In this article, we’d like to share a bit more on how Cyan’s buy now pay later (“BNPL”) plan works and be transparent on design logic.
Cyan’s BNPL was built from the user’s perspective, with the goal to make the experience as easy as possible. We want users to be able to painlessly purchase NFTs on a payment plan, without thinking about too many moving factors such as collateralization, margining, pegging, and other things which make us paranoid. The process is simple — find an NFT you’d like to purchase, check the interest rate, and make a downpayment to initialize.
To start, all BNPL plans will be payable over a three-month period in four payments, with the first payment due upfront as a downpayment to start the plan. Once the downpayment is made, subsequent payments are made every 31 days, with the last payment made on the 93rd day. Once fully repaid, the user will receive the purchased NFT. In the meantime, the user will own a wrapped version of the NFT, which we call ‘cNFT’.
The cNFT functions as both a synthetic representation of ownership of the NFT, as well as being a repayment plan. Monthly payments are made to the cNFT, and so long as payments are made on time, the cNFT continues to exist. The benefit of this model is that the user is able to immediately enjoy most of the utility of the real NFT — Twitter blue, any airdrops, free NFTs, or other economic benefits are accumulated during the repayment period and released to the user upon the last payment. We’re currently making efforts to reach out to individual projects to recognize cNFTs, in order to provide the same whitelisting benefits as the underlying NFT.
The NFT you’re purchasing is executed by Cyan and transferred to Cyan’s protocol (PaymentPlan contract) which handles the wrapping and issuing of cNFT. Due to the complication of the process, there is one manual bit of operation — the purchasing of the NFT from a marketplace. As marketplaces beef up their APIs and smart contracts mature, the Cyan protocol will upgrade to v2 with the full intention of automating this one step.
The operation described above requires a request to pull funds from the relevant vault, and once funding is received, will execute the purchase of the underlying NFT from a marketplace, such as OpenSea. This process is usually executed quickly, within 1 settlement block from initiation of the BNPL plan. Due to the sensitive nature of this operation, the operator has limited access to functions and is governed by a Trezor wallet — operators are maintained and selected by the Cyan core team (Mikio, Naba, and one advisor) and are governed by a Gnosis multi-signature wallet. A quorum of 2/3 from the Cyan core team in the multi-signature wallet is required to make any changes to the operator. Once marketplace technologies mature and more resources become available, the Cyan protocol will automate these operations to eliminate centralization.
In the event of an error or NFT unavailability on the marketplace, the BNPL plan is rejected in order to return the downpayment to the user. Gas fees are initially handled by the user but are refundable from time to time.
Lastly, in the current version of BNPL plans, any missed payments will put the cNFT into default. A default will release the underlying NFT into the relevant vault, and any payments made to date will be forfeited. We’re looking to add grace periods and possible restructuring plans along the way. Early repayments are possible at the moment but do not provide discounts on interest rates — this is something we’re working on as well.
One thing to note on the underlying NFT’s asset value — if the price of the NFT were to drop, measured in say the floor price of the collection, the user does not need to post any additional collateral. The economics of the plan remains the same, whether the NFT price rises or falls, and it will be up to the user to decide whether to try and sell the cNFT in a marketplace or continue making payments. The simplicity in the user experience is an important aspect of the Cyan protocol, and adding the complexity of margining, moving collateral values and other features may overwhelm the product in the beginning. In the future, Cyan will add features as the community requests.
We’re super excited to lower the bar for entry into NFTs. There are lots of features in the works now, and as we make progress we’ll share the wins with the community.
BNPL docs: https://docs.usecyan.com/docs/bnpl
BNPL demo: https://www.youtube.com/watch?v=OyyHgobbHL4