What is NFT renting? All you need to know.
Trading NFTs that are well-known or have intrinsic value to them are not cheap. If you are in the NFT space for a while, you know the ones. To name some, such as BAYC (Bored Ape Yacht Club), CryptoPunks and few others. But what if there was a way for you to rent it for a specific period rather than to buy. With renting, you can make use of all the benefits that the NFT holds for a limited period without any commitment. So, let’s dig into this and we’ll explain in detail the complete process of NFT renting.
What is NFT Renting?
Simply put, NFT renting is exactly what the term states. You get to rent an NFT for a set period for a given sum. This can be achieved by making use of smart contract that acts as deed and usually requires a deposit in some cases. After the renting period, the NFT must be returned to its original holder.
NFT renting has gained a lot of traction in the the world of crypto since it allows one to get more exposure to the crypto and NFT space in general without any sort of financial commitments.
Who rent’s an NFT? And why?
There are multiple reasons for people to rent an NFT. There are two different perspective to this. From the point of a lender and the borrower. To name a few:
- It is one way of putting your digital asset to work and make an income out of it. You can charge the borrower a rental fee for the use of NFT for a period.
- Since the cost of high-end NFTs comes with a big price tag, it’s not feasible for everyone to buy it. So, renting allows the user to enjoy the benefits and privileges of the NFT for a period without making huge investments.
- The ones who are fearful of this sector, initially want to try it out before making a big purchase, so renting allows them to use it for a while and make sure if they really want the asset or not.
- Even the ones who are skeptical about the world of NFT and want to explore first will give this a try.
These are few of the major reasons why people would try to rent the NFT than to buy it.
Types of NFT renting
There are two types of renting NFTs:
- Collateral Renting
- Non-Collateral Renting
1. Collateral Renting
As the name suggests, this involves the borrower to provide a collateral to rent the NFT for a period. There are multiple platforms which we will talk in a while, where users can go and rent or borrow NFTs.
Whoever is interested in renting the asset can pay the specified collateral fee along with the rental fee and initiate the NFT rental smart contract process.
Once the contract is signed and the process is complete, the borrower has a specific period of time till he can make use of that NFT and as soon as the contract comes to an end, the NFT is sent back to its original owner and the collateral is returned to the borrower.
The potential drawback in this system is that the collateral fee can be the same or higher than the actual market price of the NFT which will reduce the number of potential borrowers.
If the borrower decides not to give back the asset or something goes south, although you do have the financial backup (collateral), it’s still a condition of loss of digital asset. This is where non-collateral renting comes into action.
2. Non-collateral Renting
In here, the process is same as collateral renting, where the smart contract is formed, but instead of the original NFT, the borrower gets a wrapped NFT with the exact characteristics to that of the original and they don’t have to pay the hefty collateral fee either to the lender. As soon as the contract expires, the wrapped NFT is burnt. This is a win-win situation for both the parties.
Items like Metaverse lands, Digital Art, Game assets, Event Tickets, Fashion, Music and much more can be rented on the platforms.
Marketplaces to rent/borrow NFT
- IQ Protocol
- Unitbox DAO
In here, the lenders are required to list their asset on the ReNFT site, and the listings are all smart contract enabled. The lender sets the price and duration of the digital asset (NFT) along with the collateral which the borrower must pay. The support Ethereum, Polygon and Avalanche network.
This platform creates the smart contract that gives wrapped, collateral-free NFT for renting with a fixed duration and expiry. This project is still in beta stage. They support Polygon and BNB network.
This is still in the testing phase, but they allow users to rent collateral free on their system. By making use of the wrapping concept, the smart contract takes place and gets completed. This platform is specifically suited for P2E game NFT rentals. They support Ethereum and BNB networks.
This platform allows both, collateral and non-collateral rentals. Apart from this, they also offer mortgage financing, where the users can buy the NFT now and pay in instalments. They support Ethereum, Polkadot, Solana, Polygon, and BNB networks.
Although this is a new concept and yet to make the mainstream, we all hope this is going to be a game-changer and is going to be the next evolution in the field of NFT. So, it’s high time you give this a try and see what you can get for yourself. Try renting NFT and make some money on the way or borrow and hop on the world of NFT and see for yourself.
Read on Top NFT blockchains – 2023