Enabling reliable and risk free renting of NFTs immune to high volatility
This project aimed at creating a way for NFT holders to be able to generate income from their otherwise stale NFTs. Out of the many ways, we took a particular interest in the renting of NFTs. It is particularly useful when the ownership (complete or partial) of the NFTs gives the borrower access to events or for better gaming experiences. The borrower can request for an NFT and has to provide collateral for the duration of rent as stake. The borrower is then expected to pay interest (at an agreed-upon daily rent) in regular intervals to ensure a secure renting process. Once all the repayments are done by the borrower, the NFT is repaid to the lender and the collateral amount deposited by the borrower is returned. However, if the borrower defaults, the lender loses the NFT and claims the collateral deposited by the borrower. There are still certain problems with the above approach: The price discovery of the NFT. The price for the NFT can be discovered by either exchange, wherein the NFT is traded and the price used for the trade is recorded and serves as the base price or through appraisals, wherein a third party (or expert) decides the price of the NFT based on his experience and takes the onus of the whole renting process. Since people would not like to sell off their NFTs, the second approach seemed viable. We still would have to ensure that the expert is not malicious in the first place, so we attached incentive and risk parameters for the expert as well. The expert is expected to stake a collateral amount for the rent prices he has shared with the lender. The lender gets incentives for verifying a borrower for the rent in the form of expert fees, where each time a verified borrower pays interest, some portion of it is sent to the lender. In the case where the borrower defaults, the expert loses his stake to the lender as well. This adds to the compensation pool for the lender. However, this scenario is still profitable to the borrower who now owns an NFT without paying the actual price for it. So we identified certain measures which could be put in place to ensure higher security for the renting process. We are planning to put in place a multisig wallet that the borrower would share with the expert and the protocol. This constrains the access of the borrower to the NFTs. This is in the future scope of the project, we would extend our learning to also include a mechanism to provide a yield generating mechanism for the collateral amount deposited by the borrower.
How it's made
We wanted to use one on one lending and renting mechanisms for our project and wanted a mechanism to attach credibility to the expert to ensure the security of the renting process. We used sublime protocol, where they have leveraged social graphs to collateralize lending and renting mechanisms and the credit line features which allows a one on one renting and lending behaviour. The verification modules have also been used for the verification of the expert and associating them with their social accounts. Scaffold-eth repo has been extensively used for frontend and deployment and testing of the contracts. Moralis sdk has also been used for communicating with rinkeby addresses.