More and more people nowadays want to achieve financial freedom. And one method to achieve financial stability is by generating a passive income stream.
Real estate investment, rental revenue, and peer-to-peer lending are the most prevalent means of generating passive income. However, not everyone is rich enough to go that route, necessitating the invention of new approaches.
Cryptocurrencies and NFTs staking are two such modern and popular ways for anyone to earn passive income. Both systems are based on blockchain technology, which is currently the talk of the town.
Since the article is meant to be on NFT staking, I’ll go into detail about it. I’ll go through everything there is to know about NTF and staking. By the end of this post, you will understand how to use NFTs to your benefit if you possess any. So, stay with me till the very end.
What Is NFT?
There are headlines of people making thousands and even millions of dollars by selling images of apes, tweets, digital sound of farts (yeah, you read that correctly, FARTS), and other bizarre digital items. Well, these are nothing but digital illustrations and experiences given a fancy name, NFT.
NFT stands for Non-Fungible Token. It is an Ethereum-based invisible smart contract. Each NFT is unique, and you cannot replace it. For instance, suppose you have a Bitcoin and want to exchange it for another Bitcoin. Even after exchanging the Bitcoin, you will leave with exactly the same product.
The most expensive NFT sold to date is Pak’s “The Merge.” It was sold at a staggering price of USD 91.8 million.
Similarly, if you and I both have a $10 note and exchange them, there will be no change in value even after the swap. We’ll both still have $10 worth of paper bills. In contrast, you will have something completely different if you sell an NFT, such as digital artwork with unique features for money or another NFT, such as digital perfume.
How do you ensure that NFTs stay the exact same? Simple, via blockchain technology. Every one-of-a-kind NFT, physical or digital, namely video game assets, avatars, collectible cards, video files, artworks, GIFs, and more, is stored in a blockchain to prove ownership. Hence, they become tamper-proof, and nothing or no one can meddle with them to jeopardize their authenticity.
The combination of such assurance and the potential for extra revenue has resulted in its acceptance. The majority of individuals now collect and trade them. The NFT market is quickly expanding. It is no longer restricted to the digital portrayal of valuables and artworks. Developers are exploring more useful applications. One of these is NFT staking.
What Is NFT Staking?
NFT staking is securing the NFT on a network such as Defi in return for benefits such as cryptocurrency, more NFT, or other valuable resources. The best thing is that you do not lose ownership. That’s how you make passive money through NFT investments.
NFT staking is crucial for ensuring liquidity of the NFT market.
You may be curious how it benefits staking platforms. It’s simple. Staking helps to improve the liquidity of the NFT market. You secure the NFT as collateral, outsource it to the validators, the validators execute all of the work, and reap the benefits.
This is identical to earning interest through banks. The only difference is that banks are centralized, but NFT staking is decentralized, which means there is no go-between. Since NFT features unique characteristics, it is suited for such wait and HODL practices. However, one must invest in it for the long run and be patient until one enjoys the rewards.
How Does NFT Staking Work?
The process of NFT staking is identical to that of cryptocurrency staking. Blockchain technology locks up the crypto coins in a staking pool. Following that, the blockchain protocol selects some random miner or someone who confirms the transaction blocks as a validator; when a person pledges more, their odds of becoming a validator increase.
So, new tokens are produced each time a new block adds to the chain. The minted tokens are subsequently shared as staking incentives among the validators. The minted tokens are split in a certain proportion based on numerous parameters such as the quantity of crypto a validator stakes, the token’s inflation rate, the number of years a validator has been regularly staking, and more.
NFT staking works by adding the details of an NFT on the decentralized blockchain ledger.
The best thing is that the user retains ownership even after staking and may withdraw money from the staking pool whenever they want. They must, however, follow the crypto protocol’s terms and conditions. This is due to the crypto protocol being a secure network.
Similarly, users can encrypt their NFTs on a certain platform. This is possible due to smart contracts on a specific blockchain system. After staking, customers receive rewards based on the number of coins pledged and the yearly percentage yield determined.
The ideal way to begin NFT staking is to use free tokens from NFT platforms. Take out a digital loan through an NFT lending platform using free tokens as collateral. After that, you have three choices:
- Sell your assets for cash
- Use them to purchase additional NFTs
- Use them to get more loans
Note: No two NFT projects are the same, and each has unique requirements. As a result, unlike cryptocurrencies, not every NFT can be staked. Hence, before collecting NFTs, you must first check the project’s needs.
