4 ways that already work
You probably don’t know this yet, but non-fungible tokens (NFTs) represent an untapped passive income generation opportunity.
Read on to learn how you can earn passive income with NFTs using a variety of methods that actually work.
The convergence of NFT technology and decentralized finance (DeFi) protocols has led to the potential for NFT staking.
Staking is commonly used in proof-of-stake (PoS) protocols where users pledge their tokens to secure a network and validate transactions. But there are also other forms of staking, such as locking cryptoassets into a DeFi protocol smart contract to generate a return return.
Similar to crypto-asset staking, NFT staking allows you to generate passive income in the form of staking rewards while maintaining ownership of your tokens.
Staking NFTs can be a good strategy if you plan to hold them for the long term, as you cannot trade your staked NFTs. NFT staking platforms often study the scarcity of NFT and calculate the APY (annual percentage yield). The higher the rarity, the higher the APY and the higher the staking rewards.
Currently, several platforms support NFT staking, including Kira Network, NFTX, Axie Infinityand more.
Several GameFi platforms allow you to earn passive income from your NFTs by renting your digital collectibles to NFT players. This is a new trend in the blockchain gaming space, as the utility derived from NFT games offers exciting revenue opportunities. As a gamer, you can rent your NFTs to enhance your overall gaming experience.
You can rent items such as character skins, innovative weapons and unique tools that can unlock new features in the game. For example, some card trading games will allow you to rent NFT cards to increase your chances to win. Smart contracts are used to govern the terms of the agreement, such as the lease term and lease rate.
reNFT, for example, is a rental protocol that allows rental and lending of NFT assets. You can lease NFTs by specifying the lease term, paying the stipulated collateral and receiving your borrowed NFTs.
Collect royalties on NFTs
The NFT industry is estimated to have recorded billions of dollars in revenue in 2021. Creators are looking to get a share of the profits by pushing their digital artworks to market. One way to do this is to generate passive income through NFT royalties.
As a creator, you can set terms that impose royalties each time your NFT is traded on the secondary market. This way, you can earn a share of the NFT sale price in perpetuity.
For example, you can set the royalty for your NFT at 5%, which means you will receive 5% of the actual sale price each time your digital work is sold to a buyer.
What is fascinating about NFT royalties is that the entire process of enforcing royalty terms, tracking payments, and disbursement is automated through smart contracts. NFT marketplaces such as Rare allow creators to collect royalties from works of art.
Providing liquidity with NFTs
The continued integration of NFTs into the DeFi ecosystem allows you to provide liquidity in DeFi pools and earn NFTs in return.
For example, when you provide cash to the Uniswap V3 decentralized exchange, you will receive LP-NFT tokens, which is an ERC-721 token that captures the amount you have locked in the pool. You can sell this NFT on the secondary market to liquidate your position in the liquidity pool.
In addition to earning encoded royalties on your own NFTs, all other current passive income strategies involving NFTs carry a relatively high level of risk, as you typically deposit your NFTs into smart contracts on DeFi markets. As with all DeFi and investment activities, there are risks that investors should be aware of before deploying capital or NFTs.
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