NFT Lease to Own — How NFT Renting Will Change Existing Lease Models

Buying, selling, airdrops — the NFT market was filled with excitement for all of 2021. Barely understood prior to the start of that year, NFTs arguably overtook the crypto industry — reaching a market capitalization of over $40 billion US dollars in only a span of 12 months. But buying, selling, and trading are just the initial use cases for NFTs. Earlier articles explained how NFTs are poised to disrupt the ticketing and subscription industries, through the possibilities enabled via NFT renting. Other articles pointed out how the gaming industry is on the cusp of undergoing a revolution, enabled by the same capabilities.

But one economic model that has yet to be fully explored and discussed is around the topic of leases. Popular in the analog and Web2 worlds, leases are a heavily used tool leveraged by businesses who wish to sell expensive assets to their customers. These assets, at times out of financial reach for their consumers, are instead leased out to the individual, with a potential to purchase the asset outright at the end of the lease.

As NFTs become increasingly popular, it would be well within the realm of possibility that a similar lease to own model could also materialize for the blockchain industry soon.

A Common Lease to Own Structure Today

One of the most common assets which follows the lease to own model is the automobile. Popular due to the consumer’s avoidance of paying the full price tag for such an expensive asset, lease to own programs allow users to spread out their payments over time. At the end of the lease, lessees can opt to pay a final settlement balance, or to start a new lease with a new car.

In these arrangements, everyone wins — the lessor is able to get the car off the car lot and have steady revenues coming in, while the lessee gets to enjoy driving a new car, with the potential to one day own the vehicle outright.

Leases are relatively simple — the lessor and the lessee agree to a few terms, and a contract is usually drawn up to serve as the governing document of the lease. In particular, the lease itself covers everything from:

• Initial payment (down payment)
• Lease length (e.g. number of months)
• Monthly payment amount
• Lease renewal options
• Buyout options
• Baseline price of the asset being leased
• Legal terms & conditions

Of course, the contract can vary depending on how the contract is drawn up, but in general, these are the terms which are typically followed.

Therefore, a lease of a $20,000 USD Toyota vehicle may require that:

• Lessee put a down payment of $2,000
• The lessee agree to a lease length of 36 months
• Monthly payment amount equal $300 (or $3,600 per year)
• Option to renew another 24 months after the first 36 months
• Option to buy the car at the remaining balance at any point during the lease

Based on the above, after the first 36 months, the lessee would have already spent $12,800 for the vehicle ($2,000 + 3 x $3,600). At the end of the three years, the lessee would have the option to buy the car for the remaining balance ($7,200).

NFT Renting Enables the Same Type of Arrangement for NFT Assets

The Bored Ape Yacht Club, arguably one of the most popular NFT projects in the cryptoverse — broke the 100ETH floor in recent months. And while the price of a BAYC has fallen since those days, it remains a fact that there are a growing number of NFT assets which are increasing in value, making it difficult for an average consumer to purchase the asset outright.

In conjunction, the possibilities enabled by NFT renting are on the rise. Projects which enable such capabilities are allowing the space to completely reimagine what can be done with existing NFT business models. While NFT renting will slowly become the norm, locking NFT assets and establishing lease to own models may not be too far behind. Similar to leasing and eventually owning a car, users may soon find themselves operating similarly for NFT assets which are financially out of reach for them without monthly installments.

From PFP projects to in-game assets, digital asset owners and their eventual lessees will be able to establish smart contract agreements for the rental and eventual transfer of ownership between one party and another.

While the asset is being rented, the original NFT would stay locked in a protocol, while a wrapped version is issued for the lessee to use. After a fixed amount of regular payments, the lessee would have the option to continue renting to own, or if the principal has been paid down enough — the remaining balance could be settled. Once cleared, the wrapped asset would be burned, while the locked asset could be transferred over to the lessee to be its new rightful owner.

The Future of NFT Renting and NFT Lease to Own

With the NFT market and demand continuing to grow, there is little doubt that NFTs are here to stay, and will soon become a mainstream part of society. From PFP projects to in-game assets, there is little that NFTs can’t represent and can’t do in terms of digital ownership and utility.

Building upon the basics of buying and selling today, NFT renting will soon become a normal occurrence, as users rent NFTs for various purposes. These reasons, ranging from music to gaming, can further be branched out with the possibilities of owning the NFT outright via a lease to own model. As an increasing number of digital assets makes its way to the blockchain, and as these assets grow in popularity and price, the NFT space will soon introduce yet another business model for the world to see — via lease to own.