Alex Masmej, an etherean focused on the dapps ecosystem, says you basically lock the NFT into the smart contract as a proposal for the dapp, Rocket, to accept it as collateral.
Unlike many other defi dapps, here you might need to fill out a form explaining why you want the loan and also how predictable your income is.
“After careful due diligence, Rocket will query funds from our lending pool, which is a Moloch-based DAO dedicated to Liquidity Providers,” Masmej says, further adding:
“The pool is in ETH to remain aligned with Ethereum’s future, and today is worth around $10,000 of potential loans to offer.”
Making this quite a bit interesting as for things like Cryptokitties you probably can’t do it any other way because there isn’t a live exchange market as each cat is worth different prices, if it is worth anything at all.
There are however NFTs that can potentially be valued by the market and so automatically court a loan through collateral.
One that comes to mind is Decentraland where a patch of digital land was sold for as much as a physical house.
Getting a $10,000 loan on that should be fairly easy, but the lender is taking a risk as there is no real time market. Unlike in “proper” defi where the lender takes no risk, save for bugs and the like, because ethereum is very liquid.
Yet this Rocket project is still quite interesting because it seems to combine quite a few ethereum dapps to keep those cats moving.