NFT Renting: Understand The Two Types Of Renting

Do you want to own non-fungible tokens but do not have enough money to actually purchase them? Are you one of those who feels that NFTs are expensive and you can never buy them? Well, we have good news for you! Go for NFT renting!

Yes, NFT renting is a concept that benefits people who want to experience how non-fungible token works. So, what exactly does renting non-fungible tokens mean? How can one borrow it? This article will shed light on these fundamental questions and help you understand this concept better.

What’s NFT Renting?

NFT renting basically refers to the procedure of renting a non-fungible token for a specific period using a smart contract. Usually, NFT owners rent their non-fungible tokens to interested parties who do not possess digital assets. There are non-fungible token markets that facilitate this transaction.

How does it work?

Typically, this renting process begins at a good rental platform or marketplace with a blockchain network supporting this process. The NFT holders list their non-fungible tokens on these sites so interested people can go through them. The non-fungible tokens will have basic details, such as the intended cost of the token per day and the duration that the owners want their NFT to be listed on the site.

Numerous blockchain networks support NFT renting, such as N3RP, Vera, UnitBox DAO, reNFT, Trava NFT, and much more. 

Once the non-fungible token holder and the borrower agree on the cost, rent duration, and other aspects, they can embed these terms into a smart contract and initiate the transaction. The renter usually pays for the non-fungible token to the smart contract, and once the rent duration is completed, the smart contract returns the non-fungible token to the original holder. 

There are two types of renting: collateral renting and collateral-less renting:

• Collateral non-fungible token renting:

In this type of renting, the borrower offers collateral to the NFT holder to utilize their non-fungible token for a certain period. Furthermore, the borrower is supposed to pledge something that possesses a higher price than the borrowed non-fungible token to protect the owner’s interest.

Apart from this, the borrower must again pay a certain fee as rent for using the non-fungible token. Once the rent contract expires, the non-fungible token is given back to the original owner, and the pledged collateral is sent to the borrower. In case the borrower does not return the non-fungible token, the owner gets the collateral. 

• Collateral-less non-fungible token renting:

This type of renting is similar to collateral non-fungible token renting. However, as the name implies, no collateral is locked in this type of renting, and the borrower, instead of getting an original NFT, gets a wrapped NFT with the same characteristics as the real NFT. Experts opine that this renting minimizes the financial risk for the borrower and the lender. 

Once the rent duration is completed, the wrapped non-fungible token is burned, and since the holder does not lend the NFT, it remains with the owner itself. 

Why rent NFTs?

Renting NFTs is gaining momentum and confidence from NFT holders and investors across the globe. There are numerous reasons why an NFT owner rents an NFT, of which one of the significant reasons is that renting increases the value proposition of a non-fungible token. NFT renting is beneficial for both lender and borrower.

Non-fungible token renting opens up a new revenue stream for non-fungible token holders so that they earn passive income. It is known that non-fungible tokens offer some utilities, and it usually has a specific price. But it is also possible that sometimes, the owner may not want to utilize it, and in such cases, the NFT can be lent to others, and they can earn a side income. Know more about making money from NFT.

Furthermore, it is also a good opportunity for renters or borrowers as renting an NFT gives them a chance to experience the non-fungible tokens without having to purchase them. They can, in fact, use their utility for a specific time duration and reap its benefits. 

Here are some common reasons borrowers rent an NFT:

Flexibility to use:

Sometimes, one may need to use a non-fungible token for a short duration, and in such cases, it is best to rent an NFT instead of buying one. 

Expensive costs:

Some of the non-fungible tokens are expensive and hard to buy. However, people who cannot purchase such costly NFTs can get an experience of these tokens by renting without spending too much money.

Uncertainty about value:

NFT investors sometimes fear that the value of a specific non-fungible token may go down after they purchase it. Thus, in such cases, one may simply rent the non-fungible tokens for a short period.

A trial before purchase:

Renting NFTs offers a chance to try out the non-fungible tokens before actually purchasing them. This can be beneficial for everyone who wants to be sure before the purchase.

Insufficient space:

When a non-fungible token is purchased, it may need huge storage space. However, renting will not require such a thing. 

How to make money from renting NFTs?

Renting non-fungible tokens helps its owner get passive income, and this trend is popular and receptive in the gaming community (play-to-earn games or move-to-earn). In fact, the GameFi industry is one of the leading sectors for non-fungible token renting. 

Usually, the non-fungible tokens that are in demand and P2E NFT games are good choices for renting purposes. The normal non-fungible tokens that are in huge demand can be rented using one of the renting methods mentioned above. 

Also, there are numerous P2E games where players must pay exorbitant fees or purchase high-priced non-fungible tokens to play the game and earn crypto through it. Thus, some of the game sites permit non-fungible token owners to rent some of their already-owned assets to new players. This helps the game to increase its active user base to a great extent. Moreover, this also helps NFT holders to earn rental fees and boost their earnings.

However, there are some other instances where the player has enough non-fungible tokens to start a game. However, they lack extra non-fungible tokens that can enhance their earnings. And these NFTs are exorbitant; thus, they can borrow non-fungible tokens again in such situations.

Apart from games, another site where rentals make sense is virtual plots. This is because buying Metaverse lands or virtual plots is pretty expensive. Additionally, renting out virtual or digital art is another option to make money. Digital artists can lend their artworks to people or art galleries and earn some rental fees through it.

Top NFT renting Platforms

Numerous renting sites are popular for NFT renting. Here are some platforms that you can count on:

IQ Protocol

This site favors collateral-less renting and issues wrapped NFTs to the borrower. The smart contracts will have an expiration date or rent duration, which determines the period up to which the borrower can retain the wrapped non-fungible tokens. However, the original non-fungible token will remain with the owner.

reNFT

This site primarily facilitates renting non-fungible tokens and supports collateral-based renting. Usually, non-fungible token owners will list (upload) their NFTs on this site and establish a price for them. Anyone who is interested in borrowing the non-fungible tokens will thus have to submit a collateral equivalent to that price. Additionally, the owner will also fix the rental duration and rental fees.

The collateral will be returned to the borrower once the borrowed non-fungible token has been returned. However, if the borrower fails to do so, the owner may keep the collateral without returning it.

UnitBox DAO

This is again a collateral-less renting platform that is based on DAO. A platform is a perfect place for people who are interested in P2E game NFT rentals, as it is a part of the GameFi sector. Borrowers may not pledge any collaterals to use non-fungible tokens on this site. 

Apart from these sites, there are other platforms that support NFT renting, such as Vera, Defy, Trava Protocol, and so on. One must thoroughly research the non-fungible tokens and the rental platforms before renting.

Conclusion

NFT renting is a relatively new concept and is still in its nascent stage. However, it is sure to evolve with time. In fact, there are some good NFT rental marketplaces where people rent NFTs to earn passive revenue. Renting NFTs will empower NFT holders and give a first-hand experience for those who cannot own non-fungible tokens