Non-fungible tokens (NFTs) have been in existence since 2014, but they have only just come into the spotlight, garnering attention from investors and celebrities alike. Interestingly, the underlying technology and economies powering NFTs have gone well beyond profile pictures (PFP). Developers are creating new functions and utilities for NFTs thanks to concepts such as play-to-earn (P2E) and the metaverse.
Sadly, though, the cost of buying some NFTs is high, which makes these assets less accessible to mainstream users. Although the emergence of NFT rental platforms is changing the narrative, existing solutions still face issues such as lack of robust security and high development/integration costs.
Double Protocol aims to solve these problems through its newly launched Dual-Role NFT Standard (EIP-4907), a game-changer for the NFT rental market.
What is Double Protocol?
Double Protocol is a decentralized NFT rental platform currently deployed on Ethereum and the BNB Chain. Right now, it supports rentals of virtual land in Decentraland and in-game assets in the popular GameFi project Warena.
The idea behind NFT renting is simple. Just as people can rent luxury homes and cars for a short period without owning them, renting an NFT allows users to enjoy the experience and use it for a limited time without having complete ownership of it.
The NFT rental marketplace offers users access to a wide range of NFTs they can choose from, including in-game assets, virtual estates, digital art, financial NFTs, and collectibles.
Double Protocol aims to lower the threshold for Web3 users to enter the metaverse or GameFi via simple and inexpensive NFT rental services while extending the liquidity and functionality of NFTs.
The project is built by a team of developers, game product experts, tokenomics designers, and marketers who have been in the crypto space for over five years.
The Dual-Role Standard (EIP-4907) For NFT Rental
In April, Double Protocol launched the Dual-Role NFT Standard (EIP-4907), a critical component for NFT lending that allows the project to separate NFT ownership and usage using a Dual-Role mechanism.
In other words, the EIP-4907 standard, which has been merged into the Ethereum master branch, allows owners to rent their NFTs to other users without transferring ownership.
For any GameFi projects, it will only take about 30 lines of coding to integrate Double Protocol. With EIP-4907, this integration can be done even faster with no coding required.
Double Protocol is not the first of its kind to utilize the Dual-Role model to separate the usage and ownership of NFTs. Nevertheless, the team noticed a lack of consensus on naming and implementing the Dual-Role mechanism, which makes collaboration difficult. This is why Double Protocol proposed EIP-4907.
Applying the EIP-4907 to the smart contract allows Double to easily extract the user rights from the ownership, which is the key to enabling rental. Additionally, the dual-role standard has an expires() function; thus, the usage rights of the borrower automatically expire at the end of the rental period without any extra on-chain transaction.
How this works is that Double first deploys the dual-role contact to ensure that the underlying in-game asset or any other NFT has two roles, the owner and the user. Once confirmed, it automatically creates a doNFT that corresponds to the original NFT to represent the user’s rights.
Next, when the borrower pays the rent, the doNFT will be minted and issued to the renter as per the doNFT contract. Renters are entitled to several usage rights during this period, including subleasing, splitting, merging, and even financial derivatives.
Once the rental period expires, the doNFT contract automatically revokes the usage rights of the borrower. This dual-role solution lowers the barriers to entry into the NFT space, considering that borrowers do not have to deposit huge collateral and NFT owners do not worry about the security of their assets and credit risks.
The Wrapped Dual-Roles NFT
Some existing products cannot update their smart contracts to achieve dual roles. However, Double Protocol also has a solution for them dubbed the Wrapped Dual-Roles NFT.
The protocol mints a new NFT containing user information and wraps it over the original. Similar to the wrapping of ETH into an ERC-20 compliant wETH, the wNFT eliminates the risk of double-spending as it corresponds 1:1 with the underlying NFT.
Double Protocol introduces a new form of NFT called doNFT, which represents a certificate for the right to use an NFT. The doNFTs also ensure that the underlying NFT usage rights will expire as soon as the rental period ends.
Through Double’s solution, the market contract mints the doNFT for the renter after they pay rent, which gives them temporary usage rights of the NFT for a specific period until the rent expires. Interestingly, the doNFT can be further split into multiple shorter-period doNFTs, or combined with new doNFTs to form longer durations, for lending and renting.
The use of doNFTs effectively solves the prevalent issue of illiquidity in the NFT space, creating room for the development of derivative financial products, such as installment payments, and facilitating interoperability with other NFT financial protocols.
Renting non-fungible tokens provides a whole new avenue of opportunity. Double Protocol meets its goals through its EIP-4907 Dual-Role NFT standard. This allows the protocol to extract user rights from ownership, which is vital for NFT rentals. The Dual-Role mechanism, if widely adopted as the de facto standard for building NFTs, will serve as the optimal choice to boost innovation in the NFT ecosystem.