Alpha Leak: Kanon Close to Releasing the World’s First Rentable NFTs
And why rentable NFTs are just the tip of the iceberg of what we can build with Kanon’s new Quantum NFT technology
Imagine you walk into your living room and right there, hanging on your living room wall, is the Mona Lisa. Not a print of the Mona Lisa, or even an exact replica. But the actual Mona Lisa. The very one Leonardo da Vinci crafted with his own two hands more than 500 years ago.
The iconic painting is no longer at the Louvre, or anywhere else on the planet for that matter. It is in your living room, for you and your loved ones to enjoy.
No print, or replica, or fractional ownership certificate could ever reproduce that experience.
In the same way, no edition or fractionalisation could ever replicate the experience of holding, in your wallet, an NFT that you feel a close emotional connection to.
Over the last year or so since I collected my first NFT, I have received a number of offers from other collectors to purchase some of the NFTs that I feel the strongest connections to in my collection.
These offers are always extremely tempting. Not because of the amount of ETH being offered — although I would probably have a hard time explaining to my family my decisions not to sell!
The main reason these offers are tempting isn’t because of the money but rather because the offers are almost always accompanied by heartfelt explanations of why the artwork means so much to the bidder.
I find that really gut wrenching, because what I want more than anything for my NFTs is not to hoard them, fractionalise or even exhibit them, but for thousands of people, heck for millions of people, to experience the NFTs that I own in exactly the same way that I experience them when I hold them in my wallet.
But how could an NFT live in someone else’s wallet and still be mine?
Surely this would be nonsense. As soon as the NFT leaves my wallet, it is, by definition, no longer mine. Right?
Indeed, if I ever transferred my NFTs to another wallet, I would no longer own them. But why is this the case?
If the Louvre can move the Mona Lisa from Paris to New York, Tokyo, or Moscow, as it has in the past without losing ownership of it, why can’t an NFT travel in the same manner from wallet to wallet?
Shouldn’t it be easier to move a digital artwork from wallet to wallet without relinquishing ownership, than it is to move a priceless physical artwork in the same manner?
How ERC-721 (and ERC-1155) NFTs Determine Ownership
The reason holding (i.e. wallet location) and ownership of an NFT are bound together comes down to how the ERC-721 (and ERC-1155) standards define a transfer of ownership.
ERC-721 contracts maintain a table of tokens that record which wallet address owns each NFT.
You can query this table at any time by passing a `tokenId` into the standard `ownerOf()` function, which will return the current owner address of an NFT token.
In the below example, I’m querying the SuperRare NFT contract (an ERC721-compliant contract) for the owner of token `26436`, the Claire artwork by Anyma and Marigoldff (2021).
It just so happens the owner of that artwork is me.
Let’s say that I wanted to transfer the token to 0xAnimist.eth. When I click “transfer” on OpenSea or SuperRare, what is happening under the hood is that the UI is calling another standard ERC-721 function, `safeTransferFrom()`, which changes the ownership table in the ERC-721 contract to replace my address, fastackl.eth, with the address of 0xAnimist.eth, after which 0xAnimist becomes the new owner of Claire.
Platforms like SuperRare or OpenSea, which are listening for `safeTransferFrom()` events, will then display the Claire artwork as being in 0xAnimist’s wallet.
In this classical NFT set up, 0xAnimist is always both the holder and the owner of the NFT.
Let’s say however that I didn’t want to transfer ownership of Claire to 0xAnimist (I don’t, lol), I just wanted to let him borrow it so that he can hold it in his wallet and enjoy it for a while in Spatial or Decentraland or on some other platform.
I could, in theory, modify the ERC-721 contract to add a new table to the NFT that tracks ownership and holding separately.
In Figure 3 below, I could transfer the holding of the NFT without affecting the ownership of the NFT using this modified ERC-721 contract.
Unfortunately, 0xAnimist and I would likely be the only ones to know about the change in who “holds” the NFT, because none of the major platforms, whether it’s OpenSea or SuperRare or Etherscan, are set up to query and track changes in the holding of (as opposed to changes in the ownership of) the NFT.
As often happens with standards, once they become widespread, it becomes very difficult for everyone to agree to migrate to some other standard.
Quantum NFTs — An ERC721-Compliant Decoupling of Ownership and Holding
Ever since we launched the K21 Collection in March 2021 we have been struggling at Kanon with the question of how to broaden audience participation in the experience of individual NFTs in a way that fractionalisation and editions don’t seem to be able to do.
The solution came to us in the form of what we call “Quantum NFTs.”
These NFTs, which we invented at Kanon, decouple NFT ownership from NFT holding, while maintaining compliance with ERC-721 standards, so that platforms like OpenSea, SuperRare, Etherscan etc. can display and track these NFTs.
We achieved this by creating two separate ERC-721 NFTs for every artwork: one that tracks ownership of the artwork (Ownership NFT), and one that tracks the holding of the artwork (Holding NFT).
The Ownership NFT behaves very much like a standard ERC-721. If at any time I transfer the Ownership NFT to someone, then I will be transferring ownership of the artwork to that person. In Figure 4 above, I am transferring ownership of the artwork to samethjackson.eth.
The artwork itself however is not contained in the Ownership NFT. The artwork is contained in the Holding NFT. And as you can see in Figure 4 above, the artwork (tracked by the Holding NFT) remained in my wallet, even after I transferred ownership of the artwork to samethjackson.eth.
In Figure 5 above, the Holding NFT is transferred to 0xAnimist.eth, while samethjackson.eth remains the owner. When this happens, all major platforms will show that the Holding NFT — which contains and displays the artwork — has moved from my wallet to 0xAnimist.eth.
