# V3 Protocol Upgrade ### Overview The purpose of this upgrade is to: * Introduce flexible (pro-rata) asset and collection loans * Improve ergonomics for approving NFT and ERC20 transfers * Enhance gas efficiency ### Key Changes #### Offer Schema Modifications * **Fields Removed:** * `loanAdminFeeInBasisPoints` * `referrer` * `LoanContract` * **Fields Added:** * `bool isProRata` * `uint16 originationFeeInBasisPoints` * `OfferType: "Regular" | "Collection"` #### Pro Rata Interest (`isProRata`) * **False:** Fixed interest is paid on repayment (standard NFTfi loans). * **True:** Interest is pro-rated; less interest is charged the earlier the loan is repaid. #### Origination Fee (`originationFeeInBasisPoints`) * **Purpose:** Balances the risk for lenders in pro-rata loans. * **Application:** Subtracted from the loan principal before transferring funds from the lender to the borrower. * **Effective APR:** A new APR concept that calculates based on the principal plus the origination fee. * **Note:** Origination Fee is independent of the `isProRata` setting. #### Admin Fee Handling * **Removal from Offer Schema:** The `adminFee` is no longer part of the `Offer`. * **Loan Contract Admin Fee:** * Captured when the loan starts and applied upon repayment. * This change implies that lenders are no longer guaranteed a specific adminFee, but this is now managed by the NFTfi Foundation's smart contracts. #### Removal of Referrer * The `referrer` field was underutilized and is now removed from the `Offer` schema and smart contract logic. #### Offer Types * **New Association:** Offers are now associated with an `OfferType` rather than a `Loan Contract`. * **Loan Coordinator Role:** * Specifies which Loan Contract handles a given `OfferType`. * Supports multiple Loan Contracts, though one default handler is specified. #### Optional Promissory Note * **Prom Note Flexibility:** * The Promissory Note (Prom Note) is now optional, similar to the existing Obligation Receipt. * **Loan Lender Definition:** * If no Prom Note exists, the original lender remains the lender. * If a Prom Note is minted, the current owner of the Prom Note is considered the lender. * Only the original lender can mint a Prom Note. #### New Loan Coordinator * **Reason for Change:** Modifications, such as the optional Prom Note, required changes to the loan coordinator. * **Unique IDs:** Compound loan IDs can be considered unique across loan coordinators. * **New Contracts:** New ERC721 contracts have been introduced for the Prom Note and Obligation Receipt. ### Detailed Schema Comparison #### Previous Offer Schema ```solidity struct Offer { uint256 loanPrincipalAmount; uint256 maximumRepaymentAmount; uint256 nftCollateralId; address nftCollateralContract; uint32 loanDuration; uint16 loanAdminFeeInBasisPoints; address loanERC20Denomination; address referrer; } ``` #### Updated Offer Schema ```solidity struct Offer { uint256 loanPrincipalAmount; uint256 maximumRepaymentAmount; uint256 nftCollateralId; address nftCollateralContract; uint32 loanDuration; address loanERC20Denomination; bool isProRata; uint16 originationFeeInBasisPoints; } ``` #### Lender signatures In the previous protocol version (V2), lender signatures included a combination of: * Offer * Loan Contract In the updated protocol version (V3), lender signatures now encompass a combination of: * Offer * Offer Type The process of constructing a lender signature in protocol V3 is as follows: ```javascript function getLenderSignature( lender: SignerWithAddress, loanPrincipalAmount: bigint, isProRata: boolean, maximumRepaymentAmount: bigint, nftCollateralId: bigint, loanDuration: bigint, nonce: bigint, nftCollateralContract: string, loanERC20Denomination: string, expiry: bigint, offerType: string, originationFee: bigint, ) { const chainId = mainnet; return lender.signMessage( ethers.getBytes( ethers.solidityPackedKeccak256( [ 'address', 'uint256', 'uint256', 'address', 'uint256', 'uint32', 'bool', 'uint256', 'address', 'uint256', 'uint256', 'bytes32', 'uint256', ], [ loanERC20Denomination, loanPrincipalAmount, maximumRepaymentAmount, nftCollateralContract, nftCollateralId, loanDuration, isProRata, originationFee, lender.address, nonce, expiry, offerType, chainId, ], ), ), ); } ``` ### Implementation Considerations #### For Developers * **Migration:** Ensure that offers are compatible with the new schema. * **Promissory notes** We can no longer assume that a Prom Note exists for a loan, the lender has to mint it on demand #### For Lenders * **New Origination Fee:** Understand the implications of the origination fee, especially when offering pro-rata loans. The fee will be automatically deducted from the principal * **Effective APR:** Be aware of the new APR calculation that considers the origination fee, which could affect your returns. #### For Borrowers * **Pro Rata Loans:** If opting for a pro-rata loan, note that early repayment will minimize interest costs. * **Origination Fee:** Note that the origination fee will be deducted from the loan amount you receive. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.nftfi.com/overview/v3-protocol-upgrade.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. 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