Imagine Buying a House with a Bored Ape Yacht Club NFT
The NFT space is still booming despite a rather slow end to the year for crypto overall. Tons of major companies like adidas and Nike are dipping their toes into the NFT and metaverse space. The largest toy companies in the world are making NFTs on WAX. Coinbase, Kraken, and FTX are all gunning to launch their own NFT platforms as well.
Kraken NFT Loans
Kraken announced earlier this month that it plans to launch an NFT marketplace and an NFT custody service. Kraken wants you to borrow against your CryptoPunk or other NFTs stored on its platform. Just like how you can use crypto like Bitcoin or ETH to get a collateralized loan, you will be able to do the same with your "blue-chip" NFTs like CryptoPunks or Bored Ape Yacht Club NFTs. We don't really have details as to which NFTs will be supported, but I assume it's going to be based on the floor prices on different marketplaces. For example, you have a Bored Ape NFT worth 100 ETH in your Kraken wallet and you want to get cash to buy a car or house... You could let Kraken custody that NFT and issue you a loan with the NFT itself as collateral for that loan.
The loans would be based on the "liquidation value" of that NFT. Meaning if you were to default on the 100 ETH loan you took out against your Bored Ape, Kraken needs to be able to liquidate or sell that NFT to recover the funds issued on your loan. This will be based on the floor price of the NFT collection and the trade volume, at least I assume. That would be the best way to calculate what value that NFT has as collateral. NFTs with higher trade volume on the collection would probably be more likely to have a loan approved against them because it's easy for Kraken to liquidate that asset in the event of a loan defaulting.
Kraken's CEO seems to have her third eye open wide here. Phase 1 of NFTs was speculation. Phase 2 is buying NFT art to support artists directly. Phase 3 is functional use cases for NFTs. She's absolutely right in my opinion. Granted, we already have some very function NFTs that allow people to do different things such as use NFTs in games. The possibilities of use-case for NFTs are limitless. One of those use-cases seems it's going to be collateralized loans for major exchanges. Can you imagine Coinbase introducing this to its insanely large userbase? Well get ready because at this point I would call it inevitable. The exchange is safe because they vet the NFT and determine its collateral value based on risk, then charge interest on the loan.
Buying a House
This bring such incredible use-case to high dollar NFTs specifically. Now, I'm not rich so I can't really speak for it directly, but there's people that spend hundreds of thousands of dollars on these NFTs. So a collector with a Bored Ape NFT wants to purchase a house. He doesn't want to sell the BAYC NFT but he does want to use the value he knows that it holds. He gives that NFT to Kraken and Kraken determines the liquidation value of the NFT and issues a loan. The loan could be issued in ETH, BTC, or even USD straight to your Kraken account. Just like a traditional loan, there's interest owed on the loan and a fixed time to pay that loan. So now, Chad can use his BAYC NFT to literally purchase a house with cash, and pay back the loan to Kraken. At the end of the loan term or when it's paid off, Chad now has his BAYC NFT and a new house that's paid off. How cool is that?
NFTs are here to stay, so you might as well get involved.
WAGMI
Thanks for reading! Much love.
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I am looking forward to the day when physical properties are NFTs that can be instantly swapped for valuable collectibles like crypto punks or digital land in a game. No more legal paperwork or lawyer's fees - just a simple and peaceful transaction from one individual to another.
Those will be the days! Hopefully we live to see it.
I'm sure we will. Of course it will start in small communities in crypto-friendly nations, but eventually spread to all corners of the Earth :)
That is crazy to imagine, but at the same time as the world goes digital, some would think twice about where is better to have real estate. Like I have land in Splinterlands and that might be more precious than one in real life.
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My thoughts exactly. That Splinterlands land is going to be a retirement account.
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