ERC-4907: Lending or borrowing a NFT

In the Ethereum blockchain there are several types of standards for tokens. ERC-4907 comes to be an extension of ERC-721, the standard for NFTs that we already know.

The project ‘NFT Double Protocol‘ passed the final review by the Ethereum network development team and became the 30th standard for ERC tokens. The goal is to lend or borrow a non-fungible token and separate the user from the owner.

When we talk about NFTs, we can find different uses and properties. There are art NFTs, where artists exhibit their works and present them to the secondary market as art collections without any external utility.

There are also utility NFTs, where non-fungible tokens, when obtained, can provide the owner with different benefits and exclusivities in the physical world or in a virtual/digital space.

This new EIP-4907 standard created by Double Protocol comes to provide another solution to NFTs that did not exist until today.

It refers mostly to the NFTs used in the GameFi world, a fusion of the words games and finance, which are currently worth an estimated $2.8 billion. Clearly we will see the play-to-earn gaming industry, along with NFTs, expand more and more in the ecosystem and could be one of the largest markets in the digital and virtual world.

When we talk about NFTs used in games or metaverses, we say that they range from characters or avatars, weapons, skins, to virtual lands such as Decentraland and The Sandbox. For example, in Double Protocol they are already renting plots of the known virtual world Decentraland ranging from 1 MANA (the native token of the metaverse) to 50 MANA per day. Also, assets and characters from the videogame are being offered for rent with the WarenaThe rentals range from 3 RENA to 50 RENA, depending on the characteristics and rarities of the character.

On the other hand, they are planning to add this protocol to twelve more projects with the aim of expanding this new standard to give more functionalities and possibilities to NFTs and users who want to enter the world of non-fungible tokens and games.

This new way of entering the world of NFTs can be positive for people who want to enter and do not have the prices that are requested, since many projects require an investment in dollars, which is usually quite complicated for users, especially in countries where the economy and the country’s currency are not stable.

In some cases, the owner and user may not be the same person. Individuals may invest in an NFT with utility, but they may not have the time or ability to use it. So separating the right of use from ownership makes a lot of sense.

To understand it better, this standard proposes two user roles: the owner and the user. The rights of each are as follows:

  • An owner has the rights to transfer the owner role and transfer the user role.

  • A user only has the right to use the NFT.

The advantages are there for all to see:

Clear management of permissions: usage rights are part of ownership, so the owner can modify the user at any time, while the user is only granted some specific permissions, such as the user generally does not have permission to make permanent changes to the NFT metadata.

Simple time management on the blockchain: the right of use often corresponds to a specific time, such as the deployment of ground scenes, the rental of game props, and so on. Therefore, it can reduce on-chain transactions and save gas with expirations.

Easy third-party integration: the standard makes it easy for third-party protocols to manage NFT usage rights without the permission of the NFT issuer or the NFT application.

Compatibility: as mentioned above, this new standard comes with ERC-721, i.e. an extension. Developers will be able to easily adopt the ERC-4907 standard.

Suppose Alice owns NFT and wants to rent it. Bob is interested in renting it.

  • Alice approves the lease that could transfer the NFT she owns.

  • Alice sends a rental list to the rental agreement.

  • Bob selects a rental time, which is calculated according to the time and price of the rental.

  • Bob transfers the tokens with which he will pay, the lease transfers the NTT (non-transferable token) from Alice to the lease and sets the user of the NFT to Bob, sets the expiration on the lease time.

  • When the lease expires, Alice can redeem the NFT from the lease.

Finally, we will see many functions and properties that will be assigned to the NFT, no doubt that this is one that will attract a lot more people who are interested and do not have the possibility of owning a non-fungible token. We will have to wait and see how this new standard adapts to the functionalities of programmers, developers, and how to unlock different possibilities for NFT owners, buyers, markets, projects and artists in order to generate more secure and lucrative options in both the digital industry and the ecosystem.

Written by Rodrigo Catalan (TW: @RodrigoCatalanB) for NFT Express.