Kingdomly; expanding NFT utility through ERC-4907
November 29, 2022
OVERVIEW
Kingdomly is a new protocol on the Ethereum network looking to increase the efficiency and utility of the NFT market. Kingdomly aims to be the go-to spot for renting NTFs. Many NFT’s act as token gated services and experiences of which the value can only be captured by the owner of the token. Other applications offer NFT renting through market solutions like upfront collateral. We believe this creates barriers to entry and have thus leveraged the technology of the new ERC-4907 token standard to separate ownership from user-ship to expand the potential of digital assets.
Have you ever wanted to play that super fun looking crypto game but didn’t have the capital to purchase an asset or upfront collateral? Or have you ever owned a gaming NFT and couldn’t get the full use out of it because you didn’t have the time to play 24/7 ? Kingdomly is your scalable solution to renting NFT’s through the ERC-4907 token standard and interoperable API.
GOALS
- Understand why NFT renting is needed
- Differentiate between usership and ownership
- Understand how Kingdomly is using this tech to develop a more efficient market
Non-Fungible Tokens
How they work
After an incredible run up in 2021, NFTs were the topic of much conversation regarding blockchain technology and its role in our modern world of ever increasing digital consumption. As the market has cooled down, so has the world’s exposure to NFTs. Luckily, the winter market conditions haven’t deterred entrepreneurs and developers in the space from building better services for a decentralized future.
At its core, an NFT is a token that represents one’s ownership of a digital asset. This asset is unique due to the establishment of recorded ownership made possible through the transparency and immutable nature of the blockchain. Everyone can see which contract the NFT came from, at what time, and to whom. Even if your NFT might be visually similar or identical to another person’s, if the contract addresses differ they are by definition different assets.
This is an important distinction. Many people think an NFT is the picture they are buying, this is not the case. They are buying the provenance of the asset. NFT’s don’t have to be pictures, they don’t even have to have any visual representation. They merely serve as unique metadata on the blockchain that points to an owner. This is extremely important to understand; NFTs provide a secure mechanism for establishing and verifying the proof of asset ownership.
One standard for NFTs is the ERC-721 standard. This is the most widely adopted token standard which is verified by the Ethereum Foundation. Developers use this standard in order to create unique, ownable, sendable and secure tokens. ERC-721 is the most widely used in the industry as tokens that are built with this standard are verified and safe. ERC-721 serves as a “skeleton” for developers to build around and add their own functionality.
Examples of utilities they can provide
Currently, the NFT industry is focused on building products and experiences for its rather niche onset of digital consumers. These can include NFT’s that represent membership to exclusive clubs that aim to provide their members with networking opportunities, creative tools, and access to angel investors for entrepreneurs. Companies have also used NFTs to represent deeds to the ownership of land in the metaverses they are building. Land that could be monetized in whatever way the owner sees fit.
In order to link value to the unique digital assets that they create, developers often implement what are known as “token gates”. Token gates act as gatekeeping mechanisms wherein only holders of select NFTs are allowed access to the contents of the website or online application. Ownership is verified on the backend where the token gate software checks your address against the addresses of holders of a specific token on the blockchain. This technology enables any digital experience to be token-gated by an NFT or “proof-of-ownership”.
Up to this point, much of NFT utility has been built for digital experiences only possible through the mass adoption of web3 and the consumption of digital assets. Examples include metaverses, ownable usernames, profile pictures, digital clothing etc. Such adoption of these functional digital assets and the volume in sales regarding them prove the power of utility in user adoption. Play-to-earn experiences have emerged in the last 5 years and have been extremely successful as they provide utility right now for NFTs.
The growing industry of play-to-earn
What is play-to-earn ?
Online games have been on the internet for a long time, and play-to-earn isn’t revolutionizing the games themselves, but the way players interact with each other, and invest their time in it. The format of a lot of p2E games are similar to a lot of the same games you know and love but with the added technology of a blockchain allowing you to own the trading cards, characters, currencies and inventories that help you progress in the game. The added incentive for players is that, as they play more of the game and accrue items, currencies, and other rewards, they can actually sell these items to other players as NFTs for them to use in game.
NFTs are the product, the blockchain is the technology, and the NFT marketplace is the medium of exchange.
Projected growth
Currently, the total market cap for gaming tokens is around 10 billion dollars, with a 2 million dollar daily trading volume. The P2E industry is currently large and is only going to keep increasing as developers can create more seamless experiences for users and as traditional game developers start using this technology. 2 days ago, Playstation published a patent exploring the implementation of digital assets secured by a decentralized ledger. AKA, non-fungible tokens (Ivan, 2022).
Playstation entering this space is great for the crypto gaming industry as it brings users to the ecosystem and provides tangible value to them through a reputable provider. However, there is currently an inefficient rental market for NFTs that reduces liquidity and increasing barriers to entry for everyday users hoping to access the games that these NFTs are built for.
NFT Renting
The need for renting NFTs
The value and need for renting NFT is evident. Just like traditional renting of assets, you rent them because you want to use them but can’t afford them. Another reason for renting is that sometimes owning an individual asset and holding onto it isn’t what the user cares about. Some gamers want to test out the utility of an NFT to see if they would like to buy it before they make the full purchase. Renting allows them to try it out at an affordable price and do so safely.
