More and more businesses are beginning to use derivatives to lease or lend, as the demand for NFTs grows. Understanding the kernel of them and grasping their general laws requires our wisdom. The article looks at how NFT leasing could work in the real world, using housing leasing as an example. This text is suggesting that, in addition to reading the thoughts of others on current problems, it is also beneficial to develop one’s own thoughts on these matters.
In economics, the act of leasing, or Economic rent, first referred to the income obtained from land, and was later expanded to all income obtained because of scarcity. The rise in leasing also results in an increase in rent-seeking behavior.
Leasing consumables, trucks, houses, and even lending can all be seen as special kinds of capital leasing behavior.
Leasing behavior becoming more common is an unavoidable result of a more advanced market economy, as well as the rich getting richer.
The market for NFTs and GameFi is booming, so it’s likely that leasing NFTs will also become more popular. There is a lot of potential behind this trend.
NFT=House?
NFT leasing behavior can be understood by looking at how real-world leasing works.
For many people, renting an apartment is the most common form of housing. Let’s use this as an example.
The price of rent is determined by the amount of people who are looking for a place to live (the demand) and the number of available rentals (the supply). But the rental market is not just affected by supply and demand; it is also influenced by the price of housing. When housing is a consumer good, the higher the price of housing, the lower the demand in the rental market. People cannot afford to buy a home when prices are high, so they naturally turn to renting.
Britain was the first country to encountered the issue of housing shortages while finishing the process of urbanization over two hundred years ago. This happened because many peasants came to live in the city, and there was not enough housing for everyone. Because of this, renting was slowly advertised more and more.
Renting has become a popular way for homeowners to make money.
Since it is an investment, we need to think about the return, and as renters began to increasingly act more like landlords in how they think about investment cost and return cycle. This has led to the gradual transformation of real estate leasing from a spontaneous act undertaken by individuals to a derivative transaction based on real estate.
Leasing is not limited to real estate. You can also lease trucks, instruments, and musical instruments. Leasing has become a specialized economic behavior that involves almost all aspects of society and promotes the liquidity of assets in various fields.
A similar approach can be taken to grow the NFT leasing business.
NFT bottleneck: scarce liquidity and difficulty in expressing complex economic relationships
As people move towards the meta-universe, the concepts of blockchain and cryptocurrency have taken on new meaning.
NFTs will play a big role in the DeFi economy of the future. They will be used to represent assets and to create applications within the framework of the meta-universe.
PFP, by playing gold, asset recognition ……NFT itself as a commodity has a lot of application scenarios, while its own value flow also has monetary properties.
NFTs have a variety of functional limitations which lead to them not being able to effectively express the complex economic relations of a complex world.
The flexibility of smart contracts needs to be improved in order to effectively respond to industry trends.
The 24-hour trading volume is the best indicator of the poor liquidity of the NFT market. The Footprint data showed that the average 24-hour trading volume for the past 30 days was $4 million. This amount is very small when compared to the $98.8 billion total trading volume of the cryptocurrency market.
Unlike Bitcoin and other standardized tokens, non-homogenized tokens (NFTs) are each unique and distinct, unable to be divided, and not interchangeable with one another. This makes NFTs very difficult to sell, and almost impossible to turn into cash.
The lack of ability to split it also creates a significant obstacle to it being traded in the market, especially for high-value NFT works.
The end result is that the industry, in order to develop further, has looked into solutions regarding liquidity such as: NFT fragmentation, NFT lending or NFT leasing with more financial attributes.
NFT’s “means of production” attributes drive leasing businesses’ boom
As NFT technology develops rapidly in fields such as GameFi and NFTFi, the “means of production” factor is increasingly outweighing the PFP factor.
The “means of production” refers to the resources or tools that workers need to use when they produce.
It is increasingly clear that NFTs (non-fungible tokens) represent more than just speculative artifacts. The true potential of NFTs lies in their ability to represent assets with utility, just like cars and houses have utility in our economic lives.
In other words, as GameFi develops, the number and variety of games will increase, and the gameplay and financial aspects of each game will be more evenly matched. As more people become involved in the industry, the NFT will be valued more as a proof of participation.
As more players get involved with NFTs, larger organizations with more money and power will start to buy them up and rent them out for a profit. This has caused a boom in the NFT leasing market.
This leasing behavior by YGG is different than that of other guilds in that it is more forward thinking.
At the beginning of YGG or Axie’s official launch of the leasing service, the purpose was to capture private domain traffic and have more users.
A new industry is being created whose purpose is to provide services for more public domain traffic and get returns from it.
