How it Works [ELI5]

A high-level overview of how the MetaStreet ATM works

Market Participants

Lenders choose the following terms when they deposit funds into a pool
  1. 1.
    Collateral = the NFT collection you want to lend to
  2. 2.
    Max Price = highest NFT price you are comfortable lending at (LTV)
  3. 3.
    Max Term = longest duration you are comfortable lending to
  4. 4.
    Rate Tier = target interest rate you are comfortable lending at (defaults to market)
  5. 5.
    Deposit Amount = how much capital you are comfortable lending
Borrowers will see single offers according to these terms and can then borrow from that pool

How Pool capital is organized and aggregated

Capital is organized by Price, Term, and Rate Tier first THEN aggregated with all Deposits. This allows ALL lenders to act collaboratively and provides borrowers with the best possible terms.
  • All risk tolerances: Lenders with low risk tolerances can participate at lower returns in the same loan as high risk tolerance lenders who want higher returns. The low risk lenders get insurance (default protection) from the high risk lenders, while high risk lenders get leverage (boosted returns) from low risk lenders.
  • No capital requirement: all capital is aggregated so no matter how much you deposit, your capital will be combined with other depositors to originate loans.
  • Single offer for Borrowers: once the capital is organized and aggregated, single loan offers with the best possible terms are then made available to Borrowers. Borrowers simply choose the Term and Amount they want to borrow in a single click.

Example: Market Organization by Price (Vertical Stacking)

Let's assume a CryptoPunk is currently worth 100 ETH. There are three lenders with different risk profiles interested in lending to CryptoPunks:
Lender organization by Price [Vertical]
When a borrower comes to the pool, they’ll see instant liquidity at 60 ETH for their CryptoPunk, as outlined in the above diagram.
Lender organization by Price = Single offer for Borrower
While the borrower will see a single interest rate, the Lenders will split the interest disproportionality, such that Lender C gets the bulk of the return (in exchange for taking on the bulk of the risk), with the share of interest waterfalling down to each subsequent lender in the pool.
Lender distribution of APR
In the same way that return is split disproportionally, so too is the risk carried by each lender. If the value of the CryptoPunk declines and the borrower defaults, Lender C bears the loss first, up to 100%, before each subsequent lender bears any losses.
Borrower default waterfall for Lenders

Example: Market Organization by Rate and Duration (Horizontal Stacking)

While price decisions drive lender collaboration, rate decisions drive lender competition and act as a ranking mechanism when two lenders have identical price decisions. Borrower preferences on duration are first matched to the appropriate lender decision, then backfills any remaining capacity in ascending order of duration.
  • Rate Tier: the interest rate offered by the lender to the Borrower
  • Duration: the term/length of the loan offered by the lender to the Borrower
Continuing our above example, that same Borrower is looking for a 60ETH loan for 3 days. There are 3 lenders (Lender C1, C2 and C3) who are all willing to lend up to 60 ETH per CryptoPunk, BUT all offer different terms.
Lender organization by Rate [Horizontal]
Assuming all 3 lenders chose the same Duration in the above example, the lender with the lowest interest rate (in this case 10%) will have their capital utilized first as this provides the best offer to the Borrower. Continuing on to look at Duration:
Lender organization by Duration [Horizontal]
Assuming all 3 lenders chose the same Rate in the above example, the lender with the longest duration (in this case 30 days) will have their capital utilized first as this provides the best offer to the Borrower.


This protocol design address three major problems in NFT lending: oracle dependency, centralized permissions, and capital inefficiency.
  • Oracle dependency: the ATM does not subject users to any oracle dependencies as users indicate their own maximum loan prices. This keeps the protocol anti-fragile, with zero external failure points.
  • Centralized permissions: without oracle dependencies, the protocol is able to offer complete long-tail coverage without risk of harm to users. This means the ATM does not need a centralized whitelisting mechanism - any user can create a lending pool for any NFT, at any time.
  • Capital inefficiency: without collaborative pool dynamics amongst lenders, this design would result in fragmented liquidity and laborious origination efforts, both of which drive costs of capital up. With capital pooling, these pitfalls are avoided, causing a virtuous flywheel (lower interest rates -> attract more borrowers -> increase earning potential of lenders -> attract more lenders -> lower interest rates).