What problem are they solving? How?

The Problem

When you take out a loan to buy a house, the house itself is pledged as collateral; this means that if you fail to pay back the loan, the bank can take possession of your house and sell it. They can use the money from that sale to pay back the loan. Because the value of the home is well understood and the bank knows that there are other people who would buy that home, they feel more comfortable lending you the money. That’s why a bank will “easily” lend you a couple hundred thousand dollars to buy a home, but wouldn’t lend you that same amount of money for most other reasons - there’s no clear and valuable collateral. (Cars are another example of easy-to-value and easy-to-sell assets which can be used as collateral).

In the DeFi (decentralized finance) world, people have been trying to use NFTs (non fungible tokens) as collateral in the same way that you might use a house or car: they agree with the lender that — if they don’t pay the loan back — the lender will be able to take ownership of their NFT.

This is a good idea in theory. In practice, it’s been slow to take off. The reason? Unlike houses and cars, the market for NFTs is not as well established. It’s therefore more difficult for the lender to how much they could really sell the NFT for if they had to. Because of this, they are less sure how much they should be willing to lend in exchange.

Today, most NFT lending protocols address this problem by leaving this decision up to the individual borrower and lender: if a borrower wants a loan, s/he proposes their own terms for the loan, and lenders individually review and decide if they want to accept it or not. Because each party has to evaluate every offer themselves and because they are likely not experts in that specific NFT market, the whole process is very slow and difficult. Because of that, the volume of lending in this existing protocols is low.

How They’re Solving It

The current model involves two parties: the borrower and the lender. Astaria is solving this problem by adding another player, who they call the strategist. The strategist is a person or group knowledgable about a particular type or set of NFTs. They’re role is to help standarized the loan terms for any given NFT or collection of NFTs. For example, a strategist may say that "Any NFT from [x] collection can be posted as collateral for up to $50,000 in loan value, payable back over 5 years.” Because there has been an ‘expert opinion’ on the terms, both lender and borrower should feel more comfortable engaging in the transaction. And, because each side didn’t have to set and negotiate terms, the whole process can go a lot faster. Finally, the strategist gets paid through a percentage of the fees when a transaction occurs, so they have an incentive to set terms that are acceptable by both lender and borrower. Win-win-win.

You can find out more by reading through the links below.