NFT Rentals - From vanity to utility

August 21st, 2022

Overview

In this post, I will be discussing a lesser known capability with NFTs - the ability to rent NFTs using EIP-4907, a new standard. This standard and capability has the potential to drive up a whole new economy within GameFi and beyond.

Opportunity

Gamefi is currently estimated at $21B+ and overall gaming industry is at $178B+.
As Blockchain games evolve, NFTs will be a huge part of this for reasons like true ownership, provenance and interoperability.

Pain

According to OpenSea, as of Aug 21, 2022, Floor Price of a BAYC NFT is 70 ETH ($114450) or a Decentraland LAND 1.55 ETH ($2535) . This is clearly out of the reach of regular person or a young gamer!
How do we get to a much cheaper solution like being able to “Rent and use an NFT”. My contention is, as we migrate from Vanity usage (e.g. I own this ultra-expensive Profile Picture and nobody else does) to Utility usage (can I rent a Tuxedo to attend this party over the weekend?) the need for NFT Rental is a must-have and not nice-to-have.
The current mechanism of renting NFTs is based on trust (there is no built-in mechanism), expensive (requires multiple transactions with Smart Contracts), and cumbersome to implement.

Enter ERC-4907

On June 28, the rentable NFT standard "EIP-4907" submitted by the NFT rental marketplace Double Protocol , passed the final review by the Ethereum development team
It became the 30th ERC standard with the status of "Final".

Stated in simple terms:

NFTs are allowed to have additional role (user)
User role is automatically revoked after a defined time (expiration)
Renter (user) can use the NFT but cannot transfer it
Expiration sunsets rental period automatically and eliminates a second on-chain transaction thereby making the process much less expensive
Baking it into the standards simplifies third-party integration process. Checkout some implementations in the reference section

Evaluating a Real-Life Implementation

We decided to test-drive the current implementation from Double.

Double rental Marketplace

It seems we can rent domains from ENS or land from Decentraland.

Decentraland Rentals

NewtonsAppleTree

We decided to dive into Decentraland and try renting the plot Newton’s AppleTree

Rental Price of Land Parcel

It seems I can rent it for 0.0015. Much more affordable than having to own it!

Decentraland Rental Purchase

We decided to rent this for a duration of 2 days.

Metamask Purchase Details

The transaction was submitted and had to go through my MetaMask.

The rent was $4.91 but the gas fees was $9.82. Ouch!!!

Purchase Fee Details

The transaction finished and I was able to see it in my wallet.

Metamask ImportRental

Also tried to import it in my Metamask Wallet.

Decentraland MarketPlace LandDetails

Also had this urge to view this is Decentraland MarketPlace

We could find it in the marketplace by looking up the land coordinates and turning off the not for sale filter.

Decentraland Metaverse Rendition

Being a proud renter, I had this urge to go to the land parcel and take a selfie in front of it.

My avatar in front of the Rental Property

Road Ahead

First things first

As we go through the mechanics, it should be stated that the process was somewhat involved and only early adopters would have the patience or expertise to wade though this. It requires significant usability simplification!
The bigger unknown is what are the common use cases with this rented land? What will happen to any build-out, decorations etc. that we do to the rental land? Will those automatically disappear and taken away from the renter? What is the “cleanup” process?
Talking about Cleaning up - The rentals did not disappear from my MetaMask wallet after the rental period of two days was over!
We need to explore other rental artifacts like ENS or Warena!

Longer term

Play-To-Earn (P2E) in blockchain games will be another use case which can reduce the barrier to entry for most players.

As NFT use cases become more mainstream a need for a standards based, risk-free and inexpensive renting will become critical. Many web3 subscription business models will emerge based on a safe renting mode. Think beyond GameFi and real-life like subscriptions!