By the Numbers: User Rental Traffic 10x+ that of Trading when Adopted
When adopted, how do NFT rental markets compare with trading markets when it comes to user activity? We took a look at two major GameFi projects, Splinterlands and Aavegotchi who have already implemented renting for their NFTs. Here is what we’ve found.
Splinterlands
We used the Splinterlands API in order to aggregate transaction data from the third party PeakMonsters marketplace for the week of 6/24–7/1, then we derived the average numbers per day. Note that, rental volume was calculated by taking the total in DEC and in Credits, converting both to USD using the exchange rate at the time and adding them.
Splinterlands data for the week of 6/24–7/1:
We were able to use Dune in order to create a dashboard to compare the monthly on-chain transaction activity of users. Here are the key numbers for June of 2022 since Aavegotchi launched their rental market in late March and found the average numbers per day. Note that, for the numbers presented below, the trading transaction, volume and wallet numbers for ERC-721 and ERC-1155 tokens have been added together for clarity.
Aavegotchi Data for June
Observations
Rentals as a Key to Onboarding New Users
Unsurprisingly, the average price of renting an asset is upwards of 99% cheaper than the price of purchasing one. This can make the project much more accessible for new users to be onboarded. By being able to rent instead of having to buy, new users are able to experience the utility first hand that NFTs bring without having to commit a hefty sum to purchasing it.
1200%+ More Total Users for the Platform
In addition to having drastically lower average prices, we also see that many more wallets are active when it comes to rentals. In the Splinterlands data we see that there are around 12x more wallets with rental activity than there are with trades. With a lower barrier of entry, there are more users who rent than there are who make purchases, dramatically augmenting the MAU.
2000%+ More User Activity
While trading volume converted into dollars still surpasses that of the rentals, the number of rental transactions absolutely dwarfs that of trades. For example, in the week on the Splinterland market we looked at, there were 23x(!) more rental transactions than trading ones. Users are more active when it comes to rental compared with trading. After all, there may be thousands of cars bought every day but there are millions of uber rides every hour.
Further Discussions: Traffic is Power
If any lesson is to be learned from web2 it’s that for an internet company, user traffic is power. The more users a platform has and the more active they are on it, the bigger the share of attention that platform commands. First, this serves as the primary (if not only) true moat for a platform as it can accelerate network effects and any feature or gimmick can be copied by competitors nowadays. Second, it allows for entry into new verticals. In web2, we see this all the time with companies like Uber leveraging their user traffic to enter new verticals like food delivery with UberEats. In web3, we are already seeing this as well, with Uniswap acquiring the NFT marketplace aggregator Genie.
More than anything else, NFT rentals excel at driving user traffic. They do this by making access to the assets more accessible and thus also increasing liquidity in these markets and enhancing user engagement. What would be the role of NFT rentals for future projects? How will the rental platforms leverage their user traffic? When the rental platforms enter the trading market, what will happen? Will rental platforms take over the trading verticals? What will the future landscape of NFT financialization look like? Let’s see what happens!
- Research by Shrug, Jesse and the Double Protocol Team
If you are interested in implementing rental in your project, check out Rental NFT Standard ERC-4907, which enables it permissionlessly.
