NFTs are more popular than ever. While the world’s first-ever NFT was issued in 2014, acceptance of this new class of digital assets only began to take off in 2021, which will go down in history as the “Year of the NFT.”
NFTs are omnipresent these days, peddled from every corner of the globe and in countless Twitter discussions. Everyone wants in, from Heidi Klum to Snoop Dogg and down to your local postman and barista. The excitement’s consequences are apparent. According to DappRadar, the market valuation of NFT has surpassed USD 22 billion, an increase of more than 22,000 percent from the same period last year.
These figures are shocking to analysts both within and outside the crypto business. Even more astounding is that, because the industry is still in its early stages, NFTs have a long way to go.
NFT Renting
NFT renting is as straightforward as the name implies. Individuals who do not own a certain NFT but would like to use or experience it for a short period can rent it through a suitable platform that enables NFT rentals. There are at least two ways to execute in reality.
1. Collateralized Renting: Owners of digital assets can offer them in a marketplace set up for NFT lending and borrowing. When interested renters come upon an NFT that they like, they may begin the NFT borrowing procedure. The NFT is subsequently put into a smart contract, with the lender and borrower defining the contract’s parameters. The borrower is obliged to deposit collateral, which is likely to surpass the value of the NFT, to safeguard the lender and their asset. Price oracles are most likely used to verify the value of each NFT. Furthermore, the renter will be charged a rental fee to cover the expense of borrowing the NFT.
These terms are codified in a smart contract, which will also contain other essential elements like the rental period and other terms and conditions (such as returning before the contract ends, providing collateral, and so on.). The contract takes effect after the lender and the renter has agreed on all of the smart contract’s criteria. As soon as the NFT is passed to the borrower, the asset is available for use for the contract term. The smart contract runs and returns the NFT to its original owner when the contract expiration date approaches. The collateral is released and subsequently returned to the borrower at the end of the NFT loan procedure.
2. Collateral-less Renting: NFT rentals can also take place in a second, although similar fashion – though, in this case, the rental procedure is substantially simplified, and both asset owners and renters benefit from two advantages. For lenders, approach two provides an alternative in which the original NFT never reaches the renter’s hands. At the same time, those who borrow do not have to put up collateral, lessening the impact on their financial holdings. Having to borrow without collateral starts in the same manner as borrowing with collateral. NFT owners post their assets on a marketplace that allows NFT rentals, and anybody who sees the item and is interested can start the NFT renting process.
The NFT is subsequently put into a smart contract, with the lender and borrower defining the contract’s parameters. A wrapped replica of the original NFT is coined in a collateral-free rental arrangement. This wrapped NFT has the same qualities and properties as the original asset and, of course, is backed by it.
The borrower and the lender agree on a rental price and term. The rental sum is paid, together with any incentive costs, and the smart contract is activated, with the borrower receiving the wrapped NFT. The wrapped NFT is returned to the smart contract at the end, thereby burning the wrapped asset. Liquidity providers gain money from the incentive fees included in the initial payment (those who stake the asset into the renting pool).
The Types of NFT Renting
Without spending a lot of time on it, one may rapidly grasp the potential that renting NFTs provides. At its most basic level, the NFT rental sector will provide individuals with access to certain NFTs that they would not otherwise be able to afford. This is analogous to hiring a race vehicle for the day because the typical individual cannot afford to buy one for half a million dollars.
NFT rental creates a parallel economy in the NFT business. Many NFTs are resting in crypto wallets today, unused for the day by their owners (or for even weeks and months on end). While these owners aren’t utilizing their assets, they aren’t willing to give them up. As a result, whatever usefulness the digital asset could otherwise provide is squandered, as it sits unused in the wallet.
Owners may put their assets to work by activating NFT lending and borrowing capabilities. Furthermore, with the advent of collateral-free NFT rentals, owners can rest sure that their original asset is protected in a smart contract — rather than in the hands of the borrower.
