NFT renting gives you the benefits of having an NFT without the financial commitment of investing in it.
Whether we like it or not, there is an NFT for everything under the sun. There is NFT toilet paper, beasts made from food, NFT clothing and much more. The deeper you delve into the NFT space, the more unique token offerings you will find. As unique and diverse these token offerings might be, there is common among most of these otherwise unique offerings is their hefty prices.
Buying and collecting NFTs is certainly not cheap. Even the cheapest NFTs from popular projects, like Bored Apes and Cryptopunks, are not up for sale at a price anywhere near an average person’s purchasing capability. This is where NFT renting comes into the picture. It means exactly what you might think, renting out tokens and giving people the experience of owning an NFT (and enjoying the utilities that come with it) for a limited period of time. Curious how NFT renting would work? Let’s find out.
How to rent NFTs?
There are two broad ways in which NFTs can be rented out—collateralized renting and collateral-less renting.
Collateralized renting
Owners can list their NFTs on a marketplace that has integrated lending and borrowing features. Renters who like the NFT would then initiate the borrowing process, under which the NFT will be placed inside a smart contract. The terms of the smart contract would be defined between the lender and the borrower. Once the terms have been set and agreed upon, the renting process begins.
To protect the interests of the lender, the renter is required to deposit collateral of a higher price point than the NFT. The renter also has to pay a certain sum as a rental fee. After the contract expires, the NFT is returned to the original owner and the borrower will get their collateral back.
Collateral-less renting
The process of collateral-less renting is pretty much the same as collateralized renting. The only difference is that unlike collateral renting, here, the renter never gets the original NFT. Instead, a wrapped NFT with all the same characteristics of the original asset (also backed by the original asset) is minted for the renter. Once the contract expires, the wrapped NFT is burned. Here, the renter never has to put up collateral, and the owner never has to part with their original asset. This minimizes the financial risk for both parties.
What is the purpose of renting NFTs?
Now that we know how NFT renting is done, I am sure you must be curious about why would anyone ever want to rent and borrow NFTs. Well, for the renter, the answer is pretty simple: to make money. Renting creates a secondary economy in the NFT ecosystem, where NFTs are often just left lying idle in the user’s wallet. It provides the renter with a source of income. For instance, to dine at American entrepreneur Gary Vaynerchuk’s members-only private restaurant Flyfish Club, you have to buy a Flyfish Club NFT, which will serve as your membership token. When the NFT holder is not using their membership, they can rent it out to others and make a profit out of it.
Coming to the borrower, NFT renting is a cheap way to enjoy some utilities, such as the access to exclusive members-only content, offered by the NFT without paying hundreds or thousands of dollars to purchase them. Look at Stoner Cats, for example. The NFT project, produced by American actress Mila Kunis, gives its holders access to an animated TV show by the same name. Renting out the Stoner Cat NFT would allow the renter who has perhaps watched all the released content to make money off their holdings. For the borrower, it is akin to renting a DVD or a film from an online catalog—you view the content and then return it. No long-term commitment is necessary!
With the gaming and music industries also entering the NFT space, NFT rental will likely become more popular over time. However, for now, renting NFTs is a relatively new concept and thus, there are only a few rental marketplaces at your disposal. As of now, the most well-known ones are reNFT, Vera and Trava NFT. Of these, reNFT and Vera have been gaining a lot of traction recently, with venture capitalist firm Animoca Brands raising US$1.5 million and US$3 million in seed funding for the two platforms respectively. As NFTs become more and more mainstream, the demand for NFT rentals will increase, and we will see more such renting platforms cropping up.
Also read:
- How Brands Are Leveraging NFTs for User Engagement
- Beasts from Feasts: A Mid-Life FOMO Holiday Startup
- Gender in the NFT Economy
- Gamers Turn To NFT Games to Earn Cryptocurrency
- What Is a SMART Contract?
- What Are the Cheapest Cryptopunks?
- What Are the Cheapest Bored Ape NFTs?
- When Fashion Meets Tech
Header image courtesy of Freepik
