As the NFT market evolves, the options of what you can do with your digital assets are becoming more dynamic. As such, financialization strategies are becoming a bigger discussion and most importantly their impact on you as the owner of an NFT. It’s imperative for our community to have awareness on the potential implication and use-cases of renting your NFTs or using it as collateral.

VeeFriends is in no way affiliated or endorsing any of the discussed platforms in this blog post. As our community becomes more interested in different financialization strategies, we are sharing an agnostic discussion in this post. We know people use these tools and if you choose to use them, as always please do your own research. This post should be used for educational purposes only, and as with everything in web3, please navigate safely and smartly.

Impact as an NFT Owner

The most important information to know about having your NFT subject to one of these secondary types of contracts is that while the NFT is rented or being used as collateral for a loan, as shown by the blockchain, the ownership has been transferred to a contract outside of the holder’s ownership. Therefore, it is not eligible to receive airdrops, qualify for whitelists or other similar actions.

For example, Series 1 VeeFriends owners are eligible to claim their Series 2 character beginning on April 18, 2022. In order to claim your Series 2 character, you will need your Series 1 character to be held in your wallet under no secondary contracts (not being used as collateral for loans or rented) at the time of claiming.

In another example, in the event that owning a VeeFriends would entitle the holder to an airdrop or a whitelist for a new opportunity, the owner would need to have the NFT in their wallet under no secondary contracts at the specific time of the snapshot.

* Loan and rental terms and conditions will be specific to the lending or renting platform and contract of that particular NFT transaction. Be sure to always read all the fine print to understand the details of your contract to know when and how the transaction will complete.

* NFT Loan and Renting transactions may also be taxable events, so be sure to consult your tax preparer for the most up to date information.

NFT Loans

As with any high-value asset, NFTs are now being used as collateral for loans. NFT holders looking for short-term liquidity may use their NFT as collateral for a loan. There are many platforms offering NFT-backed loan services: some using peer-to-peer lending methodologies such as NFTuloan, nftfi and Arcade, and others using peer-to-protocol models such as JPEG’d.

NFT Renting

NFT holders may rent access to their NFT and associated utilities to another person for a predetermined price and duration. An owner can rent access to an NFT to a renter for a specified period of time in order to give the renter access to a utility, such as entrance into Flyfish Club, or to use the NFT as their PFP. Some current NFT renting platforms include reNFT and Rentable.