Do You Own a CryptoKitty? You Could Soon Use It as Collateral for Loans

CryptoKittes are adorable. However, apart from sitting around and mating all day within an application, they don’t do much. But now, if you hold CryptoKitties and want to borrow some cryptocurrency, you’re in luck – thanks to the blockchain firm Dharma.

Dharma, which lets users borrow native coins to access DAPPS, has now extended its support to take CryptoKitties as collateral for cryptocurrency loans.

Every CryptoKitty is unique in its nature, which makes them non-fungible. This characteristic makes them an ideal digital commodity to hold as collateral against a loan.

Trust me. This is neat.

Non-fungible, collectible CryptoKitties can now serve as collateral for a loan through the Dharma Protocol. This application of ERC 721 demonstrates an early real world financial use case. https://t.co/cGeOCm8Ces

— Alexis Ohanian Sr. (@alexisohanian) February 6, 2018

Answering to the question of how Dharma is planning to increase access to capital, in an AMA session at Token Daily, Nadav Hollander, founder of Dharma, noted: “The market mechanisms by which a dollar gets from an investor’s pocket to an eventual borrower’s are generally known as “capital markets” — and the infrastructure that enables capital markets to function today resembles the DMV much more than it does AirBnB in terms of efficiency. With on-chain loans represented by cryptographic tokens, trading and securitizing loans become *much* easier and *much* cheaper — and, insofar as this gives fixed-income investors more attractive investment opportunities, more lending capital enters the capital markets ecosystem. In turn, access to capital should become cheaper and more convenient.”

Hollander also thinks that loans based on the decentralized platform have a huge advantage over the traditional centralized one, as he wrote: “All digital assets/tokens are easier to implement using centralized databases. The reasons why cryptographic tokens are a useful way to represent loans are the same reasons why cryptographic tokens have become as popular as they are — decentralized, permissionless token standards are easier for the heterogeneous, global ecosystem of exchanges, wallets, and developers at large to look into than their centralized, proprietary counterparts. Decentralized computing of any sort is incredibly inefficient — but incredibly necessary when what we’re trying to build is shared, public infrastructure.”

How does Dharma make money?

Dharma is still in development, and like most nascent projects, the team is more focused on attracting users than making money. However, Hollander revealed that internally, the team is actively discussing ways to monetize the platform, and has come up with six potential ways to earn profits. They are considering traditional business models like charging platform fees, consultation and first-party application, and also the three popular token models – governance token, medium of exchange token, and staking token.

Unlike most blockchain projects, Dharma is not rushing to raise money with an ICO – its main focus is on building its technology and ecosystem.

“We’re trying to be very thoughtful and cautious about inserting a token model into the protocol — there are a lot of people rushing to do token sales nowadays with half-baked models. We’d rather build out the protocol and ecosystem *first*, and then focus on value capture later,” Hollander added.