Rocket LP DAO, a 4-month-old loan provider that uses non-fungible tokens (NFTs) as collateral, issued a $1,000 loan this week, backed by only one Ethereum domain name — brantly.eth. The loan was issued for 90 days with a 15% interest rate and is the first loan to ever be issued with only an Ethereum name service domain name for collateral.
Rocket signs off the first ever domain name backed loan ⌨️🚀
— Rocket (@RocketNFT) April 15, 2020
Ownership of the ENS domain name, represented as an NFT, has been temporarily given to Rocket as the issuer of the loan. NFTs are ERC-721 tokens that are created to digitally represent a physical or digital asset. The most prevalent use case revolves around tokenizing ownership of valuable assets and can be transferred to another user using a smart contract.
The 90-day loan, worth 6.5 ETH ($1,000 at the time of issue), was given to ENS director of operations Brantly Millegan on Tuesday. Although Millegan retains the ability to use the domain name during the term of the loan, Rocket has authority over it. Should the loan default, Rocket will retain ownership of the domain name and has the right to remove Millegan’s access to it completely.
Although a domain name in general may be purchased for very little, Millegan explained in a Medium post that: “Brantly is my first name and this particular ENS name has great personal value to me so I have a strong incentive to repay the loan.”
This raises the question of whether we can accurately tokenize or value sentiment. Although the transaction is recorded on the blockchain, some users suggest the valuation was too high or that it has little correlation to an NFT. One user commented saying, “Might be worth 1/10th of that on the market.”
The cryptocurrency community continues to push the boundaries set in place by the traditional financial systems with multiple P2P lending opportunities among other new approaches. In the recent market turmoil, the MakerDAO has caused a stir as it struggled to handle the wild fluctuations and now faces a $28 million lawsuit.