One of the immediate thoughts that come to mind when “NFTs” (non-fungible tokens) are mentioned is that of a simple JPEG that costs a small fortune. Rightfully so, the idea of NFTs being simply a digital graphic that costs an arm and a leg developed early in the evolutionary development of NFTs. CryptoPunks, for example, was created by John Watkinson and Matt Hall as a social experiment to see just how popular a collection of generative graphics could be among web3 enthusiasts. Even until today, there are many who treat NFTs with “paper hands”, that is to say, they buy promising NFTs in a bull market situation with the express intent to sell them off quickly for a profit.
However, the use of NFTs has greatly changed since those early days. The beating heart of the NFT is not its aesthetic design. It’s its smart contract. A smart contract determines the ownership of the NFT, whatever form the NFT may be in, be it a CryptoPunk, a Bored Ape or a Moonbird. Whenever a buyer mints an NFT on a secondary market such as OpenSea, the buyer gets a default smart contract given by the secondary market that determines who owns the NFT, from whom it was procured and at what price. But custom smart contracts allow for NFT developers (“devs” in web3 language) to be more creative with this idea of “ownership”.
Enter NFT renting. NFT renting is just what it describes. The renter is able to possess the NFT for a specific period of time, for a specified price. After that time is up, the borrower no longer possesses the NFT? There are two mechanisms in smart contracts for this to happen. The first mechanism is that the borrower manually transfers the NFT to the owner. Usually in this scenario, the borrower is made to put down a collateral that is valued higher than the NFT itself, so that there is motivation to return the NFT. The second mechanism is that the NFT itself is not transferred to the digital wallet of the borrower. Rather a “wrapped” version (a clone) of the NFT is transferred into the digital wallet of the borrower. At the end of the rental period, the wrapped/ clone version is “burned”. That is to say, the smart contract is destroyed, thereby breaking the relationship between the borrower and the NFT.
While the first mechanism is a more manual approach to NFT renting, the second mechanism is more technologically driven. The second mechanism is only possible with the new ERC- 4907 standard. Now, some say that ERC-4907 will be the last Ethereum standard before Ethereum upgrades into Ethereum2. Ethereum started off with ERC-20, which is the standard used to create the Ethereum coin. These coins were fungible, which means that all coins were equally tradeable or each other at the same value. Ethereum then created ERC-721, which was used to create non-fungible tokens (NFTs). NFTs are not fungible because no two NFTs can be equally traded for the same value. Following ERC-721, Ethereum created the ERC-1155 token which allowed for NFTs to be “lazy minted”. This was the period in which many NFT creators rushed into this space because they did not need to pay gas fees to upload their NFTs to OpenSea. Gas fees would be payable only when an offer to purchase the NFT is made.
ERC-4907 enables the separation of the owner and user of an NFT. Without ERC-4907, the transfer of NFTs from one wallet to another necessarily means that one loses ownership. ERC-4907 enables the owner to wrap the NFT into a clone, and for the clone to be transferred into the digital wallet of the user. The owner thus retains ownership, while the user is allowed use for a period of time.
Another difference between ERC-4907 and the earlier standards is that in the earlier standards, the creator of a token must choose one standard to be used to mint the token, and that standard remains the standard that was used for the entire life of the token. ERC-4907, on the other hand, works with ERC-721 and ERC-1155. ERC-4907 merely “wraps” around the earlier standards in a similar way that WETH wraps around ETH.
But why would anyone rent an NFT? Well, the simple reason is that renting the NFT allows one to reap specific benefits for a specific period of time without having to fork out all the cash to buy it. Imagine the annual ApeFests (organised by Yuga Labs, the creators of Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC). Let’s say I really very badly want to go to this year’s ApeFest. I can’t afford a BAYC or MAYC, because, currently, the floor price of a BAYC (the cheapest item) is at 84 ETH (USD 252,000) and the floor price of a MAYC is at 16 ETH (USD 48,000). So what do I do? I rent a BAYC or MAYC from an owner who is happy to let me have it just for ApeFest, and then I return the NFT back when ApeFest is over. Win-win. I get to go to ApeFest, and the owner of the NFT gets to make money from the rent.
NFT renting is popular whenever NFTs are used as tickets. Aside from ApeFest, those who wish to dine at Gary Vaynerchuck’s (Gary Vee) restaurant have done the same too. Gary Vee’s restaurant is a members-only private restaurant, and in order to dine there, one must own a Flyfish Club NFT. If one does not have the USD 11,100 in ETH to purchase the cheapest item in the Flyfish Club NFT collection, the best thing one can do is to rent an NFT out just for an experience to dine at the restaurant.
So where can one rent NFTs? One of the forerunner platform in this regard is BoredJobs. As a marketplace, BoredJobs connects potential borrowers to the owners of certain NFTs in the Bored Ape Yacht Club, Mutant Ape Yacht Club, Moonbirds, World of Women, Azuki and Doodles at this moment. Think of BoredJobs as AirBNB. It connects potential tenants to potential homeowners if homeowners express interest to rent out their properties only. As such, not all the NFTs in these collections are reflected on BoredJobs.
NFT renting is a process by which you can lease your NFTs to another person or entity in return for regular payments. This can be a great way to earn some extra income from your NFTs, as well as providing the lessee with the use of your NFTs. There are several benefits to NFT renting, including:
NFT Renting is a new and popular way to invest in digital art and other online assets. However, there are some risks to be aware of before investing in this new trend. One of the biggest risks of NFT Renting is the potential for fraud. Because NFTs are still a relatively new concept, there are not yet many regulations in place to protect investors. This means that there is a greater potential for scammers to take advantage of people who are not familiar with the process.
Another risk to consider is the volatility of the NFT market. The prices of NFTs can fluctuate rapidly, which means that there is a greater chance that you could lose money if you invest in them.
NFTs have a lot of potential when it comes to rental agreements. By using NFTs, landlords can create unique rental agreements that can be stored on the blockchain. This allows for a more secure and transparent agreement between the landlord and tenant. In addition, NFTs can be used to track rent payments and ensure that they are made on time.
Overall, NFTs have the potential to revolutionise the way that rental agreements are created and stored. By using NFTs, landlords can create more secure and transparent agreements with their tenants. In addition, NFTs can be used to track rent payments and ensure that they are made on time.
