Zumer: The DeFi Protocol Creating a New Financial Infrastructure via NFTs
You can be a part of the decentralized bank of the Metaverse
Fasten your seatbelts; time voyage activated!
POV, you’re traversing the lush, fertile valley of the revered Tigris and Euphrates rivers in southern Mesopotamia. You’re walking a road built by the first Bronze Age civilization. It has led you straight to the gates of one of the most astounding marvels of ancient organization and architecture — a city. One of the first cities in history, in fact, built by a civilization dating back more than five thousand years — Sumer.
Sumerians formed a political and financial system arguably more advanced than some modern-day states. The cities of Sumer were so brimming with intellect that they were the center stage for two breakthroughs that have shaped the concepts of politics and economics as we know them today: the first constitution and the first credit system.
Fast forward to 2019, two bright ivy league graduates, Mike and Sy, are discussing the underutilization of NFT assets in the current DeFi ecosystem. They finalized their thoughts in an op-ed article at Coindesk, that paves the road to a completely new and different decentralized financial framework for the DeFi space. Five thousand years ago, the world had Sumer to light the way forward. Today, we have Zumer.
History doesn’t repeat itself, but it often rhymes. — Mark Twain.
Zumer is aiming to disrupt DeFi’s status quo
The current lending-type DeFi frameworks are mainly influenced by the development of Compound, AAVE, etc. They are all applying a brokerage-driven business model. In simple terms, they are basically offering margin loans in a decentralized manner. This is pretty much like brokers extending loans to stock owners in the real-world financial system. The current DeFi lending model works quite well for cryptocurrency-backed loans as the collaterals are very liquid in trading, and there are well-developed infrastructures and ecosystem partners to tackle the real-time decentralized pricing, liquidation, etc.
We have seen a lot of new DeFi protocols coming to the market, but they are basically solving the same problem that has been largely solved by Compound and AAVE (though with better UX and lower fees).
In the real-world financial market, margin lending only accounts for a very small part of financial activities. In the US, the total outstanding margin loan balance is currently around US$700bn (there might be some off-balance sheet lending activities, so the actual number could be larger), as compared to the total commercial loan balance of US$12trn in the banking system.
The collateralized margin lending business is easier to decentralize than other lending businesses involving credit risk and liquidity risk, as the former doesn’t require an underwriter. Margin lending involves minimal duration risk and credit risk because the liquidation of underlying collaterals is almost instant. The DeFi framework developed by Compound and AAVE is good enough to handle decentralized lendings of fungible cryptocurrencies.
Now we have a new market centered around the NFTs. Unlike cryptocurrencies, NFTs carry more unique information, and the number of holders of NFTs is significantly smaller hence NFTs are less liquid for trading in nature. It is also very difficult to value an NFT as each of them is different. Therefore, the current decentralized price oracle model doesn’t apply well to the NFT market.
Therefore, applying the current DeFi framework would not be a perfect solution for the NFT financialization. We realize that most of the NFT lending platforms are still using the “traditional” DeFi framework to operate the collateralized lending business for NFTs. This leaves a lot of risks to take by both NFT owners and yield farmers. We believe we need a new framework that mimics the real-world banking model, which is able to underwrite credit risk on a decentralized basis. Therefore, we started Zumer, which has a novel decentralized underwriting model for illiquid and heterogeneous digital assets such as collectibles, 1:1 NFTs, GameFi NFTs, virtual properties, etc. This new framework would open the door for the crypto ecosystem to build more complicated banking products with bigger market potential for mass consumers instead of focusing on the niche NFT degen population.
We will discuss more about Zumer’s framework in one of our next Medium articles.
Solving NFT x DeFi’s security and reliability issues
The NFT market has grown tremendously in value in the last two years, progressing from a volatile asset with credibility issues to blue-chip NFT projects that have gained momentous growth and retained price stability even in the midst of a crypto bear market. However, the value of NFTs outside of creative micro-transactions on marketplaces is still largely unexplored. On the other side of the spectrum, the crypto ecosystem is in arguably the worst state since its inception due to ill-crafted risk management mechanisms that have led to the collapse of some of the biggest CeFi players, such as Celsius. This further strengthens the importance of DeFi applications.
