Breadth And Accuracy Of ML Appraisal Models To Provide More Reliable LTV For Lenders
Upshot, a firm building financial infrastructure for NFTs and other traditionally illiquid assets, has announced its entrance into the NFT lending space. Utilizing their Machine Learning-powered NFT appraisals with industry-leading breadth of coverage – over 100M NFTs from over 100,000 collections – and accuracy – an average MAPE of 3-10% for the best-performing collections, Upshot will be operating a number of managed lending strategies that aim to simultaneously reduce risk while still providing competitive terms for lenders.
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“Our entrance into the NFT lending space is a culmination of that work and we believe our models will help to provide lending exposure for lenders looking to mitigate risk and remain competitive in the increasingly active NFT lending market.”
As the NFT lending market continues to grow and become more competitive – hitting an all-time high in loan volume, users and quantity last month – lenders will need to ensure they aren’t overleveraging loans while still remaining competitive in their offers. Upshot’s machine learning-powered appraisal models will allow it to offer safe and competitive terms for dozens of collections. These terms will be published regularly for borrowers to accept. These terms are generated as the result of new lending strategies developed by the company based on fair value estimates of the NFTs, look-ahead appraisals (otherwise known as “recovery rates”), volume, liquidity, wash trading as a percentage of total trading, ownership and transaction wallet concentration, and more.
“When we originally launched Upshot, we focused solely on building out the most accurate and comprehensive appraisal models to unlock the exotic DeFi x NFT primitives we saw coming in the future,” said Upshot Co- Founder and CEO Nick Emmons. “Our entrance into the NFT lending space is a culmination of that work and we believe our models will help to provide lending exposure for lenders looking to mitigate risk and remain competitive in the increasingly active NFT lending market.”
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While its appraisal models are at the core of Upshot’s lending strategies, Upshot has also built out several other components that are essential for successful lenders in the NFT space. These include:
- Recovery rate models calculate forward-looking estimates of an NFT’s value to predict the future collateralization of an NFT-backed loan and estimate how much money a lender stands to lose when a borrower defaults.
- Default probability models factor in the probability of a borrower defaulting on their loan so that lenders can estimate how frequently they will miss interest income and assess the chances they will have to liquidate the assets.
- Risk management framework manages the number of collections with loans being written against an NFT and takes into account the loan concentration per collection on other lending platforms, ownership concentration per collection, Upshot’s own loan concentration per collection, and collection concentration per wallet. This protects both liquidity providers and Upshot from potential downsides.
Upshot is a firm building financial infrastructure for NFTs on top of their industry-leading NFT appraisals. By delivering accurate and reliable appraisals in near-real-time, Upshot enables the creation of novel solutions at the intersection of decentralized finance (DeFi) and NFTs – for the industry and themselves. The Upshot API is currently available and being used by teams to enable a number of use cases.
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