SquiggleDAO and Zharta Make History With The Largest Squiggle Backed Loan
A Special Edition of the SquiggleDAO Times
Introduction to NFTs & Collateralized Lending
For those who have been paying attention to the worlds of digital art and NFT finance, it should come as no surprise that the Chromie Squiggle, Art Blocks project zero, is pushing the space forward again, this time in the NFT finance field. NFTs have dramatically transformed industries like gaming, art, and finance, and this article delves into the intersection of NFT art and its financial potential.
The intersection of art and finance is not a new phenomenon; indeed, the traditional art world has engaged in it for years. Take, for instance, Sotheby's, which offers its own financial services and is believed to have a portfolio of art loans valued at $1 billion.
However, traditional art is entangled in complexities concerning the custody and management of assets. Challenges such as storing physical pieces, shipping, and the rise of fraudulent counterfeits have long troubled the industry.
It's no surprise, then, that NFTs have emerged as a seemingly perfect solution to some of these challenges. The inherent properties of NFTs help to diminish these logistical and security costs, and their compatibility with the financial infrastructure of the blockchain positions them as an ideal asset for financial transactions.
Unlocking Value in NFT Finance
NFT Finance spans the sector where decentralized protocols and applications provide financial value to NFTs. Companies like Zharta develop products that enhance value, create new opportunities, and increase liquidity in the NFT market. Examples of these products include lending, renting, options & perpetuals, and fractionalization. For lending, an NFT owner can use their asset as collateral to secure a loan much faster than traditional banking methods allow.
This significant boost in efficiency is achieved through the use of blockchain technology and smart contracts, facilitating a permissionless process that protects the interests of all parties involved. This is because both parties can agree on loan terms and confidently sign a permissionless contract, assured that the agreed-upon rules will be upheld. Smart contracts foster trust in these transactions and mitigate counterfeit concerns by ensuring only verified pieces can be involved in the process.
Moreover, as NFTs are digital, logistical issues common to traditional art transactions, such as shipping or storage, are nonexistent. This synergy between NFTs and finance represents a harmonious fusion in the digitization of assets
NFT Lending is Making History
Since starting to pick up steam in 2022, the NFT lending market has been constantly breaking its own records and making history. The weekly NFT borrowing volume reached an all-time high of $197mn in Q2 of 2023. Additionally, the YTD cumulative NFT lending volume increased 270% as of June of 2023. The growth of the NFT Finance market, like many things crypto related, has been unprecedented and fast.
Here are 4 examples of large loans in the short history of NFT Finance:
In October of 2021 a collector by the name of KrypTonik (@BlueMooon on X) used Autoglyph #488 (a legendary class 10) for a loan worth $1.42M with a duration of 30 days. This still stands today as the largest loan ever on a single NFT.
In May of 2022 an anonymous collector took another large loan. This time simply 2 Cryptopunks were used as collateral for a loan worth $3.3M. The difference here is that the Cryptopunks used in this loan were “Zombies,” which are very rare. The duration of this loan was 60 days.
In June 2023, Zharta arranged a precedent-setting 120 ETH loan against Fidenza #591, a record in Art Blocks transactions, thanks to its comprehensive appraisal techniques. This significant deal was notably influenced by the piece's rare "Small Scale" trait valued at over 1 million dollars.
This year, In early March, a $10M multichain loan against 60 CryptoPunks was executed using a complex mechanism that harnessed the composability of DeFi and NFTs, drawing from a pool of over 5000 lenders.
However, the maturity of the lending space wasn’t all about short term loans. In 2023, the first ever 1-year loans were issued using NFTs as collateral. At the time, with the volatility associated with most NFTs, it surprised most people. Of course, collections and projects that were able to garner long term loans were ones that have been around (relatively) for a long time.
Chromie Squiggles Are Proven “Blue Chips”
To understand how Squiggles are where they are, it is important to know where they stand in the history of long form on-chain generative art. Many influential collectors have identified three landmark stages of generative art on the blockchain:
CryptoPunks: the origin of the whole NFT movement.
Autoglyphs: first-ever generative art project on a blockchain with the art stored on the blockchain.
Chromie Squiggles: the first major 10k on-chain generative art project that used a hash to generate the variables that determine the art.
In terms of timeline and history, Squiggles have been recognized as a milestone marker for on-chain generative art. Feel free to read a more comprehensive history of Squiggles on this learn page.
Their historical significance has also led to Squiggles accomplishing a lot in their short history. The first Chromie Squiggle was minted November 27th, 2020 making the collection ~4 years old. In its short time it has become the icon of generative art. A Squiggle has adorned the jersey of a professional football team in England, found its place in prestigious museum collections, and served as the focal point in numerous news articles exploring the realm of NFTs.
The transformation of Squiggles into iconic figures within the realm of web3 crypto art is challenging to encapsulate, but you can get glimpses of how much the collection is revered by looking at other generative art collections. Most generative art projects have “traits” built into them and a very common trait to be one of the most rare and sought after is the “Squiggle Trait.” It comes in many forms, it can be a literal Squiggle, a shape, or even a color palette, but when a project adds in a trait that is a nod to Squiggles, it is always found to be one of the most rare and collectable.
