The non-fungible token (NFT) rental market demonstrates major growth potential, meriting close monitoring as the “Airbnb of the metaverse,” according to a recent report by the Asian digital asset platform matrix port.
Looking at the current landscape, according to the report, NFT financialization is “distinctly divided into five verticals of splitting, leasing, pricing, lending, and aggregation.”
He argues that, for liquidity and returns to be generated from NFTs, “these key primitives must be built for the financial layer to operate efficiently and at scale.”
In principle, according to the study, NFT rental can take the form of:
- collateral-backed leasing in which tenants deposit assets as collateral managed by the protocol;
- NFT wrapped and guarded by the marketplace where tenants pay rent and get wrapped NFT, while their lenders lock the tokens into the protocol and secure the rent;
- Expirable dual role NFT which allows tenants to act as users and the NFT automatically expires once the rental period is over.
The report’s authors say the NFT rental market remains a priority as wide-scale adoption of blockchain games, guilds, and the metaverse is imminent. The rapid development of such virtual experiences is expected to result in large amounts of dormant NFTs being held by users, guilds, and projects.
“Therefore, having an active rental market is crucial to lowering costs of participation and increasing engagement of existing users through rental revenue,” according to Matrixport, adding that:
“Our thesis in this vertical is that a warranty-free rental model with product design to separate the ownership and utility of an NFT would prevail in this market.”
At the same time, the authors concede that since there are no universal minting standards built around NFTs with respect to the separation of ownership and utility, NFT tenancy protocols in this space should work closely with projects to build reputation and trust around their services.
The report indicates that projects such as Dual protocol, reNFT, IQ protocoland pine loans attempt to develop solutions to this problem using various designs.
He concluded that,
“In addition to the separation of ownership and utility of NFTs, we can expect new use cases such as reserving or subletting NFTs (i.e. the Airbnb model in NFTs), installment loans and buy-it-now and pay-later options be expanded, which will unlock a whole new range of apps for games, guilds, metaverses and NFT projects that users will be able to use.
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