Current mainstream centralized NFT leasing programs:
The development of the NFTFi concept by GameFi has increased the value of using NFT. NFTs can be used for a variety of things, such as playing games, building scenes, and listening to music. The owner and the user of an account may not always be the same person. It makes sense to separate the rights to “use” an NFT from the ownership of the NFT, because someone may buy an NFT that has utility, but they may not have the time or ability to use it.
NFT leasing requires that ownership be separated, which is necessary for expressing complex economic relationships using NFTs. At present, almost all NFT transactions are one-time title buyouts. This form of transaction will become increasingly outdated in a future where the metaverse is booming.
As NFT applications become more widespread, it’s likely that access management issues will become more common. In this case, NFT leasing—which separates out property rights—will become increasingly popular.
NFT derivatives are either NFT lending programs or NFT leasing programs.
Type one: With this option, you can put up your NFT as collateral to borrow cryptocurrencies like Benddao. Type two: The second option lets you rent out your NFTs to others- for example, if the borrower wants access to a token-gated community.
NFT leases are more likely to facilitate the flow of NFTs than NFT lending, which concentrates NFTs in the hands of a small number of people.
The Genesis Of Digital Art
The digital age, or information age, is thought to have started sometime between 1950 and 1970. Artist began to use digital art techniques on television, computers and other mediums.
Contemporary art that is created using digital media and mass-production methods can be referred to as digital art. This type of art is easily accessible to a wide audience through the internet, social media, movies, and television. The impact of the internet has been far-reaching and profound across many different disciplines, including the arts. We can find digital art in a variety of places, such as advertising websites, logos, brochures, roadside billboards, illustrations (books, comics, and websites), 3D models (movies, animations, and video games), and digital photo artwork (ads, posters, and video games).
Many images you see online have been edited to look more aesthetically pleasing. An artist may have initially created an online image in a different medium, but it is now widely disseminated in digital form. Images created online are done so with computer graphics software that creates a virtual image. This software typically has a ‘painting box’ with different colors and tools to create the image. Many computer-generated artwork has a multi-layered complexity that can be easy to master with experience.
Digital Art In 2022
To put it simply, digital art is any art that is made with the help of a computer. In today’s society, everything is digital and computerized. We rely on technology for many things in our everyday lives, such as checking email, reading the news online, and communicating with others through cell phones. We now routinely take pictures and shoot videos with our phones. The main point is that digital art uses digital technology to create art using both new and old methods. An understanding of visual design and digital technologies is now essential for artists, marketers and IT professionals who work with multimedia.
Digital art is also changing the way we think about art by making it easier to blur the boundaries between mediums. Since the internet became widely available, art has become much more accessible to everyone. Graphics continue to evolve with exciting future potential for virtual reality and other technical applications, including three-dimensional television and AI (Artificial Intelligence) immersive environments. Wireless technology has been essential in the development and popularity of digital art forms. A resourceful digital artist can accomplish a lot with just a smartphone. Digital technology and artistic expression are now inextricably linked.
Museums dedicated to digital art are now gaining reputability. Some of these works are three-dimensional graphics that are meant to be viewed on a screen. They are often enhanced by multimedia projection. On a deeper level, this breakthrough integration of art, computers, and design has been made possible by a combination of art, math, science, and technology.
Digital Video Vs. Traditional Film Production
Digital video is becoming more popular with filmmakers than standard film production because it allows for a smoother workflow, is more affordable, and can be more easily duplicated. Images, sound, color, and special effects can all be altered by reversing video. This event provides viewers with the option of choosing different endings for videos and films they are watching.
As digital art becomes more popular, it is also becoming more interactive, giving users more control over the final product. Interactive art experiences have gained widespread popularity. Most Windows software has standard tools that allow you to crop images, adjust color, and fine-tune brightness/contrast. However, digital artists who use Adobe Photoshop and Adobe Illustrator need more sophisticated image-generating software.. Interactivity will soon become more widespread in other areas.
Niche Marketing With Image-Enhanced Ads
image was used for all advertisements Now, advertising imagery is catering to specific target demographics. Recently, advertising has been targeting specific demographics rather than using one image for all advertisements. Big data has been used to develop more sophisticated algorithms that can be used to get specific information about a group of people. Social media platforms like Facebook and Instagram use algorithms to show users content that is tailored to their specific demographic and psychographic profiles. This means that the content users see is based on their personal interests, allowing for a more personalized experience. Niche marketing, which targets a specific audience, has yielded higher conversion rates than traditional mass marketing techniques. This new development also aids digital artists who need to identify groups of people who are more inclined to appreciate their type of art. The purpose of the text is to encourage collaboration with other artists.
The internet has allowed digital art to be created and distributed without going through traditional gatekeepers, who would otherwise have monopolized the market. Now that anyone with internet access can upload content, it’s routine for amateurs to do so. This estimate suggests that over eight hours of video are uploaded to YouTube every minute. The outcome of this situation is that there is a lot of information and creations that are available to everyone, but it is all scattered and not organized. This allows inexperienced people to compete with professional artists, and sometimes win.
