Quick note: This article has been written in collaboration with Guest Author: Maaz Ahmed (Linkedin) and we would like to thank him for this.
How NFT Rentals works
There are currently two ways by which NFTs can be rented out: collateralized renting and collateral-free renting. In both methods, the owner transfers ownership of the NFT to the user with some collateral or conditions to ensure that the renter will return ownership after the rental period is complete. However, these methods come with potential risks, and when the rental period expires, the owner has to manually reclaim their asset, which can be a complicated and expensive process, especially when renting multiple assets at the same time.
ERC-4907: The Dual Role NFT Rental Standard
The ERC-4907 standard is an extension of ERC-721, and it is easy to implement by adding just a few lines of code. Adopting this model as the standard for NFTs may accelerate further innovation and growth of the NFT ecosystem.
The ERC-4907 offers simple implementation, roles to NFT, on-chain time management, easy third-party integration, making NFT more accessible, and increasing market liquidity. With dual “owner” and “user” roles, it becomes significantly easier to manage what lenders and borrowers can and cannot do with the NFT. The “user” of NFT is revoked automatically after the renting duration is over, making on-chain time management hassle-free.
Renting an ERC-4907 NFT does not require any collateral or on-chain transactions, as renters are allowed to use the NFT but cannot transfer it nor change its user-ship, which is automatically revoked upon expiration. This opens up more opportunities for users to rent NFTs and make use of them, increasing market liquidity over time.
Applications of Rental NFTs in Metaverse
The metaverse is a virtual universe composed of various interconnected settings, and renting NFTs in the metaverse can offer users exclusive experiences, making it an ideal platform for those who cannot afford to purchase them outright. Here are some examples of how renting NFTs can be applied in the metaverse:
Renting Rare Assets
In the metaverse, owning unique digital assets has become a status symbol. One such example is a racing game where owning a rare car is a valuable asset. Renting the vehicle to other players for a specific period of time instead of selling it can offer users exclusive experiences. The rental fee would be based on the car’s worth and the duration of the rental period, allowing other players to experience the car’s benefits without paying a high price for it.
Renting Access Tickets to Exclusive Events
Many events in the metaverse are limited to a certain number of participants, and acquiring entry to these events can be difficult. Renting access tickets to these events for a set period of time can be an ideal solution. The rental fee would be based on the pass’s value and the duration of the rental period, allowing the renter to attend the event without having to purchase the pass themselves.
One of the most significant benefits of renting NFTs in the metaverse is the ability to share experiences. If you have an access permit to a private event, you can rent it to a friend who cannot attend, allowing them to experience the event through your eyes without transferring ownership of the pass. This expands opportunities for people to enjoy unique experiences together in the metaverse.
The Future of NFT Rentals with the ERC-4907 Standard
In conclusion, NFT rentals are the future of renting in the digital world, and the ERC-4907 standard provides a much-needed solution to the challenges of renting NFTs. As the metaverse and Web3 continue to expand, the demand for NFTs will increase, and the rental market will become even more crucial to support the growing ecosystem. The potential for NFT rentals is enormous, and with the right standards in place, it can be a game-changer for the entire NFT space.
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We would like to thank our Guest Author: Maaz Ahmed (Linkedin)