As Non-Fungible Tokens have shaken up the world of art, gaming, and collectibles, the NFT market continues to expand rapidly, with new opportunities emerging for people to engage digital assets. One of these new opportunities is NFT renting. Renting NFTs is gradually becoming accepted, giving users access to valuable assets without committing to a long-term investment. This article delves into what renting NFTs entails and how it works.
Renting NFTs: How Does It Work?
Renting NFTs works similarly to renting traditional assets. Users can rent NFTs for a set period instead of buying them outright. While renting the Non-Fungible Tokens, they benefit from the advantages and perks of owning them. These include exhibiting it in a digital gallery or using its features in a metaverse setting.
Types of NFT Rental
Renting with Collateral
Before anyone can begin the borrowing process of renting an NFT, they have to ensure they meet the renting requirements. In order to begin the borrowing process, the lender will first place the NFT within a smart contract. The next step is for both parties(lender and renter) to agree on the smart contract’s terms mutually. Once they have established the terms, the process begins. In the case of renting with collateral, to protect the lender’s interests, the renter must provide collateral that has a higher value than the NFT. Additionally, the renter has to pay a rental fee. Once the contract term has ended, the NFT returns to its initial owner, and the borrower receives their collateral.
No-collateral Rentals
Renting without collateral follows the same process as renting with collateral. They differ in that, unlike collateral renting, the renter does not get the original NFT in this case. The renter receives a wrapped NFT that has identical features to the original asset and gets backing from the original asset. Once the contract ends, the wrapped NFT gets destroyed. In this case, both the renter and the owner are exempt from this requirement. This reduces the financial risk for both parties.
Benefits of Renting NFTs
- NFT rentals offer the option to test various NFTs before buying them. This way, you can discover and enjoy various collections, artists, and genres.
- People can gain access to valuable assets without the need to purchase them. When renting an NFT, you can display and enjoy valuable digital assets without making a large initial investment.
- When you rent NFTs, you can choose a short or long rental period, which provides flexibility. Users can rent an NFT for a short duration, like a day or a week, enabling them to exhibit it for a particular event or purpose.
- NFT rentals reduce the risk of losing money due to a decline in asset value as the NFT market is highly volatile, and asset values tend to fluctuate.
Takeaways
The idea of renting Non-Fungible Tokens brings excitement and accessibility to the digital world as NFTs continue to develop. As rental platforms and fractional ownership become more popular, it is becoming easier to access high-value digital assets.