Pawn Bots is an NFT project by HiFi, a Utah company centered around a cryptocurrency lending protocol.
HiFi says that with Pawn Bots, which are set to launch in the next several months with a series of 8,888 NFTs, holders will be instantly able to borrow against their Pawn Bots.
Pawn Bots wrote in their official blog on Medium that Pawn Bots is founded on “four B’s: Build, Borrow, Buyback, Burn.”
If those last two B’s sound interesting, that’s because HiFi has promised to buy back any NFT from the collection at mint price within 24 hours of the reveal, and royalty funds from sales on the secondary market will be used to burn the floor of the NFT collection.
Burning an NFT is to effectively remove it from the collection. Any Pawn Bots that are used as collateral with holders that can’t pay back what they borrowed will be burned as well, says Noel Lopez, marketing director for HiFi.
“That causes a diminishing supply of NFTs for the people holding them,” Lopez says.
He adds that the company will likely loan out a percentage of the NFT, not the entire value of it, as values can fluctuate. That percentage, as well as the price of Pawn Bots, has not been announced yet.
At first, Pawn Bots will be the only NFTs lending through HiFi, but there is a future where HiFi will allow NFT owners of “blue chip” projects to take out loans against their NFTs. Unlike lending from a bank, which goes through a credit check and must be approved by the bank, NFT lending will be decided by a smart contract and borrowing will be immediate, based on what the NFT is worth.
A smart contract is a contract stored on a blockchain that executes automatically when certain conditions are met. The code for the contract is executed on the blockchain. When a Pawn Bots holder requests to borrow against their NFT, the loan information will automatically be calculated, rather than having to go through an actual person to decide how much value a person can take from their NFT.
“It’s instant because of the smart contract. It just calculates how much it is worth, and how much we are lending out right now, what is the interest rate, what are the terms? And you can have your money in seconds,” Lopez says.
“Pawn Bots is the lowest risk NFT,’” he says. “We have a 24-hour buyback guarantee if you don’t want it, and then let’s say you keep it after that. You’ll still be able to leverage a good percentage of its value that you can pull out at any time. It’s not something you’re going to be sitting on, necessarily, waiting for a buyer if you need immediate leverage. It’s backed by HiFi, it’ll be backed by our protocol, our liquidity pool. For anyone that wants to get into NFTs, I think this is a really good first NFT.”
There’s no set mint date for Pawn Bots. Lopez says they’re trying to build an organic community in Discord and on Twitter, though it’s a fine line between building a community organically and retaining people’s attention spans with all the other NFT projects launching every day.
The difference in the community building is that HiFi wants to be “one of the first true DeFi NFTs.”
Pawn Bots calls what it offers “Utility 2.0.” There aren’t any plans for traditional NFT utility benefits like merchandise, chat groups, and events. The focus is on moving forward the future of the web3 ecosystem through lending.
“I have a Chase Sapphire card, a Chase Freedom card. I’m not getting a Chase t-shirt,” Lopez says. “The same thing applies to Coinbase, Gemini, where you can stake certain coins in your portfolio. We’re not wanting to burn any money doing any of those things. Right now, it’s out the gate, we want to be one of the first true DeFi NFTs. We’re just focusing all of our profits and efforts on that specifically.”
On April 27, HiFi announced the launch of the HiFi ecosystem, “a series of new projects and partnerships that build upon and integrate into HiFi’s lending protocol,” on its official Medium blog. The HiFi ecosystem includes a future of lending with crypto, liquidity tokens, future assets, NFTs, and more as collateral.
“We are borrowing, lending, leveraging, staking, yield farming,” Lopez says. “We’re opening the door for people to use their collateral, as leverage, to do any of those things.”