Can Digital Art Be Kept Private And Secure?
There is a debate among people about whether everything on the internet should be free and accessible. Some people who create digital artworks think they should be able to make money from their creations, but others believe that everything on the internet should be free. Unfortunately, it hasn’t been easy to protect copyrighted work. If government and corporate systems that are supposed to be secure can be hacked, then any digital product that is accessible on the internet can be stolen. –This includes films, music, and TV programs. Many viewers are, to one degree or another, complicit. People often download internet art and don’t credit the artist, or they claim the work as their own. Many people who violate copyright laws are not aware that they are doing so.
For some time, digital artists have been watermarking, signing, and providing copyright information on their art to deter theft. However, this was not enough to reassure potential buyers. Sales of online art have been low because people are reluctant to pay for something they can’t see in person and can’t be sure is a good investment. To convince people to buy art online, sellers have started offering guarantees of exclusive content, reliable quality, and legitimacy. As we will see, NFTs are being offered as a solution. More on that to follow.
Digital Art Challenges
Some argue that digital art is not real because it is computer generated and therefore has an infinite number of copies and no tangible original. Any digital file is stored electronically and can be perfectly reproduced with all of its elements intact. An artist who works traditionally creates art that exists in a physical form and is one of a kind. Some digital artists create a single print from their file to present as an original while others create limited, numbered editions of their work.
The always the potential for losing digital artwork when the computer contracts a virus, the hard drive fails, or a power surge occurs as creation is just coming into focus. On the other, bugs can eat canvas paintings; art can degrade under sunlight or be lost in a fire.
Although many large and progressive museums have been hesitant to add digital art to their collections, this is largely due to the belief that the digital media is not permanent. This has been a problem because the links artists have been using to create prints have not been good quality and have not lasted. These issues have driven the development of new technology. Giclee print is a high-quality method of reproducing digital art that eliminates many of the old objections to digital art. In addition, researchers have created new inks that will last forever. The public is becoming more aware and interested in digital art as it is being displayed more often in museums, galleries, and contemporary art centers.
NFT’s lease-to-sales ROI is difficult to calculate
As a new financial product, NFT leasing business will encounter some potential problems in the process of development.
Current phenomena of NFT leasing:
- The value of collateral + rent is set too high, even the rental cost is higher than the NFT floor price
- The rental time is too short, the shortest is 1 day, generally concentrated in about 10 days
- The ratio between rent and selling cost is confusing.
It is still too early to calculate a reasonable return on investment (ROI) in the NFT rental market because it is still in the early stages of development and the laws of the market have not yet spread to this area. NFT rental prices depend more on players’ self-pricing.
The other important reason is that the cost of NFT can change drastically over time.
We can take real estate as an example, after the UK took the lead in the market economy to try this behavior of housing rental, because the UK promotes the free market economy, the government does not intervene in the real estate industry, which resulted in more than 90% of the houses at that time were controlled by the capitalists, greatly raising the rent to exploit the workers, and the rent deviated too much from the income level of the tenants, also to a certain extent, led to the atrophy of the supposed housing rental market.
The rental market is also affected by urbanization. There is a big contradiction in how urbanization is happening around the world. More people are becoming urban dwellers, but they are not able to get housing and normal living conditions in cities. These events can cause some people to leave rental housing, which can then decrease the demand for rental housing and have an effect on urbanization.
The current average amount of time it takes to recover the cost of a regional property is between 200 and 300 months. The annual rental yield is the percentage of the cost of the house that is recovered by renting it out in a year. The yield is usually between 4% and 6%.
A 200-year leasing study has shown that high housing prices are not necessarily indicative of a prosperous rental market, and that the stability of the rental market is crucial to prosperity.
NFT holders and hoarders who don’t want to sell their NFTs may be forced to do so because of the higher cost of NFT purchases, which will reduce returns on NFT leases. This could damage the NFT leasing market and hinder the development of the NFT industry.
The market economy’s ability to regulate itself will also fail when it comes to NFT leases, meaning that a decrease in the desire to lease NFTs will not affect the decrease in rent.
The two key factors that are causing rental prices for NFTs to go down are that the prices for NFTs in the primary market are falling and that the time frame that lessors are using to calculate payback periods is getting longer.
Thus, we can conclude that:
- The elevated attributes of the means of production have forced the NFT rental market to mature.
- A prosperous NFT leasing market, on the one hand, relies on price stability in the primary NFT market.
- On the other hand, it requires that this economic logic of leasing be more widely accepted and observed during the development of the industry.
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