NFT Rentals & Digital Landlords – Why NFT Renting is the Next Billion Dollar Industry in Blockchain

Updated: May 26

NFTs are Evolving. Here's What You Should Know.

Photo by noodle kimm on Unsplash


Without a doubt, this has been the year of the NFT. As we wrap up 2021, the seasons may be changing, but this new class of digital assets remains hotter than ever. Depending on your source, the NFT market is currently worth anywhere between $7 billion USD and $10.2 billion USD – a mind-blowing statistic given that at the same time one year ago, hardly anyone even knew what NFTs were.


During the year, NFTs like CryptoPunks have led the charge, with the collection reaching a staggering USD $5.1 billion market capitalization. Other NFTs – like Beeple art, “weird whales”, and more, have further contributed and added to this frenzy.


Today, a single NFTs can easily be valued at over $1 million US dollars, making the digital assets largely out of reach for most individuals. However, there are a growing class of NFTs which are selling for hundreds, or thousands of US dollars. This group of NFTs, while not financially out of reach for many, still presents a financial hurdle for the average individual. This hurdle is significant enough such that acquiring and enjoying NFTs at this price point can still be out of reach.


Meanwhile, NFT holders (whether they are holding NFTs worth hundreds or worth millions of dollars) are generally unable to extract any value from their digital assets while they continue to hold them in their digital wallets. In fact, most strategies deployed by NFT holders is a “wait and see” mentality. That is, wait and see whether the value of their NFT assets increases over time, so that they can sell for a hefty profit.


During this time, the NFT – which could be enjoyed or used by someone else – is locked in the NFT holder’s wallet. The NFT holder extracts no daily value, and those who wish to use the asset have no way to get to it.


But what if it didn’t have to be this way? What if both the owners and non-owners of a specific NFT could mutually benefit from the same asset at the exact same time?



Understanding the NFT Consumption Model Today


Since the Cryptokitties craze of 2017, little has changed in the way of how NFTs are consumed by the public. Like those adorable digital cats, NFTs today are largely purchased and held in crypto wallets globally – as buyers of NFTs eagerly wait for those digital assets to appreciate in value, so that a worthy profit can be realized.


But NFTs are destined for much more than just idly sitting by in digital wallets as speculative digital assets. Even today, NFT adoption is growing. In the Play-to-Earn space (which is a growing sub-industry within the world of crypto), platforms like Axie Infinity are leading the way with NFTs via the sale of in-game assets (such as a plot of in-game land, which just sold for $2.3 million US dollars). Other gaming platforms, such as Cryptoblades and Decentraland, are also making NFTs accessible in several different forms (e.g. weapons, avatar wearables, and more).


In Cryptoblades, users start out by putting down some money so that they can begin playing. This money is used to buy their characters, and to equip them with some basic game assets. Eventually weapons are acquired so that the participant can battle other players in-game, waging battles and gaining experience.


Both characters and weapons are represented as NFTs, and can eventually be traded and transferred to other parties (much like a commodity). As players find increasing success on the platform (by winning battles and completing missions), more and more rewards are unlocked in the game.


These rewards lead to the acquisition of more valuable NFTs, which the player can then later decide to sell for a profit. Conversely, users may also want to acquire NFTs from other players (e.g. a particular weapon, wearable, etc), and may want to purchase the NFT from another player to give themselves more advantages in the game.


Such applications are very exciting, within the gaming industry and outside of it. And while there is enormous potential here already with this form of NFT consumption, it completely overlooks another method of consumption which users regularly consider when transacting in an asset class. What is this form of consumption? Renting.



The NFT Consumption Model Tomorrow – Renting & Lease to Own


It has only taken a year, but many NFTs are already out of reach for the average consumer. Valued in the millions of dollars, many of these digital assets will likely never be held or used by the common person. While analogous to the real world (after all, how many individuals are owning Gulfstream jets or driving Lamborghinis?) – NFTs enable a completely different type of possibility. One that the physical world simply cannot match.


Example:

Imagine owning a Gulfstream. Imagine that on the days that you didn’t need to use it, you could rent it out – and generate passive income. Imagine that, each time after it is rented, the jet looks exactly the same – no additional wear and tear, no damages, exactly as you had left it. Further, imagine that the value of your jet is able to increase over time – despite having used it every single day of the year.


Now replace the Gulfstream with an NFT.


Using the example in the preceding section, players of Cryptoblades (or Axie, or Decentraland), can acquire NFTs while playing the game. Players may not use the NFTs daily, but may hold on to it anyway, believing that it could go up in value. Meanwhile, if the NFT holder chooses to, he/she may make their asset rentable. For the first time, other players in the respective gaming ecosystem could utilize a NFT that isn’t theirs – thereby enjoying the utility of an asset, while the NFT owner can also keep owning the asset, while enjoying passive income on their holdings.


This application extends beyond gaming. The owners of Beeple’s digital art pieces, for example, could one day rent out their NFT art, allowing other individuals to enjoy “displaying” the original NFT for a limited time, while the original asset owner continues to hold the actual asset.


Cryptopunk owners can also rent out their digital beings – giving others an opportunity for others to “flex” their online personalities (if only for a limited time), all the while earning some passive income. This scenario becomes increasingly relevant as the metaverse industry begins to develop, and avatars within the metaverse become increasingly valuable and important.


And finally, we will one day see a world of digital landlords. Owners of the $2.3 million USD parcel of land in Axie may one day rent that plot of land to another, who may make use of the digital space for their own purpose (e.g. putting a digital storefront on top of the land). One day, digital land rental will be paid to digital landlords.


Lastly, digital lease-to-own schemes will also materialize. Similar to lease-to-own programs for automobiles in the real world, NFTs which are a bit too pricey for a consumer to purchase all at once may be sold instead through a lease to own model. In this model, consumers can pay regular installments over a number of months/years – and with the final payment, ownership of the NFT can transfer over to the consumer.


For many, this new NFT model may seem far-fetched – however, with NFT asset prices continuing their astronomical rise, and NFT assets producing no value while slumbering in digital wallets, a leasing and rental market unlocks enormous value for NFT owners and consumers alike.


A new crypto segment is about to be born.



Looking Ahead


If history is our guide, it will not be a question of whether or not such changes in how NFTs are consumed today will happen, but when. As interest and demand in this industry rises, and as NFTs find more and more use cases across other industries, the world will find ways to satisfy those demands so that the desired product can be enjoyed by as many consumers as possible.


One way which has consistently proved to be successful is through the renting consumption model. From airplane seats to apartment units, assets which are high in demand will find the right pathways to meet the needs of the people who wish to utilize them.


Those who recognize this evolving landscape and position themselves to be the first to adopt may be at the forefront of another technological revolution.