Ever since non-fungible tokens (NFT) shot to popularity in 2021, it keeps revolutionizing the decentralized space. This is true because it broadens and redefines the decentralized economy, promotes the permissionless and transparent features of blockchain, and creates more case use of blockchain technology.  At the moment, NFT renting is another aspect of the industry that is picking up.

What Is NFT Renting?

The process of borrowing NFT for a set period is known as NFT renting. The use of smart contracts makes this possible. The smart contract requires some deposit, however, and also acts as an escrow. At the end of the rental period, the NFT must be returned to the real owner.

Just as NFT came to prominence a few years back, crypto investors are also embracing NFT renting. NFT renting gives a means for investors to be exposed to new NFTs without buying them.

Why Should You Rent NFT?

People rent NFTs for different reasons. Below are some reasons why you can rent NFTs.

    The high price of NFT: The number of people that can purchase NFT outright is not many. Nevertheless, these people can get the privilege of owning their favorite digital asset for a set period without having to pay huge upfront fees.

    Source of income: Renting NFT for lenders can be a source of income. A rental fee is charged by the lenders for the use of their NFTs.

    The need to be flexible: Some people only need an NFT for a short period. As a result, they enjoy this benefit from NFT renting.

    Inadequate storage space: There may be the need to have more storage space to keep a bought NFT. With NFT renting, investors can enjoy the benefit of not having a storage space for the asset.

    A trial before making a purchase: With NFT renting, investors can try to use an NFT before buying them. This is helpful to investors who need help in choosing the NFT to buy.

Types Of NFT Renting and How They Work

Below are the two forms of NFT renting.

1.  Collateral renting

There is a marketplace for NFT renting. Owners of NFTs can place their NFT on this market in collateral renting. Here, NFT enthusiasts can borrow and lend them. A renter who is interested in NFT can go ahead with the NFT renting process. In the process, the lender and the borrower agree on the terms of the contract.

The terms of the contract are the smart contract in which the NFT is embedded. The terms and conditions which include providing collateral and returning the asset before the end of the contract are only effective when the lender and renter accept it.

When the rental period is up, the smart contract is rendered inactive, and the NFT lender receives their NFT back. When the borrower reclaims their collateral, the NFT loan procedure is over.

2.  Collateral-less renting

Collateral-less NFT renting is free of collateral. Although it is similar to collateral-based renting, it offers huge benefits to both the renter and the owner of the asset. It is also easier. A lender is not necessitated to give up collateral for this form of NFT renting.

In collateral-less renting, owners of NFTs enlist their assets on an NFT renting marketplace. Any interested buyer may indicate interest in an NFT from which a smart contract is initiated by the marketplace. Thereafter, both the lender and the borrower agree on the terms of the contract, including the duration and rental fees.

Once the renter has paid the rent and any incentive costs, the marketplace will execute the smart contract to get the wrapped NFT delivered to the renter. After the smart contract's expiration, the wrapped NFT is brought back to the contract and destroyed there.

Conclusion

To leverage their digital assets without having to spend a lot of money, people are increasingly turning to NFT rentals, which are growing in popularity. NFT renting also helps both parties; the owner earns a passive income and the renter benefits from the NFT's utility.