GM web3 fam!
We’re back with another paradigm-shifting DOer Spotlight episode just for you.
At Web3 Academy, we’re all about using web3 tech for actual business use cases rather than speculating on floor prices. 📉
And that’s exactly what we’re going to cover with some help from today’s DOer, Nick Vale from reNFT.
Nick’s experience across game development, crypto, and technology opened his eyes to a missing key in the NFT space—rental NFTs. 🗝️
In this episode, we’ll cover what rental NFTs are, how they work, and why they’re important. Then we’ll introduce you to five situations where rental NFTs will seriously improve user experiences.
Time for some serious alpha, folks 🧠
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The What, Why, and How of Rental NFTs
The concept of rental NFTs is the same as renting a physical appliance, object, or home—access.
Access encompasses many reasons why someone may rent as opposed to buying—for example:
- Someone may only need the object’s utility for a finite period, such as renting an outfit
- The rented item may be expensive, such as a home
- There’s less risk in renting versus owning as an item’s value can decrease over time
And it’s the same for NFTs.
Not everyone can afford to buy blue-chip NFTs since their prices rise due to their success. Even in the current bear market, BAYC has a floor price of 74.2 ETH (just over $100,000), and cheaper blue chips, like Moonbirds, still cost over $13,000.
And as web3 continues to onboard more people, prices will likely continue to rise due to demand. As a result, many people may prefer to rent these expensive NFTs for temporary utility while owners can monetize their assets.
This provides owners and renters with exceptional flexibility in how they interact with web3.
For example, an NFT owner may have access to an IRL event. But they could be unavailable or live in a different country. In this case, they could find a renter who wants to attend.
So instead of wasting their utility, the owner can share it for an affordable price—or even free in the case of renting the asset to a friend. The best part is that it can all be done on-chain in a trustless and immutable method.
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How reNFT is Implementing Rental NFTs
Right now there are two main ways to rent NFTs: Collateralized renting and collateral-less renting.
The former involves the renter depositing collateral equal to or more than the NFT’s value, then receiving the actual NFT.
The latter involves wrapping the NFT through a smart contract, creating a new asset that is backed by the original. But instead of returning the wrapped NFT on contract expiry, it’s burned.
The problem is collateralized lending requires enough funding while wrapped NFTs can lead to composability issues.
An example of a composability issue could be someone taking out a loan on a wrapped NFT—think of it like someone renting a house and then taking out a mortgage on it!
Instead, what Nick and the reNFT team are trying to do is separate NFT rights.
At the moment there’s a lot packaged into one NFT and you can’t separate it. For example, in a VeeFriends NFT, you have a VeeCon event ticket, a pfp, access to Gary Vee, and more.
It’s all stuck together.
But Nick and reNFT are building infrastructure to delegate individual rights—for example, if someone’s unable to attend a conference they could rent the NFT to someone who can.
Sheesh, talk about giving utility even more utility.
But how is the reNFT team actually doing it?
Think of the rental process as an on-chain database of sorts. You as an NFT owner come onto the platform or through an integration, you put your NFT up for rent and define all your terms.
Some parameters may include the upfront price, daily rental, max rental duration, etc. Once that’s done, the asset will be escrowed in a contract so there’s no duplicate when someone rents the asset.
Unlike collateralized renting, the renter doesn’t actually get the asset.
Instead, the protocol (where the renter plans to use the NFT) will ping reNFT’s smart contracts which will then forward the NFT’s metadata to the protocol. Essentially, reNFTs smart contracts act as an additional layer to verify rights delegation, instead of the protocol pinging their own contracts.
Any protocol that uses reNFT is essentially recognizing a right that doesn’t actually exist besides on-chain. It recognizes that person A owns this NFT and they let person B use it for X amount of time.
But since NFT rental standards are still in their nascent stages, it’s not possible to freely rent your NFTs unless the creator accepts it.
For example, you can’t lend a BAYC on-chain unless Yuga Labs implement the right infrastructure. And even then, they can specify the exact utility that lenders can share so it’s not a free-for-all.
On top of this, if you want to attend a token-gated IRL event, for example, whoever’s hosting the conference will also need to have the right infrastructure.
This limitation is mainly down to the current NFT standards we use (ERC-721 and ERC-1155) since they don’t allow functionality outside of transferring, buying, and selling.
It’s also the reason why reNFT works directly with projects to build rental infrastructure on top of their existing smart contract, enabling more utility and further use cases for their users.
👉 PSA: This sounds like an ad but it’s not. We just really dig reNFT and what they’re doing. In saying that, we want to mention that reNFT has plug-and-play infrastructure and can handle all integrations for a project.
So if you want rental utility for your ecosystem, the reNFT team is all ears!
