Win-win: Leveraging Gaming NFT Pools to Earn Yield and Support the Development of Web3 Gaming
We recently wrote about our belief that a gaming NFT rental platform is needed to eliminate dormant NFTs and promote growth in the web3 gaming space.
Although blockchain technology — especially the decentralization of gaming items through NFTs — shows strong indications to become the next technology layer that could significantly grow the gaming industry (succeeding smartphones and mobile internet), we are still in the early stages and the market is small and illiquid.
The inefficiency and lack of liquidity in the gaming NFT market pose challenges for facilitating rentals between passive NFT owners and gamers. In this article, we will discuss how the Unbound platform uses a peer-to-pool lending approach to address these issues. Let’s start with a comparison to the currently predominant model of NFT lending and borrowing.
An Alternative to NFT Pawnshops
When it comes to earning interest on your dormant NFTs, most NFT owners turn to NFT protocols that are the web3 equivalent of pawnshops. They allow the owner to take a loan against their NFT and invest such loan into another yield-bearing opportunity before they recollect such investment, pay off their loan, take back their NFT and hopefully walk away with a nice profit from the investment they made. While this is an indirect way to earn from your NFT, it bears several risks such as liquidation risks and is therefore not ideal for everyone.
Web3 gaming NFTs have a higher utility than many other types of NFTs because they can be used in games. Consequently there are gamers who are interested in using the items and avatars of other people which they do not want or cannot own. Therefore in the case of gaming NFTs, we strongly believe that it makes more sense for owners to use a rental platform to earn yield from their NFTs through rental fees, as this allows usage rights to be delegated to renters. Another great benefit of such a rental platform is that it fosters growth of web3 gaming studios and the broader market by increasing the utilization of gaming assets.
On top of that, such a platform should always come without any liquidation risk for the NFT owner.
Every Jack has his Jill: Matchmaking on a Two-Sided Platform
The goal of two-sided platforms should be to facilitate and optimize matchmaking between the different groups that use the platform. There are two main ways in which a two-sided rental platform can facilitate interactions between its users. Let’s take a look at them.
Peer-to-Peer Lending
In peer-to-peer lending, the platform connects individual gamers who want to rent digital items with NFT lenders who are willing to rent them out. The platform facilitates the rental transaction, allowing the parties to agree on terms such as the rental duration and fee. The rental agreement is between the lender and the gamer, with the platform serving as the intermediary.
Peer-to-Pool Lending
In peer-to-pool lending, NFT lenders put their NFTs into pools with specific terms for each pool. Gamers can then rent the NFTs in these pools, and the rental fees are collected and distributed to all lenders in the pool according to their contribution. This allows lenders to earn rental income without having to directly interact with individual gamers. The platform facilitates the rental transactions and manages the distribution of rental income among the lenders in the pool.
Key Advantages of Unbound’s Peer-to-Pool-Approach
We believe that in the current infancy stage of the web3 gaming market, our peer-to-pool model has several advantages over peer-to-peer rentals.
Firstly, for NFT lenders, the platform is as convenient as a crypto staking platform.
It consists of multiple collection-based (game-based) and tiered (by scarcity / competitiveness) NFT pools where NFT lenders can seamlessly deploy their unused gaming NFTs through a single, intuitive interface in order to earn rental fees and support the web3 gaming space. There is no need for any further actions other than claiming your rental fees once the NFTs are deployed.
In addition to diversifying rental income for NFT lenders, the peer-to-pool model used by the Unbound platform also allows for optimized pricing. Because of the non-fungible nature of NFTs and the market inefficiencies and lack of data in the NFT rental market, it can be difficult for NFT lenders to determine the best rental terms for their NFTs. The Unbound platform takes an active role in helping NFT lenders set the best rental terms for their NFTs by defining the pool structures and terms to maximize utilization rates and rental fees. This can help NFT lenders earn more rental income and better manage their rental business. Overall, the peer-to-pool model allows the Unbound platform to provide a more fair and efficient rental market for NFTs.
Thirdly, owners start earning rewards instantly without having to directly interact with individual renters when they deploy NFTs into our gaming pools. This can save time and effort for the lenders, as the platform manages the rental transactions and distribution of rental income according to predefined rules.
Last but not least, peer-to-pool rentals can provide more consistent and predictable income for lenders. This can help lenders plan their finances and manage their risks more effectively.
Overall, the peer-to-pool approach provides more convenience and a better user experience for NFT owners, ergo it lowers the entry barrier to deploy otherwise dormant gaming NFTs and helps gaming studios to break scaling limitations and grow their user base.
We will detail our approach to design collection pools and scarcity (competitiveness) tiers and how the math behind your yield works in one of our next posts.
Meanwhile, let us know what you think about the peer-to-pool model on Twitter.
If you want to earn rental fees and in parallel support the growth of web3 gaming, deploy your idle gaming NFTs and let people play. Get in touch with us, we are here to help!
