Rocket, a first-of-its-kind lending enterprise on Ethereum, is trailblazing at the crossroads of digital collectibles, known as non-fungible tokens (NFTs) in the space’s vernacular, and Ethereum’s decentralized finance arena.
Launched earlier this year upon MetaCartel operations ace Alex Masmejean’s recent work on undercollateralized loans, Rocket just notched its latest milestone courtesy of its biggest loan to date: 20,000 Dai stablecoin tokens against a $100,000 USD worth of Decentraland real estate.
Announced on March 2nd, the $20,000 loan is slated for a 6-month term at 12 percent APR and is backed by 421 parcels of LAND, i.e. NFT tokens representing plots of virtual real estate in Decentraland.
Digging Into the Deal
Per their due diligence process, the Rocket team conservatively valued the 421 NFTs at $100,000. However, their most aggressive valuation for the digital acreage was as high as $500,000.
Why so much for a couple hundred tokens, then? Rocket undoubtedly had a few primary considerations, the first perhaps being the liquidity factor. This deal worked, then, because Decentraland’s NFTs have enjoyed chart-topping volume in the NFT ecosystem in recent months.
Next, there’s the big question of value, and to a growing number of users Decentraland’s parcels score well on that right now.
Zooming out, the years-in-the-making virtual world launched on the Ethereum mainnet last month, and a $100,000 treasure hunt campaign that coincided with that arrival has more people interested and using the platform than ever before. It seems to be ascending and have more upside, then, generally speaking.
Adding to that, LAND tokens also directly fetch a pretty penny on the market at the moment. For example, the average sales price of LAND over the past week was 5 ETH, or roughly $1,200 at current prices, according to the OpenSea marketplace. The NFTs presently have a floor price of just under 3 ETH on OpenSea, too.
Yet the 421 LAND tokens in question appear safely poised to go for above-average prices on account of their location: the parcels are located right next to one of Decentraland’s “Genesis Plazas,” which are key, highly-valued points within the virtual world’s ecosystem.
Announcing Loan #4: 20,000 DAI against $100,000 of virtual estate ?
? 421 LAND parcels @decentraland
? 12% APR, 6 months long
? Our estimate is conservative. Highest: $500,000.
? Link https://t.co/KGFdqeO0WQ
? Mysterious owner: @metakovan
Best cryptonative collateral. ? pic.twitter.com/OzM4InKCyf
— Rocket (@RocketNFT) March 2, 2020
Taken altogether, Rocket felt comfortable moving forward with their biggest loan yet, having concluded they’ll have solid chances to recuperate in the case of default by auctioning the tokens off.
In a follow-up comment, the team also notably confirmed they were moving ownership of the LAND to a multi-signature wallet via Gnosis Safe to securely custody the NFTs.
A Taste of What’s to Come
The borrower behind the loan, a pseudonymous figure named MetaKovan, said on the news the loan wasn’t just Rocket’s biggest yet but also the largest deal of its kind in the cryptoeconomy to date. Moreover, they expressed optimism that similar deals would become even more efficient over time.
“The collateral ratios are going to get better, but [this is] a good indication of what comes next,” MetaKovan added.
On Heels of Cryptoart Milestone
Decentraland is one hot part of Ethereum’s fledgling NFT space, but another area that can’t be ignored is the NFT art, or cryptoart, sector.
Instead of expressing virtual real estate, such NFTs are wedded to digital art pieces and are, courtesy of smart contracts, provably scarce. And the creation and collection of these pieces is on the up and up lately, a fact that hasn’t been lost on Rocket.
That’s because last month the project issued its first loan backed by cryptoart. The deal saw Rocket lend 1,000 Dai to entrepreneur Rene Schmidt for a 6-month term with 30 percent APR. In exchange, Schmidt offered up as collateral two NFT pieces by the artist Josie Bellini.
Announcing Loan #3: 1,000 DAI to @reneil1337 against @josiebellini NFT Art ?
– 1st ever Crypto Art-backed loan ?
– 2 pieces of Josie + 1 @poapxyz from @EFDevcon as reputation
– 6 months term, 15% interest (30 APR)
More loans to come through soon ? pic.twitter.com/GY1YSyxNIx
— Rocket (@RocketNFT) February 26, 2020
It’s an early and interesting foray, to say the least, and it’s the first of more to come.