5 Ways Rental NFTs Will Be Used in the Future
In the sharing economy, everything is rented—Ubers are glorified car rentals. You can rent furniture, time, and almost anything you could otherwise buy.
The same will eventually be true with digital assets.
But these are five use cases we see right now for rental NFTs.
Gaming Assets
We’ve already seen lending in web3 with the popular play-to-earn NFT game, Axie Infinity. To play the game, participants need at least three Axies which at the peak of 2021 cost $340 at the cheapest—it’s much lower these days but that’s another story!
At its peak, Axie was an expensive game to play which led to the Axie community creating the Axie Scholarship Program. This functionality allowed players to lend their in-game assets to others while implementing revenue sharing.
The problem with this move was that it was all built on trust. People were either manually sharing accounts and passwords or had a team manager who oversaw everything—inefficient and messy to say the least.
But with rental NFTs, there’s no manager who takes 20-30% of earnings and no trust-based risk involved.
On the other hand, you have even more expensive virtual experiences, such as BAYC’s Otherside. Unless you’re a web3 degen and an avid gamer (or recently won the lottery), there’s no way you’re spending thousands of dollars on the metaverse.
Some ecosystems may also have tons of holders who don’t actually want to play the game but hold the NFT for the community.
So renting out NFTs not only gives the owner greater utility but also onboards more players into the ecosystem without devaluing the investment that existing holders paid.
🟣 POP QUIZ
What Type of Rental NFT does reNFT Currently Support?
A. On-chain rights delegationB. Collateralized NFTsC. Collateral-less NFTs
Find the correct answer at the bottom of this article. 👀
Event Tickets
Event tickets as NFTs are an absolute no-brainer, but rental NFTs take it to a whole new level.
What if you have an NFT ticket for an event, but you can’t attend the event? You could sell the ticket, but the ticket might have future utility. So if you want to keep the NFT, you can lend it!
When your ticket is rented, the renter can attend the event while you keep your NFT, earn rent, and still have access to future utility.
This is insane functionality since some of the biggest music companies are releasing NFT collections with a whole host of benefits, including lifetime festival access!
For example, Rolling Loud recently announced that they’ll launch a 10,000 NFT collection that includes lifetime access to all festivals, premium lounge access, and more. Sure you may want to attend the festival closest to you, but there are still six others every year.
Virtual Land
What rental NFT discussion would be complete without some virtual land?
In fact, being involved in the early stages of The Sandbox is how Nick came up with the idea for rental NFTs.
So let’s say you want to start an event company in the metaverse, but you don’t have land. Instead of buying it for a potentially one-off event, you can rent the virtual land for a much smaller amount, similar to what most physical businesses do.
On the other hand, Nick believes that over time users will spend more and more time in virtual worlds, experiences, and games. Therefore in-game advertising could become an important part of companies’ marketing strategies. In the metaverse, this means renting virtual ad spaces and in-game billboards.
So in the future, you could be not only an IRL landlord but a virtual one as well!
Temporary Assets and Subscriptions
Temporary assets and subscriptions are one of the most interesting use cases for rental NFTs. And since they're quite similar, we'll cover them together even though they are separate use cases.
As we spend more time in the digital realm, we’ll likely attend events that mimic real life, such as going to a high-end virtual casino that requires an all-black suit from a particular brand.
By enabling rentals, casino owners can still make the casino accessible for people with a smaller budget and therefore serve a broader audience.
Another example is rental pools where a user can pay X amount of money each month for access to a pool of assets—for example, a pool of digital fashion NFTs. Then each month subscription holders get to pick X pieces of clothing.
Outside of these uses, subscription rentals can also help with user retention and acquisition as holders may rent out their subscription NFTs if they’re unable to use them.
The holder doesn’t lose money, the protocol doesn’t lose a customer (and may even gain one), and the temporary holder gets to try a service without a long-term commitment.
👉 Question: Which of the five NFT use cases are you most pumped for?
Let us know in our newly opened Web3 Academy Discord server where we discuss the latest news, podcast episodes, and everything web3!
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Rental NFTs Will Make Web3 More Accessible
The biggest unlocks of rental NFTs are access and flexibility.
They’ll give temporary holders access to experiences, games, and events without the need for a serious monetary commitment. And they’ll give owners the flexibility to share utility and monetize their assets how they see fit.
While we’re still in the early stages of rental NFTs, we’re already seeing some serious traction in the gaming sector with reNFT already integrating into several platforms.
On top of this, we’ve got builders working on a new token standard (ERC-4907) that will enable rentals on existing standards.
So it’s only a matter of time before rental NFTs become the norm! 🤩
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🟣 POP QUIZ ANSWER
The correct answer is A. On-chain rights delegation ✅
