In March, Bridge Oracle CEO Sina Estavi purchased a non-fungible token (NFT) from the first tweet from now-former Twitter CEO Jack Dorsey for $ 2.9 million. How much would you lend with her as collateral?
CEO of US-based cryptocurrency exchange Kraken. Jesse powell he intends to find out.
Like many other exchanges, including Changpeng โCZโ Zhao's Binance, Brian Armstrong's Coinbase, and Sam Bankman-Fried's FTX, Kraken is launching an NFT market where they can be bought and sold. Unlike Coinbase and FTX, Kraken is also looking into establishing a loan facility where people can borrow, he said in an interview with Bloomberg.
"If you deposit a CryptoPunk on Kraken, we want to be able to reflect the value of that in your account," Powell said. And if you want to borrow funds against that, โKraken would like to be able to give it a dollar value.
Non-fungible token means that each one is unique and cannot be replaced by any other. So a can of tomato soup is expendable; Andy Warhol's image of a tomato soup can is not expendable. These variations of the cryptocurrency are designed to hold data, usually media of some kind, that is written to it when the token is minted. Once this is done, it is written on a chain of blocks, that the vast majority is in Ethereum, that the data cannot be changed and its provenance is never in doubt.
(Well, the provenance of the NFT is never in doubt; whether the person who coined it actually owns the rights to the media stored on it is another matter entirely.)
Since he was criticized all over Twitter, Dorsey's first tweet was legitimate, and Estavi is the owner of "just set up my twttr" posted at 3:50 pm on March 21, 2006.
Of course he still lives here on Twitter, where anyone and see it and copy it.
Pricing an NFT
From Powell's perspective, NFTs are now in the second of three growth phases, starting with speculation and growing to buying art and supporting artists. Phase three will be the functional uses.
And indeed, while an NFT can contain anything from a portion of stocks to a fraction of a house, the vast majority are art, avatars, and game items, and ultimately the property of the metaverse.
The whole world has heard of art thanks to Christie's $ 69.2 million sale of a collage called "Every Day: The First 5,000 Days" by digital artist Mike "Beeple" Winkelmann. There are a staggering number of avatars, basically portraits of an imaginary person or thing, but the first are CryptoPunks and Bored Ape Yacht Club (BAYC), where rare items have sold by the millions.
The top five, according to DappRadar, start with Axie Infinity NFT, which are in-game items, with 11.5 million sales that have raised $ 3.8 billion. Next comes CryptoPunks, with 19,402 sales for $ 2.3 billion. Number 3 is Art Blocks, which are actual works of art by various artists, 134,000 for $ 1.1 billion. The fourth is BAYC, with 23,309 sales for $ 877 million.
Fifth place, however, is NBA Top Shots. These short videos - basically a combination of trading cards and feature reel - attracted widespread attention from NFTs through frequent mention of them on basketball broadcasts and the pulling power of the stars - a LeBron James dunk was the top seller at $ 535,000. 11.4 million were bought, sold, and repurchased for $ 750 million.
See also: Retailers pin their hopes on NFTs like Impulse Play
Assess an NFT
Yes, but how much is an individual Top Shot or CryptoPunk worth?
Much depends on the rarity. CryptoPunks had a limited run of 10,000 and some variations, such as aliens and zombies, are very rare.
At the same time, any work of art, like bitcoin, is only worth what someone is willing to pay for it. And with art sold at auction and rarities sold at auction, a bidding war is what drives up the price of a Warhol or a Beeple.
One point in Kraken's favor is that the art loan market is very strong in the upper segment. In August, Bloomberg reported that Bank of America, a leading art lender, saw its business grow 15% year-over-year at the end of the second quarter of 2021, to $ 7.3 billion. At the higher end, lenders generally give 50% of the appraised value, while they charge 2% to 9%, CNBC said.
That 50% figure sounds pretty good, but keep in mind that they are talking about Picassos and Warhols, who have a long history of value.
Crypto secured loans generally require a 150% deposit on the loan amount.
Read more: PYMNTS DeFi Series: What are the Top 10 Uses of DeFi?
