Blockchain technology has evolved beyond financial transactions to revolutionize trust systems. This paper presents a blockchain-based model for decentralized rental agreements and dispute resolution (DRADR). By leveraging smart contracts and implementing two distinct arbitration approaches, our model offers flexible solutions for rental agreement automation, transparency enhancement, and impartial dispute resolution. Our study provides a comprehensive technical analysis of both approaches through theoretical frameworks, smart contract implementation, game-theoretic modeling, and comparative evaluation across multiple legal jurisdictions. We explore the potential of blockchain technology to address long-standing challenges in traditional rental systems, such as power imbalances, inefficiencies, and legal disputes. Key contributions include the integration of decentralized and local justice systems; a detailed game-theoretic analysis of strategic behaviors; and comparative insights into gas efficiency, economic viability, and jurisdictional adaptability across both arbitration approaches. This research paves the way for a more equitable and transparent rental market and contributes to the broader acceptance of blockchain-based solutions in everyday transactions.

Traditional blockchain assets operate in mutually exclusive states, limiting capital efficiency in financial applications. This paper introduces a state machine architecture that enables a single digital asset to simultaneously maintain both protective and collateral states. We develop a formal model representing dual-state assets as a tuple, define four state transition functions, and mathematically prove the preservation of invariants across all valid operation sequences. Our architecture is implemented using smart contracts with explicit validation logic that computationally enforces protection thresholds. We validate the model through formal verification and Monte Carlo simulations across 10,000 parameter combinations, demonstrating invariant preservation and efficient collateralization of asset value. When applied to rental security deposits, our model enables capital that would otherwise remain immobilized to be actively utilized, while still maintaining protection guarantees. This contribution extends blockchain state machines beyond binary transitions to partial-state transformations with formally proven safety properties, making it applicable to financial instruments requiring both protection and utility simultaneously.