The emergence of non-fungible tokens marks a significant revolution in the decentralized space. Redefine and expand the decentralized economy, open up other use cases for blockchain technology, and facilitate blockchain’s transparent and permissionless functionality. One of its greatest potential is the financial and investment opportunities that continue to attract investors and enthusiasts.
NFTs offer a wealth of financial opportunities that are yet to be fully explored and exploited by investors. Despite being around since 2014, NFTs went mainstream in 2017 and quickly became popular in 2021. Approximately $41 billion worth of cryptocurrency was spent on NFTs during this period. This number is expected to grow exponentially as more NFT projects are deployed.
Unfortunately, obtaining NFTs is expensive. Owning these attractive digital tokens often requires a small fortune. This has prompted investors, creators, and developers to announce exciting strategies that can make NFTs affordable and varied for all. One of these strategies involves NFT rentals.
What is NFT rental?
NFT rentals are short-term rental services that allow owners of certain NFTs to rent them out to borrowers. This novel strategy allows borrowers to experience the utility of such NFTs for a limited amount of rental time. Renting NFTs is not a standard feature of all marketplaces, but it employs a DeFi-like protocol to facilitate rentals and ensure that leased NFTs are returned to their rightful owners once the rental period ends. It is specific to the platform you use.
Why should I rent an NFT?
Renting NFTs may sound boring, but the potential of certain digital assets makes them relevant and exciting. As such, renting out NFTs is a way to monetize as a lender, essentially creating another avenue for passive income in an otherwise dormant digital asset.
Rental protocol type
Similar to DeFi lending protocols where cryptocurrencies are rented, renting NFTs incurs fees at an agreed rate. On the other hand, there are two types of NFT rentals:
Secured rental – A secured NFT rental is where the borrower deposits an agreed-upon level of collateral to secure the NFT. This insures loss and protects owners in the event of loss of digital assets.
Unsecured rental – Unsecured rentals seem easier and less risky for owners. No collateral is deposited and NFT holders do not have to relinquish their digital assets. Instead, it provides a wrapped token backed by a particular his NFT issued to the lessee. This wrapped NFT will be burned upon return.
How NFT rental works
The entire rental protocol is governed by smart contracts that automate all transactions once predefined conditions are met.
for Secured rental, NFT owners must list their NFTs on marketplaces that support rentals. Stakeholders navigate the available pool and initiate the borrowing process. Once this borrowing process is activated, the NFT will be locked into a smart contract along with the rules of that contract.
The rules of the contract stipulate the rental period, collateral and other terms. Once mutual agreement is reached, the smart contract will be executed and the NFT will be transferred to the borrower. The smart contract will also return the NFT to the owner and the collateral to the borrower after a predefined expiration or time.
for unsecured rental, The procedure is similar to the secured counterpart, but with additional options. Unsecured rentals have the unique option of not sending the original NFTs to the borrower as there is no collateral to rely on or to cover the risks. Instead, wrapped NFTs backed by specific NFTs are created for rental by smart contracts and delivered to borrowers. Immediately after the expiration date and time clock, the wrapped asset is deposited into the smart contract, which burns it. Meanwhile, some NFT ecosystems have also introduced in-house rental systems where rented assets are self-managing.
Note that in both transactions the borrower pays the rental fee. Both parties are also responsible for their respective transaction fees as defined by the network on which the transaction takes place.
As a borrower, NFT rentals allow you to experience some of the utilities that rented NFTs hold. For example, if you rent an NFT that breeds or issues tokens or collectibles that can be sold as an NFT, anything the NFT issues could belong to you if such terms are included in the smart contract of the rental. I have. Additionally, renting NFTs such as BAYC and his other community-driven NFTs gives you access to the respective community as a borrower for the duration of the rental. Renting NFTs is therefore a valuable way to make money as a lender and the only way to enjoy and experience her NFT utility as a borrower.
What are the rentable NFT candidates?
Hobbyists and investors who cannot afford to buy some NFTs can rent them for several purposes, so here are some examples or classes of NFTs you can rent.
Metaverse Land – Metaverse land is a utility NFT with some economic potential that allows third parties to develop buildings and experiences. A renter may rent such land to host social gatherings, concerts, galas, and the like. Additionally, users can develop metaverse lands with auditoriums for conferences, symposiums, or retail stores. It can also be leased to brands looking for a concession stand or his POS in the Metaverse ecosystem during iconic Metaverse events.
Digital Arts – Because avatars function as human personas in virtual worlds, digital art like avatars can be rented to hobbyists who want to attend Metaverse events. Digital art, on the other hand, goes beyond avatars. Also included are rare drawings and photographs. Digital art like this can be rented to beautify the Metaverse Event Center.
In-game collectibles – Play-to-Earn (P2E) games reward players with in-game collectibles for completing various stages and levels. Collectibles such as accessories, weapons, and potions help the player progress through the game. Additionally, you can rent them to other players who want to use them to win stages in their own gaming experience.especially with special items such as guns, swords, daggers, and armor.
Music and Art NFT – Music is another burgeoning niche in the NFT space. A music artist releases music videos and audios as his NFTs, and such his NFTs can be rented to those who can’t afford them. For art NFTs, special his NFTs with real-world utilities like the VeeFriend collection can also be rented for users who want to experience real-world use cases.
Where can I rent NFTs?
Several marketplaces offer NFT rentals. Notable ones and their compatible networks include:
- IQ protocol (Compatible with Polygon and BNB networks)
- Vera (Compatible with Ethereum, Polygon, Solana, and BNB networks)
- challenge (Compatible with Polygon and BNB networks)
- Trava protocol (BNB smart chain compatible)
- dark block (Supports Ethereum, Solana, Polygon, Avalanche, Tezos)
- Renft (Compatible with Ethereum, Polygon, Solana, and Avalanche networks)
- Jalta (Supports Ethereum blockchain)
- Renfta (Skale network compatible)
Conclusion
NFT rental is another strategic concept that adds utility to all NFTs. This allows the NFT owner to rent out her idle NFTs to investors and users who want to experience the utility. Besides earning passive income for the NFT owner, the rental opens up avenues for collaboration and facilitates her P2P transactions within the NFT space. This increases the range of NFTs and their economics.
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*All investment/financial opinions expressed by NFT Plaza are based on the personal research and experience of the site moderators and are intended for educational material only. , the product should be thoroughly investigated.
Technical writer with a passion for blockchain and all things decentralized world.