The World’s First ENS-Backed Loan with Rocket LP DAO

I received the world’s first ENS-backed NFT loan this week.

Rocket LP DAO issued the loan, and I sent the ENS name brantly.eth to the DAO’s multisig wallet as collateral — while maintaining the ability to still use the name.

This is a great demonstration of how ENS names seamlessly fit into the fast expanding universe of services that use Ethereum-based NFTs, one of the unique benefits of running a naming system on Ethereum, as I’ll explain.

Here’s what’s going on and why it matters.

NFT-backed loans

In January of this year, Alex Masmej founded a new decentralized autonomous organization (DAO) called Rocket LP DAO dedicated to issuing loans backed by NFTs as collateral. Just as a person can use their property like a house or car as collateral for a loan in the normal world, Rocket LP DAO accepts applications for people to take out loans, paid in cryptocurrency of course, against their digital property.

And they are picky. According to Masmej, they’ve received over 120 applications but have only issued six loans, mostly due to the fact that the secondary market for most NFTs is fairly illiquid.

ENS names in the Ethereum NFT ecosystem

The Rocket LP DAO’s Gnosis Safe wallet collectibles page, in which you can see they own brantly.eth

Since ENS runs on Ethereum, it means ENS names can interact with other Ethereum smart-contracts, even those that have nothing to do with naming — in this case being easily owned and managed by the Ethereum-based Rocket LP DAO multisig wallet.

And though ENS names are by definition non-fungible, its blockchain-native .ETH names also adhere to the ERC721 NFT standard. This means they can seamlessly plug into any markets, wallet interfaces, or other infrastructure built to support Ethereum-based NFTs, like the Gnosis Safe wallet collectibles feature used by Rocket LP DAO.

These are examples of some of the benefits of having a blockchain-based naming system run on Ethereum. In addition to features like censorship-resistance and security, this kind of interactivity in the Ethereum ecosystem is one of the most interesting new capabilities blockchain technology brings to Internet naming. Traditional DNS names, as well as other blockchain naming systems that run on their own bespoke blockchains, lack this ability.

Leveraging a unique feature of ENS

The ENS records for brantly.eth, in which you can see that the Registrant and Controller are different.

I was also able to make use of a unique feature of ENS names: they have two levels of authority, the Registrant and the Controller.

The Registrant is the ultimate owner of the name and has the ability to set who the Controller is. The Controller is who is able to set the records of the name (e.g. set which cryptocurrency addresses to which the name resolves). Most of the time, the Registrant and the Controller are the same person. But it’s useful to have these powers separated in case you want to keep ownership of a name but allow someone else to temporarily manage its records for you.

In this case, I was able to transfer the Registrant power over to the Rocket LP DAO multisig wallet but keep myself as the Controller. This means that while Rocket LP DAO now owns the name and could remove me as the Controller if I default on the loan, in the mean time I can continue to manage and use the name. This is akin to how when you buy a car with a loan, the bank holds the title but still lets you use the car while you’re paying it off.

The terms of the loan

The technology is what is most interesting in all of this, but you might still be wondering what the terms of the loan were: I received 6.5 wETH (~$1000), and I will need to repay the loan in full plus 15% (7.475 wETH in total) in 90 days (by July 14, 2020).

As I mentioned earlier, I put up the ENS name brantly.eth as collateral. Brantly is my first name and has great personal value to me, so I have a strong incentive to repay the loan; and first names are generally valuable .ETH names since they’re short, and there can only be one owner per name.

These terms were themselves fittingly immortalized on the Ethereum blockchain as an NFT.

The future

It was great working with Masmej and the rest of the members of Rocket LP DAO to make this happen.

I look forward to seeing what else people are able to do with ENS names in the growing NFT space!

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News about the Ethereum Name Service (ENS) from the team building it. Follow this publication for the latest ENS developments.

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Dir. of Operations at Ethereum Name Service (ens.domains)

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