To use the tokens as collateral, you must purchase a crypto wallet to keep them safe. The crypto wallet must be appropriate for the NFT you are staking and compatible with the blockchain on which you are staking NFT. After finding the right wallet, link it to the NFT platform, and you’re ready to start.
What Are the Rewards of NFT Staking?
The rewards for NFT staking vary depending on the NFT staking platform and the type of NFT staked. The following are the rewards that a holder can earn:
Rewards are often granted in the platform’s native utility token. Such prizes are listed on exchanges for holders to exchange for cryptocurrencies or fiat money. Such rewards are usually given frequently, like daily or monthly.
Voting privileges are given as a reward. Certain platforms feature decentralized autonomous organizations (DAO). The holder can use this feature to lock their NFT into the DAO staking pool. Staking NFTs in DAO grants holders voting rights in the platform’s administration. Participation in the form of making proposals or having voting rights when others make proposals.
Axie Infinity is one of the most played play-to-earn games developed by Sky Mavis, headquartered in Vietnam.
Staking opportunities in play to earn games like Splinterlands (SPS), Axie Infinity (AXS) and The Sandbox (SAND). The play-to-earn games reward you with cryptocurrency. They also give you extra NFTs for free, which you may then stake.
What Are the Risks Involved In NFT Staking?
No investment vehicle is free of risks, and NFT staking is no exception. The risks and drawbacks involved in it include the following:
- NFT staking consumes a lot of resources
- If the platform goes bankrupt and becomes insolvent, your NFTs may be lost
- You may lose money on your investment if the value of NFT drops
- The price of an NFT may drop regardless of the project or platform
However, the positives of generating residual income, increasing acceptability, and enhancing liquidity exceed the disadvantages and risks. Moreover, you may reduce the risk by conducting extensive research. Finally, invest in projects that are well-established and have strong community support.
How to Start NFT Staking?
To start staking NFTs, you must go through the following steps:
- Step 1: Invest in the appropriate NFT. As noted previously, you cannot stake any NFT
- Step 2: Pick the ideal staking platform that supports the type of NFT you want to stake
- Step 3: Create an account on the platform and wait for the verification procedure to finish
- Step 4: Complete the KYC procedure to comply with anti-money laundering rules
- Step 5: After verifying your account, deposit the NFTs into the account and start staking
Finally, sit back and wait for the rewards. Withdraw your rewards once you receive them. Your platform may need you to complete a waiting period to redeem the rewards.
What Are Some of the Best NFT Staking Platforms?
There are many NFT staking platforms, each with its capabilities. With so many alternatives, it’s natural to be confused. Here are a few of the best NFT staking platforms:
- NFTX
The platform rewards the holders 100% of the protocol costs. Holders also receive ERC20 xTokens. Browse the staking pools on the platform to select the one that best matches your NFT. Before staking in NFTS, ensure that you get a vault-based token depending on your NFT value. Then, add liquidity to the pool and begin staking tokens.
- Mobox
This gaming metaverse platform includes features such as play to earn. As a result, holders receive MBOX as a reward for staking NFTs in it. MBOX is Mobox’s native currency. On Mobox, NFTs are referred to as MOMOs. Mobox’s marketplace allows you to mine, earn, and buy MOMOs.
- Zookeeper or ZOO
Zookeeper is a gamification platform that allows for NFT staking and farming. If you stake your tokens on Zookeeper for a longer period, say up to 180 days, your chances of receiving higher value rewards increase.
And, if you want to earn huge rewards in a short period, you must stake ZooBoosters. Zooboosters are NFT cards taken from gold chests. You may purchase them with Zoo coins or by staking ZOO tokens.
Aside from these, there are platforms for music fans like BAND NFTs, sports fans like Binance NFT PowerStation, and so on. So, choose your NFTs and platforms carefully, do thorough research, and have a clear plan.
Final Words
NFT is an entirely new asset class. It’s no surprise that people are thrilled about these digitalized tokenized assets. Moreover, because they are distinctive, most investors or founders are hesitant to sell them and keep them for a longer time. As a result, a potential to generate passive revenue through NFT staking without losing ownership arises.
It would not be wrong to say that NFTs provide a better return on investment if staked. Moreover, it encourages individuals to invest in NFTs and adds liquidity to the ecosystem, increasing the value of NFTs.