Creating a consistent income stream, ultimate ownership of all 10 passes at any time, all perks provided by the BAYC ecosystem, and the original utility her pass provided, to begin with. Over time, Kaitlyn can ‘rinse and repeat’ and will be able to recoup her initial investment in rental fees, while maintaining ownership of the assets.
*Guild: A guild is comparable to a real estate portfolio in this instance. You can issue a large number of in-game assets to players around the world. By using these items they increase the value of each asset and eventually return to the owner. The player gets a small percentage of the delta and the leasing party continues the process.*
You may be saying, “Hey, but what about the project creators?” We are glad you asked! Paragon is built by, with, and for core NFT users, creators and newcomers. NFTs have enough cults, Paragon adds value to all of them.
For example, Pablo holds a Flyfish Club NFT, granting him access to the soon-to-open, exclusive access restaurant club in New York City. Unfortunately, Pablo travels a lot and worries he cannot rationalize the membership token. Using Paragon, Pablo lists his NFT for rent on the nights he plans to be away. By renting his membership he is extracting more value and everyone wins.
- The Creator keeps a good community member happy and can earn a percentage of fees from the increased volume.
- The renter is able to enjoy the benefits of the club for a fraction of the total price.
- The NFT holder, Pablo here, earns previously unavailable income and has increased the value of his NFT.
Similar to underwriting a home, rental data can accurately price the underlying asset and increasing rental prices leads to increasing home prices.
Paragon offers the ability to extract and manage NFT portfolios like never before. Most markets start with buy/sell, but speculative markets end with buy/sell.
We could go on and on about other applications Paragon enables or creates, but that’s for our discord.
But for those looking for an extra push………
- Paragon enables capital allocators to add bumpers, such as budget limits or security limitations when issuing capital in the form of ERC-20s. For example, an investor wants to put $1,000,000 into a startup but isn’t familiar with the founder or his history. To safeguard your investment you can restrict spending amounts on a time basis or prevent the company from spending too much in certain business endeavors. [*ERC-20s are a type of token, similar to NFTs, but are fungible. For example, USDC is an ERC-20 directly tied to the value of the US Dollar*]
- NFT value hunters who feel an upcoming airdrop is being underpriced, could rent the parent asset, and receive the benefits related to the airdrop, if those proceeds are greater than the rental price, the renting party earns the delta, if the rental price is greater, the leasing party earns the delta. [Delta is the difference between two values and in this case, it is the potential profit or loss on either side of the trade]
- Paragon enables users to distribute IP through NFTs and earn royalties while preserving the safety of ownership and enabling full or partial access to the renting party.
- Paragon enables users to agree on a future sale price, and pay a small fee until you are certain of their purchase through our Rent-To-Buy/Sell feature. (for those who understand options trading, here is the discord link again so you don’t have to scroll)
- Paragon enables users to purchase an expensive NFT over time, splitting the total cost with reasonable rates and granting full usage rights after the initial installment, while providing safety for the seller, by auto-retracting the NFT in the case of default.
- Paragon can use data from time-based financing agreements to better audit the true value of each NFT and help solve the widespread problem of price discovery.
- Paragon will enable a flock of new business models to come on-chain, by allowing users to incorporate rentals, subscription businesses, distribution of IP, and much more.
Paragon is building the ‘scaffolding’ to enhance the infrastructure that surrounds and enables NFT technology. The upcoming collection brings to life Paragon’s quest to unleash new NFT use cases and push boundaries on cross-community collaborations. The Paragon collection is set to release soon and a further dive into some collection alpha will be dropping on Medium shortly.
— The Paragon Team
