Hercules 101–01 spNFTs

Chiron’s DeFi Course: What Are “spNFTs”?!

Today we introduce our educational series taught by the half-man, half-horse teacher extraordinaire, Chiron. Chiron, a centaur, was renowned in Greek mythology for his wisdom and kind mentorship.

Hercules is committed to changing the relationship between people and money. Part of that is education. We believe the more people understand the freedom of decentralized finance, the more they will free themselves.

You might be brand new to DeFi, or you might be a battle-worn veteran. We can all learn a little something; that’s how we got here in the first place.

Today, we’re digging into “staked position non-fungible tokens”.

That is, spNFTs.

Introduction to “spNFTs”

It’s not often that the acronym is more comprehensible than its derivative, but such is the case with “staked position non-fungible tokens.” Let’s break this down.

1. Non-fungible tokens (NFTs), in vernacular, are often relegated to jpegs. Those are cool, but hugely limit the imagination, and utility. An NFT is really an irreproducible token representing exactly what the creator wants it to represent. It can be thought of as a truly unique proof of the existence of something and your ownership of it, like the title to an automobile (your car), a birth certificate (yourself), or a piece of art (the art). Ownership can be fractional or whole, much like one might “own” their home wholly or their home might be partly owned by the bank that loaned the buyer the money to buy it. Either way, you own some amount of that unique thing,this concept stands in contrast to, say, an ETH token, wherein 1.0 ETH is fungible and therefore always equal to 1.0 ETH (all else being held equal).

2. A “staked position,” the “sp” part of “spNFT,” is a complex and redundant name for a very simple concept. If you buy 10 shares of TSLA, you have a “position” or “stake” in Tesla and therefore an interest in the company’s financial future.In DeFi, these two terms are differentiated. Don’t blame Chiron, he’s just spitting truth. When a DeFi user deposits tokens into a liquidity pool, that user is providing liquidity and creating a new “position” in that liquidity pool, probably to earn rewards in return. That is the “position,” or “p,” piece of “sp.” The user is given non-fungible tokens (NFTs) in return for their deposit, essentially as a receipt to prove ownership of that position for later claim. Conceptually, it’s not any different from the receipt you’d get from the bank for depositing your paycheck. But this is where TradFi and DeFi diverge. For you, the paycheck-depositing worker, your paycheck deposit sits in your account, collecting 0.01% interest. For your bank, your paycheck represents an irresistible opportunity to make 8% interest loaning money to a student. You don’t see any of that interest. But if you are the DeFi superuser, you take your liquidity position NFTs and stake and lock them with Hercules or another DeFi protocol to get your fair share of the money made off of your loan. This is the “s” part of “sp,” or staked position.

In very, very simple terms, a staked position is one in which the DeFi user is getting a larger share of the value of the interest on their loan in exchange for a stronger loan commitment, and this loan is represented by the NFT.

What Does This Have To Do With Hercules? 🥩

On Hercules, spNFTs represent staked liquidity positions. When you create a position with an asset you receive an LP (Liquidity Provider) token. When you stake the LP token, it transforms (i.e., “wrapped”) into a staked position non-fungible token — thus, “spNFT.” Wrapping an LP token into an spNFT allows a huge variety of value creation options for the user, like “farming,” for example.

spNFTs gives users huge flexibility and optionally, or “composability” in DeFi-speak. Let’s explore that a bit.

Is Your Head Spinning Yet? 😵‍💫

That’s normal. Let’s keep going.

spNFTs on Hercules 💪

Simply put, creating an spNFT adds to and cements liquidity in Hercules. The stronger the commitment, the greater the rewards.

spNFTs are the backbone of Hercules and enable myriad options for protocols and individual users, such as the following:

- Lock and manage spNFTs, adapting to different strategies.

- Use xTORCH to boost the yield of staked positions.

- Deposit spNFTs into Nitro pools for enhanced rewards.

In Breve

spNFTs are a DeFi product unavailable to retail TradFi users. This capability gives huge value back to the user. Hercules offers more flexible, efficient, and rewarding ways to engage with liquidity. By understanding and utilizing these tools, DeFi users, be they protocols or individuals, can contribute to a more robust and dynamic financial ecosystem.

Whether you’re a billion dollar protocol or an individual user, Hercules has something for you.