Rent creates formalized relationships for temporary asset access, where users pay for time-limited rights to use or benefit from an asset while ownership remains unchanged. Smart contracts automate this process by handling payments, managing access permissions, and enforcing rental durations. The mechanism can incorporate various pricing approaches, from simple fixed-rate rentals to dynamic pricing based on usage patterns or market demand.

The concept of rent in digital systems emerged with software licensing in the 1970s. In 2021, several onchain implementations of rent emerged through NFT rental protocols, which automatically enforced temporary access rights. In 2022, several NFT rental standards were introduced, including ERC-4907 and ERC-5006, which extend the two most popular NFT standards to introduce a user role that can be granted to addresses for a specified duration, automatically revoking access once the rental period expires. This enables atomic rental transactions where payment, access grant, and duration settings are executed in a single transaction. Use cases for token rentals include renting in-game assets for gaming and access tokens to provide renters with temporary access to services, events, or content.

Advantages

• Resource Optimization: Enables efficient allocation of underutilized assets by matching temporary demand with excess capacity.
• Lower Capital Requirements: Provides access to valuable assets without requiring full ownership, reducing barriers to entry.
• Price Discovery: Creates dynamic markets for temporary usage rights, helping establish fair value for different periods.

Limitations & Risks

• Duration Uncertainty: Difficulty in pricing more extended rental periods due to changing market conditions and asset utility.
• Market Liquidity: Rental markets may suffer from insufficient liquidity, making it difficult to find renters or set efficient prices
• Value Misalignment: Renters may have different incentives than owners regarding asset maintenance and optimal usage.

Design Considerations

• Rental Duration: Select between fixed-term rentals (ensures predictable revenue but may limit flexibility) and on-demand rentals (allows dynamic usage but requires robust availability mechanisms). Consider mechanisms like auto-renewals to maintain seamless access for users while ensuring timely payments.
• Pricing Models: Implement flat-rate pricing (simple and transparent), tiered pricing (discounts for longer rentals), or dynamic pricing (adjusting based on demand and availability). Factor in usage-based models for metered services.
• Access Control: Utilize ERC-4907 or ERC-5006-style automatic revocation for digital assets or escrow-based access controls for non-programmable/physical assets.
• Deposit & Collateralization: Require security deposits or collateralized rentals for high-value assets to mitigate risks of misuse.