Of course, samethjacskon.eth, as the holder of the Ownership NFT, would have admin rights and at any time could recall the Holding NFT to his wallet. He could even “collapse” the quantum functionality so that the Holding NFT behaved like a “classical” NFT (“Newtonian NFT?” 🤓 ) where location and ownership are always transferred at the same time to the same wallet.
TLDR — Quantum NFTs make it possible for the holder of the artwork and the owner of the artwork to be completely separate people!
But wait, there’s more.
One of the interesting things about the ERC-721 standard is that it specifies the existence of an `ownerOf()` function, but it doesn’t specify what that `ownerOf()` function needs to be. In other words, we as developers can make the `ownerOf()` function whatever we want.
Of course, we could define the `ownerOf()` function the classical way, where the holder of the Holding NFT can transfer “ownership” (holding in this case because it’s the Holding NFT) by calling `safeTansferFrom()`.
But why not make things a bit more interesting? Spooky even (get it 🤓).
Instead of me sending the Holding NFT to 0xAnimist, what if he could come to the Holding NFT and claim the NFT away from me. One day the NFT would be in my wallet, and the next poof! It’s gone!
Taking it one step further, what would then happen if Sam decided to send the Ownership NFT to the 0xDeAd address while leaving the quantum functionality of the Holding NFT enabled?
Then things could really get spooky :) The Ownership NFT would be lost forever to the 0xDeAd address, so no one, or everyone, depending on your point of view, would own it.
But the Holding NFT, and the artwork it contains, would remain alive and well in 0xAnimist’s wallet!
Now let’s imagine that 0xAnimist sends the Holding NFT to the 0xDeAd address. Normally this would result in the “destruction” of the NFT because there’s no way to get the NFT out of the 0xDeAd address. Most major platforms do not display NFTs which have been sent to the 0xDeAd address.
But, with a Quantum NFT, I could come to the Holding NFT contract and claim the NFT into my address, thus literally raising the NFT from the dead!
The Holding NFT really could be in any wallet at any given moment, but also wouldn’t really be in any wallet in particular. Kind of like a Schroedinger NFT :D
Because Quantum NFTs are building on top of the ERC-721 standard, but not imposing any additional restrictions, I think they will turn out to be way more expressive than standard ERC-721s.
Our product pipeline at Kanon is already bursting at the seams with the first urgent implementations of Quantum NFTs, which we can’t wait to release.
Low-Hanging Fruit — Rentable NFTs
The first implementation of Quantum NFTs that we are already working on is perhaps the most obvious implementation, namely, the world’s first rentable NFT which we hope to release very soon.
The idea is very simple. I have sunk an irresponsible amount of ETH into NFTs, everything from Punks, to Doodles, to Azukis, to SuperRare 1/1s.
As I mentioned at the start of this article, I have no interest in selling. BUT, I won’t say no to a bit of rental income if someone wants to borrow one of my NFTs for a while.
It’s not hard to imagine a simple set up similar to that shown in Figure 5, where 0xAnimist comes to the Holding NFT contract, deposits some amount of K21 tokens, which then gives him the right to hold my NFT in his wallet for a certain time period.
At the end of the rental period, I could claim the Holding NFT back into my wallet, along with any rent that I collected along the way. Or, the Holding NFT would remain in 0xAnimist’s wallet until someone else paid rent and claimed the NFT away from him.
Now imagine that an art museum or gallery came and rented the artwork for an exhibition. The institution would be able to demonstrate onchain that it has followed proper procedures in borrowing the artwork, and I as a collector would build up an onchain exhibition history for the artwork, easily viewable on platforms like OpenSea and SuperRare that track and show the transfer history of NFTs. All without departing from the ERC-721 standard, and without relinquishing ownership and control of the NFT!
Of course, in this set up we (Kanon) would collect a percent royalty which we would ensure would be paid to the original creator of the NFT.
But what excites me the most about rentable NFTs, and Quantum NFTs in general, is that we finally have a mechanism for including MUCH larger audiences in the experience of individual NFTs.
I wasn’t kidding when I said that I want millions of people to be able to experience the NFTs in my collection as fully as I do when I hold them in my wallet.
I bet this is a sentiment that would resonate with many, maybe even the majority, of collectors and artists. End of the day who would ever want great art to languish in some long-forgotten vault!
With rentable NFTs, millions of people can actually share a single NFT, while generating rent for the owner (who could very well be a DAO or other collective entity), generating royalties for the artist, and creating a permanent onchain track record of who has rented the NFT (including any museums and galleries who might chose to rent the NFT).
TLDR — rentable NFTs = win win win all around.
The World’s First Quantum NFTs — Rentable Daemonica Entities
Rentable NFTs could have massive implications for metaverse applications, which is why we chose it as our starting point for implementation.
Very soon, we will be releasing a Quantum NFT wrapper which will allow any Daemonica entity holder to rent their entities in exchange for K21 tokens.
If you’re not familiar with Daemonica, I would highly encourage you to visit https://intro.daemonica.io to get a full overview.
Even though it was a Kanon collaboration with an anonymous artist from the K21 Collection, I personally played no role in the creation of Daemonica so I believe I’m unbiased when I say it is the most mind-blowing NFT that I have ever come across.
Also, just quietly, if you take a peek at the Daemonica entity transaction history, you can see that I’ve been a little busy there :)
In any case, rentable Daemonica entities are great news for entity bagholders but . . . why would anyone want to rent a Daemonica Entity?
Well, we’re not quite ready to share that yet but let’s just say that rentable Daemonica entities are just the beginning of our plans for Quantum NFTs :)
If you want to keep an eye on these and other developments at Kanon, please follow Kanon on Twitter, Instagram and Medium.
And feel free to follow me, Fastackl, on Twitter. I try to minimise alpha leaks but occasionally I slip up and can’t help myself :)