A new phenomenon is playing out in the ENS market. As the adoption of ENS increases, we are seeing a plethora of applications integrate the technology, cementing ENS as the most dominant digital identity in the Web3 ecosystem.
Many people are taking their ENS digital identities and using them as assets, which can be bought, sold, or traded for another. This concept has led to a massive boom and bust in the space, while ushering new players whom have chosen to build, curate content, and develop within the Web3 ecosystem.
Teller: Exploring Decentralized Lending with ENS
The interest in collateralized digital assets has grown in recent years, leading to an increased amount of applications that allow users to lend, borrow, and trade digital assets and NFTs, like ENS. One of the latest companies to take an interest in the ENS ecosystem is a Web3 lending company-protocol technology: Teller. Teller describes itself as “a non-custodial lending book that enables users to lend at above-market rates, borrow against any ERC20 (token) or ERC721 / ERC1155 (NFT), and build a history of on-chain credit through loan repayments (and defaults)”.
utility soon ⏰ pic.twitter.com/27odxF575f
— Teller (@useteller) May 22, 2023
A Glimpse into Teller’s Blockchain-Based Decentralized-Lending Platform
In the most basic terms, Teller is a blockchain-project platform/protocol for decentralized lending. It uses smart contracts to automate the lending process and remove the need for a central authority. It has the ability to match those who “want to borrow” with “Liquidity Providers” (LP) who are willing to lend. Teller says they make this system more secure and efficient than traditional banking methods. To signal their interest in the Ethereum Names Service (ENS/.eth), Teller recently purchased the Web3/NFT domain “Teller.eth”, and introduced an exclusive offer for 3-digit holders, providing 50% Loan-to-Value (LTV) for the 999 holders. (The 999 holders are 1,000 digital ENS names which have active liquid value.)
Use your 3 digit ENS domain to get a loan 📈
— Teller (@useteller) May 25, 2023
ENS Holders & Teller’s Risk Management Strategy
A representative from Teller addressed ENS holders on a Twitter space, stating: “Close to 80% of all the ENS loan volume that we’ve had on teller over the last weekend has come through the 999 club digits. The reason is that on a risk level if I give out a 5 eth loan for a 999 club name and the borrower defaults, I could immediately sell that at the floor for 9 Eth. On a risk level, that loan is over collateralized, and minimizes risk.”
As ENS grows, Teller will add inclusive loan opportunities beyond the 999-digit holders. So, if you haven’t been blessed with great fortune, and are not a 999-digit holder, then there’s still hope for you! If (or when) a Liquidity Provider is interested in your specific name, you may still have a chance to get a loan based on social credit or on-chain credit.
Understanding On-Chain Credit Scores & the Controversial Social Multiplier
As Teller explains in its Introduction to Teller: “More recently, the DeFi credit ecosystem has emerged, with on-chain credit scores accounting for wallet behavior. Most relevant data around over-collateralized repayments and liquidations filters into these scores. By analyzing on-chain credit, liquidity providers have greater insight into the historical probability of repayment on a per-wallet basis.”
Use any ENS name to get a loan 🔥
Your .eth & your network are the collateral
Sign up for the whitelist now 👇🏻 pic.twitter.com/s3Xll8hY5G
— Teller (@useteller) June 7, 2023
The other option for securing a loan on your ENS name is the use of social credit. The use of social credit, or as the Teller calls it the “Social Multiplier” has caused quite a stir with some in the ENS community, leaving some members to question the integrity of the protocol, believing “the social multiplier is unfair”. However, the associates at the Teller made it clear that it is up to the judgment of the Liquidity Provider to offer a loan based on their risk tolerance.
The social multiplier was addressed during the Twitter space as well, with Teller commenting: “With certain accounts, the LPs saw their reputation within the community and said this a risk I am willing to take to lend out to these members”.
Diverse Perspectives on ENS’s Evolution & Its Role in DeFi
There are many ENS users that see this lending evolution in the space, and are disliking it, stating that Teller and sites like these will liquidate users’ NFTs, like their ENS names. On the other hand, there are many that see this as an opportunity to utilize their digital assets, without having to outright sell them in the open market. This transformation is possible through peer-to-peer lending, allowing individuals, businesses, and DAO-organizations to lend or acquire digital identities, which they would like to own of there was a default on the loan.
$576,000+ in active loan offers for ENS names on Teller 🔥🔥
Most popular categories: 999 Club, 10k Club, Pokemon Gen 1 pic.twitter.com/br2oN9AZng
— Teller (@useteller) August 7, 2023
Teller & the Billion Dollar Industry of Borrowing Against NFTs
There are many DeFi projects allowing for loans against digital assets, however, it seems that Teller, in particular, has gained the attention of the ENS community by marketing storm! Some assets will be easier to secure a loan against than others, (digits have a floor price like the 999-club has more liquidity than other ENS names.) However, that hasn’t stopped ENS holders from submitting more than 1,000 ENS names (of different levels of quality) to the Teller platform. As the popularity and network effect of ENS protocol grows, ENS lending on Teller may also increase.
According to data from Dune, borrowing against NFTs has become a Billion Dollar Industry. As the holders of NFTs use these services, this new industry is likely to grow over time. Teller is just one of the newest companies to come into the space and surely they will not be the last. As the digital asset space grows, ENS is sure to be at the center.