Choosing Between Peer 2 Pool Ape Coin Staking versus Peer 2 Peer Matching
The launch of ApeCoin staking presents a unique opportunity for Bored Ape Yacht Club, Mutant Ape Yacht Club, Bored Ape Kennel Club, and ApeCoin holders to earn staking yields on their assets. As we highlight in our study of on-chain data, however, there remains a significant mismatch of people who hold BAYC, MAYC, and BAKC NFT’s versus those with significant ApeCoin assets.
The ParaSpace protocol built a crypto-first Peer 2 Pool (P2Pool) matching system to help solve this problem and bring Bored Ape Yacht Club NFT holders together with ApeCoin holders and maximize ApeCoin staking opportunities.
We feel that P2Pool is generally the better ApeCoin staking model, but in response to user feedback and in order to solve further user problems we have introduced Peer 2 Peer (P2P) ApeCoin staking to the ParaSpace protocol.
Below we list the pros and cons and a basic template for deciding whether P2P or P2Pool best suits a user's needs.
In the Peer to Pool (P2Pool) lending model, the user deposits their NFT as collateral and borrows ApeCoin to stake it via ParaSpace's auto-compounding NFT pools. The user may of course also supply ApeCoin from their own wallet to do the same--borrowing is optional.
To further safeguard BAYC/MAYC/BAKC NFT's from the risk of liquidation, ParaSpace will never liquidate the BAYC/MAYC/BAKC used as collateral if the user is only borrowing ApeCoin which they stake via ParaSpace. Do note that this may not be true if the user also borrows ETH or any other ERC-20's against the same NFT's not used in ApeCoin staking.
We nonetheless understand that some users feel uncomfortable borrowing against their NFT's, and indeed that is one key Pro to P2P ApeCoin staking.
- 1.No borrowing necessary: No risk of default on loans against your NFT.
- 2.No risk of yields turning negative: Fixed and predictably positive share of total staking rewards.
- 3.P2P also auto-compounds via ParaSpace: ApeCoin stakers can earn auto-compounding Single Side ApeCoin staking yields while they wait for an NFT match or if the NFT owner un-pairs their BAYC/MAYC/BAKC. NFT holders likewise enjoy auto-compounding rewards on the NFT Pool staking rewards.
- 4.Some capital efficiency remains: NFT and ApeCoin stakers may use their staked collateral for loans.
Peer 2 Peer (P2P) Cons
- 1.High Friction: High friction as users need to request and/or accept a pairing between NFT's and ApeCoin.
- 2.Lower Capital Efficiency: Lower capital efficiency overall as P2Pool provides greater credit to NFT holder in particular.
- 3.Potentially lower rewards: ApeCoin and NFT holders may need to negotiate for lower reward shares than they could achieve via P2Pool model.
- 4.Risk of un-pairing: There is no guarantee that the user will remain staked in the NFT ApeCoin staking pools as either side of the Pairing can unilaterally withdraw.
Let's compare this to our P2Pool model:
- 1.Permissionless and Virtually Instant: Users may submit their NFT as collateral for ApeCoin staking loans, borrow, and stake ApeCoin on a permissionless and essentially instant basis.
- 2.Capital Efficiency: In using credit for their ApeCoin staking the user can make the value of their NFT's go further than otherwise.
- 3.Pairing is persistent: In a Peer 2 Peer model the user must trust that their paired counterpart does not withdraw their staked asset. In Peer 2 Pool this is permissionless, and the staking position remains until the user un-stakes.
- 4.No Yield Sharing: Users can easily see what they could earn in yields for NFT's and/or ApeCoin; we expect P2Pool rewards will remain higher due to capital efficiencies.
- 5.Scaleability: The Peer 2 Peer model does not scale. If a user has significant ApeCoin holdings they would need to find countless Peer 2 Peer matches to earn yields. The Peer 2 Pool model allows them to collect yield at scale.
- 1.Variability of rewards: Net staking yields in a Peer 2 Pool model should generally be higher than P2P due to greater capital efficiency. But it is possible that ApeCoin borrowing interest rates could approach or in an extreme case exceed NFT Pool staking yields.
- 2.Risk of default: ParaSpace has designed its P2Pool ApeCoin staking system to eliminate the risk of NFT liquidation. But there is still a low but non-zero chance the user's staking position could be forced into liquidation via unstakeAndRepay.
ParaSpace thinks Peer 2 Pool is the future, and a look at NFT trends shows Peer 2 Pool money markets continue to drive significant growth in NFT Finance more broadly. But there are instances in which a user may be best served with P2P pairings, particularly if they feel unwilling to borrow against their valuable NFT's.
Users should review available staking yields for both P2Pool and P2P systems along with the above list of pros and cons for each. Ultimately we believe our expansion into P2P will help ensure we have user's unique needs covered.
Read more on ParaSpace’s ApeStaking program and reach out to the ParaSpace team via Twitter and Discord.