NFT Valuation
The Pine Pricer is the default NFT pricing oracle for loans initiated using the Pine Protocol. But due to Pine’s focus of building a decentralized NFT-backed loan infrastructure, and to promote the trustless nature of DeFi, lenders are not bound to using the price feeds provided by Pine Pricer. Using Pine could be a completely trustless experience.
Pine Pricer
Governed by the PineDAO, Pine Pricer is an NFT pricing oracle that provides a fair and transparent price feed for the value of NFT collaterals for all loan obligations. Pine pricer powers all stages of the loan cycle from the loan origination, to the loan recall and the loan roll-over processes by providing reproducible pricing information for individual NFTs to use in LTV calculation.
Price Manipulation Attack
Loan pools on Pine are susceptible to price manipulation attacks. Here is an example:
Assuming the floor price of an NFT collection is f1.
Attacker uses $x to buy n pieces at the floor in a short period of time to drive the floor price to f2.
Attacker immediately takes out a loan of $(n * f2 * LTV) from lenders using the NFTs.
As long as that the loan amount is greater than the original purchase amount, i.e. $(n * f2 * LTV) > $x, the attacker can default on all the loan positions and walk away with a profit.
And if f2 > (f1 * Loan Recall LTV) and the floor price reverts back to f1, the lenders would have to sell the n NFTs at a loss.
In essence, the attacker manipulated the prices so that he could get around the initial LTV limit that lenders set to give them a buffer against price volatility.
Methodology
The Pine pricer is designed to produce a more conservative valuation in order to help lenders mitigate risk associated with price manipulation, transitory volatility or short-term data feed glitches. Where applicable:
Last traded (i.e. transacted) prices are used as a sanity check against the floor prices Prices are cross referenced across multiple sources (e.g. Opensea, LooksRare, NFTBank) and outliers are dropped
Price feed data is smoothed using mechanisms such as TWAP
Loan amount throttling limits the amount of loan backed by an NFT collection within a time window
Price feed monitor is also a critical component of the Pine Pricer. When the price for an NFT collection becomes unavailable, no new loan obligation can be opened for that NFT collection.
Custom Valuation
Lenders can utilize a SDK to plug in their own custom pricing, and the lender would be a signer for the oracle instead of Pine, completely preventing Pine from becoming a supply chain attack vector. Besides building their own valuation oracle, lenders can also choose to integrate NFT valuation oracles from 3rd parties providers.
There will be some differences in the experience using a custom valuation oracle vs Pine Pricer.
Valuation
Mostly collection floor prices from popular NFT marketplaces
Completely custom - flexiblility to allow for floor prices for specific traits within an NFT collection
Loan Recall
Yes
No - this is to prevent lenders from manipulating the custom valuation in order to cause malicious loan recalls that lead to unfair liquidation
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