The Largest Squiggle-Backed Loan
Given that Squiggles are historically important, beloved by many influential collectors, and championed by a strong community, it’s no surprise that they were a good fit for lending. The first Squiggle backed loan was made on March 20, 2021 with Squiggle #7236 and have since been a staple for many popular NFT lending platforms such as Zharta. As of March 19, 2024 the total volume of Squiggle loans was over $40 million USD totalling over 1,000 Chromie Squiggle loans.
Earlier it was mentioned that there have been NFT backed loans with durations of 1-year. During October of 2023, a Squiggle was used for a 3-year loan. At the time this loan was not only the longest for any Squiggle, but for any NFT backed loan ever! Then just a few short months later, in January of 2024, a Squiggle was used for a 5-year loan! At the time of writing this article, 5 years is the current record for longest NFT backed loan on record.
It is truly remarkable that an art collection, less than 3 years old at the time, has garnered widespread respect and recognition, establishing a value that is truly remarkable.
Of course the bar has been pushed even higher as of today with the announcement of the largest Squiggle-backed loan ever taken, and one of the largest and longest loans in the history of NFT Finance.
The terms of the loan are:
Amount: $1M
Duration: 1 Year
12% Interest
Backed by 11 Squiggles from the SquiggleDAO Collection
It’s also worth mentioning that a portion of the Squiggles used to collateralize this loan make up a “Full Set” of Squiggles. A Full Set of Squiggles is made up of one Squiggle of each Type + a Hyper variant (7 total Squiggles). There are only 128 possible “Full Sets” of Squiggles to be collected and 74 currently in existence.
The exact Squiggles used in this loan are:
#9139 Hyper Bold
#9680 Hyper Normal
#8485 Hyper Normal
#1560 Hyper Normal
#1040 Full Spectrum
#9395 Pipe
#8035 Bold
#2810 Ribbed
#2138 Fuzzy
#7599 Slinky
#7866 Normal
The Chromie Squiggle has always been at the forefront, as a technology and an art collection. With today’s announcement, it is further cemented alongside other great NFT collections such as CryptoPunks and Autoglyphs as a long term store of value. Squiggles have always been loved by many and have launched strong communities around the world.
Zharta stands out as the ideal protocol for this operation
Zharta and SquiggleDAO have previously collaborated on numerous occasions, working together on various projects and participating in major international NFT events, including the annual Marfa Weekend by Art Blocks and Art Basel Miami.
Given the complexity of this deal, the significance, and the provenance of the underlying art pieces, a platform that enables a seamless experience with a proven approach was required. Zharta boasts numerous borrower-friendly features, and its innovative non-custodial pool protocol provides a secure foundation for institutional-level transactions. It distinguishes itself by avoiding auto-liquidations within the loan term, creating a more traditional and stable structure for these deals. This particular approach shields the NFT assets from market volatility. In contrast, the pool system facilitates the syndication of multiple lenders, creating an ideal setting for high-stakes deal-making.
The Zharta team has also shown a deep understanding of Squiggles and advocates for the inherent long-term value of digital art. Their shared values, vision, and history with SquiggleDAO, coupled with the lending protocol's distinctive features, make them an outstanding choice for this loan. Its security is underscored by extensive testing and third-party audits, operating flawlessly since its inception.
Zharta is deeply committed to responsible decentralization, championing integrity, unity, and collaboration within the Web3 community to foster lasting value. This commitment aligns closely with SquiggleDAO's fundamental ethos.
SquiggleDAO Breaks New Ground for DAOs
It is exciting to see the Chromie Squiggle be elevated higher and higher achieving great feats. That is the core mission of SquiggleDAO, a community formed in 2021 to “collect and promote the Chromie Squiggle.”
It is important to recognize that SquiggleDAO is the borrower in this groundbreaking loan. As mentioned earlier, significant sums have been loaned to individuals, but a loan of this magnitude, backed by Squiggles, marks a historic milestone. This is not only the largest Squiggle-backed loan, but also one of the largest NFT loans ever taken by a DAO.
SquiggleDAO has been regarded by many as top collectors and thought leaders in the web3 space. A community formed organically around a common interest (Squiggles) to take action. The DAO has led the way in terms of treasury management through minimizing expenses, diversification, and transparency. SquiggleDAO currently has a treasury valuation of $18M which is mostly split between Squiggles, ETH and $USDC. You can check out a further breakdown of the treasury on their website.
When it comes to community, the one that has formed around Squiggles is strong and resilient. A community highlight was at the 2023 Marfa Weekend hosted by Art Blocks, SquiggleDAO hosted with Zharta a packed out event with over 200 people in attendance at the Glitch Gallery in Marfa, Texas. It is also widely known that if you’re looking to buy your first Squiggle or need help deciphering Squiggle-related info, the top experts are available in the SquiggleDAO Discord to offer friendly advice.
SquiggleDAO is modeled after the creator and artist behind the Chromie Squiggle, Erick “Snowfro” Calderon. A collection of people who love art, are proud ambassadors of what web3 can offer, and hold true to the best of intentions. The success that Erick has seen is in part related to how well he has conducted himself and that model is what SquiggleDAO is following. Hopefully the success of the DAO, the leadership it has shown, and its proven track record can open the door for other DAOs to have opportunities like this in the future.