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As the Cyan protocol matures, over time there will be defaulted or abandoned buy now pay later (“BNPL”) and pawn (“Pawn”) plans. Users might forget to pay, can’t afford to continue payments, or simply refuse to! We’ll dive into what happens in the event of a default.
A default event happens when a BNPL or Pawn plan payment is missed. In Cyan Protocol v1, a missed payment happens if no payment is made by the due time, which is set to every 31 days in between payments. Any payments made to date are forfeited (non-refundable) and the NFT itself is released to the vault which funded the plan.
What physically happens in default is the cNFT, which holds the underlying NFT, ceases to accept repayments and will be deemed worthless. It will continue to sit in the user’s wallet but will have no residual value and not be backed by the original NFT. The original NFT will automatically move out of the wrapper contract and be transferred into the relevant vault which funded the plan at the initiation. Once the liquidation process begins, the cNFT will then be burned.
Once the defaulted NFT reaches the relevant Cyan Vault, Cyan operators (Mikio, Naba, and one advisor) will list the NFT on a marketplace at the appraised value, dictated by Cyan’s risk models. The target for unwinding the NFT is within seven days of listing, with the listing occurring within three days following a default event. This is to ensure adequate capital turnover in the vaults to provide as much utilization of capital as possible for yield.
And that’s it! Soon, the protocol will look to upgrade the repayment schedule to allow for a grace period, plan forgiveness, and discounts on interest for early repayments. Join our Discord to keep informed.
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Buy an NFT now and pay later → https://dapp.usecyan.com/