Digging into the concept of NFT Renting
NFT renting has been scantily known and debated. But now people are talking about it and want to know more. Therefore, his blog is all about NFT renting. If you read it till the end, you will go home clear-minded. Well, first of all, purchasing or having possession of NFTs is not a piece of cake. Let alone the expensive ones, a normal person cannot even afford to buy the cheapest NFT such as CryptoPunks or Bored Apes. Since making money is the main objective of almost everyone around the world, people in possession of NFTs lend them to make passive income.
The first question that comes to mind when you hear this term is, what is NFT Renting?
As we discussed above, having NFTs is not easy. A lot of people want to take advantage of and have experience using NFT but not everyone possesses it. Therefore, those who don’t have NFTs for themselves, borrow them from someone who does. Although for a brief time.
The process behind lending and borrowing the NFTs is simple. Marketplaces that allow rental use Decentralized Finance (Defi). Now, Defi ensures secure transactions and the return of NFT to its owner after the rent period is over. Which makes renting pretty safe.
The reason behind renting an NFT
There are two standpoints here, one is of the borrower and the second is of the lender. However, the major goal of both remains the same, TO MAKE MONEY.
For the lenders, NFT Renting can be productive to generate revenue passively. When their NFTs are being used somewhere, lenders can make money out of this circulation.
From the borrower’s point of view, it is a great way to be the part of NFT community. Similarly, renting NFTs is a frugal way to enjoy some high-end NFT utilities that too without a massive investment. However, if someone prefers to use NFT for a certain period or a specific purpose, they are granted access only when needed.
Mechanism of NFT Renting
Renting NFTs works in two ways. Collateral renting and non-collateral or collateral-less renting.
As its name is self-defined, collateral renting is when a renter provides collateral to borrow and use the NFT for the nonce. There are NFT-Rental platforms such as IQ Protocol where an owner lists their NFTs. And then the borrower initiates the renting process. This process leads the asset to an NFT smart contract.
It is mandatory for the borrower to deposit collateral to uphold the interest of the lender. Well, not only the collateral but the borrower also has to submit a certain amount of fee. However, as soon as the contract/renting time expires, the collateral goes back to the borrower and the NFT to its real owner.
That being said, there are two potential risks in this model of renting:
- Number of borrowers may reduce. Owing to the price of NFT, those borrowers have to pay along with the collateral.
- Once NFT is rented, it becomes up to the borrower to return it to its real owner. Hence this model may lead to the stealing of your digital asset.
It also brings substantial benefits to both the borrower and lender. As the process of collateral-less renting is somewhat the same as collateral renting. However, the sole distinction in non-collateral renting is that in this process borrower or lender doesn’t receive the original NFT. Here assets are wrapped up as the original NFTs but not they are not original NFTs. Nevertheless, they are as minted for them as the original ones.
Once the contract is expired. Wrapped NFTs are extinguished. Since it doesn’t involve any collateral, both parties have a safe ground to play without any financial risks.
How to make money Renting NFTs?
If you own high-demanded digital assets, then renting NFT is suggested for you. The world is getting more and more inclined towards playing play-to-earn games. And many NFT Games require an initial investment before you start making money. Here you can rent out your digital assets to earn passive income.
You can buy NFTs and lend them to those who can’t buy them. These NFTs would become in-game assets in the form of characters or virtual lands. In return, you can earn the discussed amount of crypto.
What are the best marketplaces for NFT Renting?
Since there is a multitude of markets where you can rent out your digital assets, it is hard to find which marketplace is the best for NFT renting. However, there are some recommended NFT rental marketplaces which are as follows.
NFT renting is becoming the trend faster than ever because a considerable number of people want to experience it but can’t afford to buy it. Hence, this write-up has explained NFT renting in depth. It also divulges the types and mechanisms of NFT renting. Furthermore, the abovementioned platforms are widely suggested for NFT renting.