Building on the legacy of ancient Sumerians, Sy and Mike devised an ingenious DeFi protocol that united NFT and DeFi in a match made in heaven while designing a state-of-the-art risk management framework that ensures the security of assets for both lenders and borrowers.
In simple terms, Zumer is the DeFi protocol of the NFT market. Through a seamless credit and liquidity management system, it allows blue-chip NFT holders to collateralize their assets for instant loans. Zumer also provides a buy-now-pay-later payment option for NFT buyers and traders to acquire high-priced NFTs with a lower starting price (20–30% of the face value as the downpayment and pay back the remaining balance in 6–12 months). As such, Zumer positions itself as the decentralized bank of the Metaverse, paving the way for community members to utilize anything from their virtual land parcels to their avatars to get liquidity. Capitalizing on the security of the banking system while still eliminating the middlemen in the process, Zumer gives every community member the role of the central banker, investment banker, and commercial banker by allowing them to decide the interest rate for the protocol. Through a dual-pool risk model, yield farmers could choose to become a lender (lower yield but with downside protection) or underwriter (higher yield but higher risk) depending on their risk appetites. Putting the cherry on top of the Metaverse cake, Zumer makes all of this incredibly simple through an easy-to-implement, user-friendly platform.
Built on the Ethereum protocol, Zumer will aim to capitalize on the largest NFT and DeFi communities in the web3 ecosystem, allowing its early-stage development to scale rapidly into a leading DeFi protocol for NFTs. The substantial growth envisioned in the upcoming quarters will create the befitting environment for the protocol to work towards its mission of building the bank of the Metaverse and setting the financial infrastructure of the virtual realm. As such, a robust Metaverse economy will set in motion a catalyst effect for its mass adoption by the general public.
The backstage of Zumer
The exponential speed with which Zumer was set in motion is the result of immense and prodigious work by a team of renowned industry experts assembled to build the future financial system of the Metaverse.
Introducing the Sumerian Incredible Four:
- Sy Chan, CFA (Co-founder and CEO): Sy is an MIT graduate. He is a veteran in the crypto/DeFi space with more than six years of crypto investment and research experience and another 10 years of investment banking experience with UBS, Barclays, and JP Morgan. Sy helped financial institutions raise US$6bn through IPOs during his career in the IB industry and was named as one of the top banking analysts by the Institutional Investor.
- Mike Meizals, PhD (Co-founder, Chief Vision Officer): Mike is a Harvard metaLAB affiliate and MIT graduate, ex-Professor of Art and History, and Head of Crypto Research at Abra.
- Zillin Ma, (Co-founder and Co-CTO): Zillin is a Harvard CS PhD with 3+ years of experience in developing DeFi applications and smart contracts.
- Jimmy Wei, Postgrad(Co-founder and Co-CTO): Jimmy is a Cornell Tech graduate with 3+ years of experience as a frontend DeFi developer and a couple of front/backend product development experience at Meta, Asus, AWS, etc.
Roadmap for the Zumerian Metaverse
Zumer is currently in its alpha-testing phase. However, the path for growth is mapped to be exponential, with major milestones to be achieved in the upcoming quarters.
- Q3 2022: The current quarter will see Zumer announce major partnerships, as well as deploy its Beta version on the Ethereum mainnet.
- Q4 2022: Zumer will release the highly anticipated Zumerland NFT.
- 2023: An expansion of the Zumer protocol to allow for multichain support and secondary debt market decentralized exchange for financial NFTs.
Zumer is on a path to set the pillars of the Metaverse economy in motion by giving the citizens of the future their long-awaited decentralized banking system, allowing them to generate liquidity from their virtual assets. The support of the Zumer community will be vital for the project to prosper and fulfill its objective of rewiring and re-defining the DeFi ecosystem.
So hop on, and Join Zumer on a journey through the wonderlands of the Metaverse!