If you own an NFT that has a lot of utility but do not have the time to play a game yet and don’t want to sell it, you should have the right to rent it out to others. You should be able to rent it out, accrue revenue, and enable others to want to be part of the community your NFT represents. Assuming an efficient renting market, as the developer of an NFT, you are incentivized to create rentable experiences. Renting exponentially increases the utility of your NFT and thus its value. Renter’s get value from the experience, rentee’s get value from renters payments, developers get value as the network effect increases the exposure of their NFT’s.
The current NFT rental system
With ERC-721 tokens, there is a function within the contract that identifies the owner of the asset. This allows the owner (through a token-gate) to access the game/utility that the NFT provides. This is all great and fine, but what happens if someone who doesn’t own the NFT wants to play the game? The only way to give someone access to the perks of your NFT is by sending it to them. This however, gives the renter full access to do whatever they want with it. Steal it, burn it, sell it, depreciate its value etc.
The way that current NFT rental platforms get around this problem is by requiring the renter to provide collateral at the value of the NFT they are borrowing. This ensures that if they don’t return the NFT in the specified time, they lose their deposit. This creates a problem for the renter as they must already have the amount of money that the NFT is worth in the first place. If they already have enough money to buy it they could just buy one for themselves and own it forever. But if the NFT they want to borrow is worth $4,000, there is simply no means for an everyday user to access the content. For the person renting out their asset, once it is rented out they lose complete control over their asset placing a lot of risk on the renter. Moreover, when the rental period expires the owner will usually have to manually reclaim their NFT from the renter which can be expensive and time consuming if they are renting out multiple assets.
The current NFT rental system stops many potential users from entering the space and makes the market less efficient. But what if you could rent out an NFT to someone and allow them to get all the utility of it without simultaneously revoking your ownership of it?
How Kingdomly takes advantage of ERC-4907 in their market
What is an ERC-4907 ?
ERC-4907 is the newest token standard verified by the Ethereum foundation. At its core, it contains the exact same functions as the ERC-721 token standard with 4 additional functions. These functions separate and create a new parameter called “user”. This distinguishes NFT ownership from usership. The usership parameter can be set to last a specific amount of time, and upon expiry, the usership parameter switches back to the address of the owner.
Now that within the contract, the “user” and the “owner” can be separated, developers can build token gates allowing “users” to access the utilities without being the owners of the digital asset. Because this is a new parameter within the contract, changing the user or owner permanently changes the state of the blockchain making it immutable and completely transparent to everyone else on the network.
Kingdomly’s rental marketplace
Kingdomly has built a rental marketplace that takes advantage of this technology. Users with any ERC-4907 can choose to rent out their NFT’s. The owner sets the price per day, they sign the contract and it becomes visible to rent to anyone. Below is a representation as to what the contents of the contract would look like.
Address of [owner] = Renter
Address of [user] = Renter
As the rentee, you select how long you want to rent it for and upon payment, the usership parameter of the NFT contract switches from the renter’s address to the rentee’s address.
Address of [owner] = Renter
Address of [user] = Rentee
Now that usership is established, if you wanted to take advantage of the NFTs utilities, you would connect to the token gate which would cross reference all the addresses that have “usership” against the address connecting to the site. Since the rentee’s address changed the contract and now shows their address as the user, the token gate will allow them the same utilities as if they owned it.
But this only works for ERC-4907 tokens and those are not the industry standard you might be saying.
This is true and this is why Kingdomly has created the first interoperable renting marketplace for all non-fungible token standards. Other NFT renting marketplaces have attempted to solve the problem by wrapping ERC-721 contracts into ERC-4907 tokens. The problem with this method is that the contract address of the original NFT changes, therefore the token gate no longer recognizes the original NFT. Because of this, the rental marketplaces have to work closely with the NFT developers to re-code the token-gate to check for a whole new token. This is timely, laborious and takes transaction costs.
Kingdomly has solved this issue and is able to make the renting of ERC-721’s seamless for developers, renters and rentees. Instead of wrapping the 721 token that is being rented out, Kingdomly places the token into an escrow contract. This escrow contract essentially holds the NFT like a wallet and lives on the blockchain by itself. Kingdomly has built a dynamically updating list that keeps track of the tokens in the escrow contracts. When someone chooses to rent this token, they pay the fee and the dynamic list automatically updates who the “user” of the NFT is. Kingdomly has also built their own API that developers can simply call upon in order to query who the user is.
This query hits the API with the parameters of their NFT collection address, and the address of the wallet they are checking in the gate, and then Kingdomly’s API will return which token IDs that the specified wallet address is renting from the specified NFT collection. This is beneficial for developers as they don’t have to modify their token-gates. If they are not already checking for usership all they need to do is query Kingdomly’s open API.
This is beneficial for the rentee as they don’t have to front a large amount of collateral to rent NFT’s and it is beneficial for the renter as they don’t have to worry about giving up the ownership of their 721’s to random people. It is secured on a decentralized ledger through the escrow contract, making the security a top priority.
Conclusion
Solving an inefficient market and increasing utility
Renting NFTs is the future for expanding NFT utility but currently renting, with its current barriers to entry and inefficiencies, is losing out on market exposure and liquidity. With Kingdomly’s interoperable marketplace, more people can rent the NFTs. As more people want to rent out NFTs, developers will be incentivized to innovate and create more useful and powerful experiences for expanding the possibilities of digital ownership. This technology removes much of the speculative nature of NFTs as non-owners can enjoy tangible benefits. This market mechanism will create more value for collections with the most utility and weed out NFT collections with none. Market liquidity will drive towards utility, thus rewarding innovators in the space.
Interested in joining us on this journey and entering our kingdom ?
Follow our twitter @kingdomlyapp and join our discord here.
