How Do Rent/Loan Protocols Work For NFTs?
Rent/loan protocols are a mechanism to codify how users can mortgage/rent assets on a blockchain. They provide a set of rules and methods for securely and trustlessly exchanging tokens. This might be advantageous for companies who wish to mortgage or rent things on a blockchain.
What Is an NFT?
NFTs are Non-Fungible Tokens, which is an unusual way of stating they are one-of-a-kind. Unlike Bitcoin and Ethereum, which are both fungible, each token is unique.
To know more about NFT, read our blog on NFT use cases beyond images.
How does NFT Renting Works?
As per the token Structure, ERC-721 stands for NFT, which means Non-Fungible Token, to enable ERC-721 for Renting, there is another EIP, known as EIP 4907. to proceed further, lets understand what is EIP? EIP stands for Ethereum Improvement Protocol, and it is a collection of rules that regulate how the Ethereum network works. Vitalik advanced the first EIP, which was issued a month after the repository became public. It belonged to the Standards Track. Hard-fork Homestead EIP-2 Among other improvements, the cost of gas for creating contracts through transactions was recommended to be raised from 21,000 to 53,000. Hundreds of EIPs have now been published, debated, and implemented, with some being withdrawn. Once the EIP is accepted by the Authorized member of Ethereum Community, it becomes ERC.
The NFT Rental Protocols
These NFT lending services, like DeFi lending protocols, rely on liquidity providers providing crypto money to a protocol pool. Borrowers have rapid access to cash after collateralizing their NFTs and storing them in the protocol's smart contract-powered digital vaults. It is a procedure in which borrowers pledge NFT assets as collateral for a loan, which is often backed by another individual — or “a lender” — who is trying to make a return on their investment. Lenders invest in NFT-backed loans to earn larger returns than typical crypto-backed loans or peer-to-peer (P2P) loans. So far, the industry has proposed two solutions, which we will demonstrate with two protocols. They are known as IQ Protocols and Double Protocols.
Broad Ways Through Which NFTs Can Be Rented Out —
Collateralized: Vera and reNFT are two protocols that provide collateralized NFT rentals. However, they also provide collateral-free choices, as the industry consensus is that this is where the future of this young business resides.
Collateral-Free: Each NFT project must implement collateral-free NFT rents individually. There is no simple trustless on-chain solution to allow the borrower to keep the actual NFT in their wallet without the ability to sell it.
What is the Double Protocol?
The solution proposed by Double Protocol is probably more elegant. When a renter pays, the smart contract creates a new token called a doNFT and transfers it to the renter's wallet. This doNFT is recognised as having specific privileges by the NFT project in question (such as a game). The doNFT ends when the paid rental time expires.
However, doNFTs may be used for much more than just playing games. Renters can sublease them, or they can mint many doNFT for the same NFT and combine them into one for a longer rental, or they can split a “large” doNFT into several “shorter” ones.
Double is an NFT rental protocol that is mostly used in GameFi and Metaverse projects. The Double protocol is now in use on Ethereum. Using the rentable NFT standard EIP-4907 (proposed by Double and incorporated into the Ethereum Master branch) to establish the separation of NFT asset ownership and consumption.
What Is the IQ Protocol?
The IQ Protocol is a system that allows users to rent and lend tokens without having to trust each other. It is based on the idea of distributed trust, so no one person handles the integrity of the system. The IQ Protocol provides the infrastructure for renting out NFTs for NFTs. The leasing agreements are based on a predetermined period and a fixed fee that benefits both parties.
Traditional staking frequently relies on inflationary techniques to provide interest. The NFT lending and borrowing model developed by IQ Protocol is risk-free. Until recently, NFT renting was predicated on the trust that the renter would return the original asset at the conclusion of the rental period for the collateral. Such dangers are not a concern with the IQ Protocol. Rather than the original asset, the borrower receives an expiable version of the NFT via IQ Protocol (which contains all the unique features and metadata of the original). The borrower gets the wrapped form of the NFT subsequently.
Difference Between IQ Protocol & Double Protocol
● The IQ Protocol is a technology that enables users to rent and lend tokens without requiring them to trust one another. Double Protocol is a completely decentralised and open-source NFT rental protocol and Metaverse and GameFi asset marketplace.
● The IQ protocol provides lease agreements for a set amount of time. When a borrower pays for a rental under the Double protocol, the smart contract creates a new token known as a doNFT and transfers it to the renter’s wallet.
● Double Protocol seeks to decrease the barrier for Web3 users to access the metaverse or GameFi by providing easy and low-cost NFT rental services. The IQ Protocol is about to dramatically upset the NFT sector, altering how we interact with our digital assets.
Benefits Of NFTs Renting And Lending Under Protocols.
Any type of NFT can be hired, including money, collectibles, works of art, in-game items, and collectibles.
Transparent government the entire leasing process and a decentralized smart contract between the lender and the borrower. Depending on the platform used, and the terms decided upon by both parties, it may be collateralized lending or collateral-less lending.
Renting and Lending an NFT have many advantages. At the most fundamental level, the NFT rental market lowers the entrance hurdle for those considering this asset class. This is crucial since more people are eager to embrace the asset class or try it, given the hype the NFT
business has generated globally.
Rent/Loan Protocols are a great way to manage NFTs and keep them safe. With CryptoPunks, NBA Top Shot, and Beeple collectables popularising non-fungible tokens (NFTs), various business cases for NFTs are gaining traction. Axie Infinity has seized on one evident use case. Protocol intends to decrease the barrier for Web3 users to access the metaverse or GameFi by providing easy and low-cost NFT rental services, while also increasing the liquidity and usefulness of NFTs.
If you’re looking for a way to rent or loan out your NFTs, Rent/Loan Protocols, looking for someone who is expert in NFT Rental Development or NFT rental application development, inquire about codes for tomorrow.