The Gaming Industry: Like many other industries, the gaming business is usually one of the first to adopt new technology and ways of working. With the introduction of NFT rentals, this tendency has continued. Game economies used to be a closed ecology, with players spending hours playing and accumulating in-game assets but never monetizing them on or off the platform. This changes when NFTs are used and much more when NFTs are rented.
For the first time, NFTs allow players to take their in-game assets to a marketplace and sell them for real money. Better still, gamers who wish to profit from their current assets may sell their NFTs on a marketplace that allows for NFT borrowing, allowing them to make money while they sleep.
The Art Industry: Digital art has never been more prevalent in the year 2021. Beeple’s collections are the front-runners, with over 100 million dollars in sales and single-handedly pushing digital art into the public. However, other artists, in addition to his collections, are beginning to make their mark – and will likely position themselves in the coming years to sell their works for hundreds of thousands, if not millions, of dollars. Unfortunately, most people will be unable to afford one of these art objects, housed in a rare place. However, with the introduction of NFT rental, a user with a small salary may rent one of these art pieces for a day while hosting an online party in the digital world.
NFT Renting in the Music Industry: Music streaming services have essentially made music a free consumable item in recent years, with the musicians who create it getting pennies on the dollar. However, these days are numbered, as the advent of NFTs finally grants content and music artists some of the content control lacking in the creative economy for a long time.
The public will soon have access to NFT music files and music videos. Artists who do not want their latest songs to be available “for free” on streaming services will have to charge their fans to listen to their music. Likewise, music videos will no longer be available for free but will be restricted to those who have purchased special edition NFTs. Fans who want to see the music video can buy it directly from the artist or another merchant or use the NFT rentals to rent the song straight from an NFT holder. Finally, a commercial model can emerge in which the content producer benefits and the fan can directly support the content creator.
Avatars in the Metaverse: NFT avatars like CryptoPunks, Bored Apes, and others were the other great winners in the NFT world in 2021. With the metaverse’s rapid emergence and the increasing importance that avatars will play in it, an NFT lending economy centered on avatars is almost guaranteed to emerge in the coming years. Avatars will ultimately become more complicated, wearing various outfits, holding multiple accessories, and so on. These additional NFTs, for which a conventional and rental economy will exist, will also take off shortly.
NFT Renting: The future
NFTs aren’t going anywhere. Inevitably, they will have an influence on all industries to varying degrees in the years ahead. As a result, the NFT rental business is primed to take off, allowing all Web3 economy participants to access nearly any NFT, independent of the original asset’s underlying worth.
Every stakeholder, from lenders to borrowers to the NFTs themselves, has a chance to win. NFT lenders may earn on otherwise static assets, NFT borrowers can leverage certain assets for a limited period to achieve a specific goal at a particular moment, and NFTs will be used in the way they were designed and intended.
References
Axel F., (Jan 6, 2022), 2022 the year of NFT Rentals,
Retrieved from: https://medium.com/renftlabs/2022-the-year-of-nft-rentals-12fab1f93156
Shilpa L., (Feb 9, 2022), NFT Renting- How do Lenders and Borrowers benefit from IQ protocol?,
Retrieved from: https://beincrypto.com/nft-renting-how-do-lenders-and-borrowers-benefit-from-iq-protocol/
Ryan C., (Oct 6, 2021), NFT Rental Service- Who is going to actually rent NFTs?,
Retrieved from: https://www.nftqt.com/nft-rental-service-who-is-going-to-actually-rent-nfts/
Nftworlds, (n.d.), Staking and Rent for NFT world Holders,
Retrieved from: https://docs.nftworlds.com/nft-worlds-usdwrld-token/staking-and-rent-for-nft-world-holders
Dylan K., (Aug 6, 2021), Crptopunk Owners can now rent out their Avatars,Retrieved from: https://hypebeast.com/2021/8/cryptopunk-rental-protocol-nft-ethereum-blockchain-renft
