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How to earn passive income with NFTs

Through CNBCTV18.com 09.11.2022, 13:26 IST (Published)

The NFT market is seeing a slump in sales. The prices of these digital assets have also started to fall; NFTs that sold for millions last year are now worth a few thousand dollars. This has forced NFT creators and holders to think outside the box and find new ways to capitalize on these digital assets.

NFTs came onto the market last year. And in no time at all, these digital assets caught the attention of celebrities, brands, and some of the biggest names in the crypto industry. As such, their prices reached astronomical, borderline absurd levels, with some NFTs fetching million dollar prices. Since then, however, a lot has changed.

The NFT market is seeing a slump in revenue, with major trading platforms like OpenSea seeing increasing trading volumes. The prices of these digital assets have also started to fall; NFTs that sold for millions last year are now worth a few thousand dollars. This has forced NFT creators and holders to think outside the box and find new ways to capitalize on these digital assets.

There are many ways for NFT holders to do this. One can choose to stake, rent, and even earn royalties on these digital assets. Sounds interesting? Join us as we explain these revenue streams and how they work. Let’s go.

NFT staking

NFT staking is quite similar to cryptocurrency staking. You lock your NFT with a blockchain network or liquidity pool for a set period of time. By doing this, you help the network process transactions and increase the security of the platform. In return, the network provides you with staking rewards in the form of crypto tokens.

Most platforms that offer this feature allow you to stake a wide range of NFTs, while others may require you to purchase their native NFTs to start staking. Additionally, most of these NFT staking platforms are Metaverse or P2E gaming platforms like Splinterlands, The Sandbox, Decentraland, etc. Some DeFi protocols like StakeDAO and NFTX also offer this feature.

The rewards you receive for staking are usually denominated in the platform’s native cryptocurrency. Sometimes you will also receive governance tokens as a staking reward. You can keep these tokens, exchange them for other assets, or reinvest them in a liquidity pool to earn even more rewards.

Rental of NFTs

NFTs are a big part of the GameFi industry. Most platforms have replaced in-game items such as wearables, weapons, and tools with NFTs. This adds to the gaming experience as the digital assets earned in-game have value outside of the platform. Sometimes these NFTs are very important and you can only get through the game with the right NFT.

For example, in the M2E game StepN, users need to buy a set of NFT sneakers to earn tokens in the app. However, these sneakers can be expensive and are often out of reach for most players. In this case, you can rent your NFT sneaker to other players and earn passive income.

In most cases, a smart contract will automatically find a tenant and maintain a secure, auditable, and tamper-proof record of ownership. You will be rewarded according to a fixed agreement or receive a share of the renter’s in-game rewards. In any case, you will get a decent residual income.

NFT Lending/Liquidity

NFTs are all-or-nothing investments. It is almost impossible to access the underlying value of an NFT without selling it outright. Fortunately, several platforms have emerged to address this issue. For example, a platform called EverGrow allows you to borrow funds against your NFT. You can get a 70-80 percent loan-to-value and then use those funds to enter a liquidity or staking pool. You can then use a portion of those returns to cover interest payments while earning passive income from your NFTs.

Another platform that offers a similar feature is NFTX. This Ethereum-based protocol allows you to vault your NFT and in return gives you a set of its native vTokens. The number of tokens you receive is equal to the minimum price of your NFT collection. You can deposit these vTokens into liquidity pools and earn rewards. Finally, when you have earned your winnings, you can return the vTokens and free your NFT from the vault.

NFT License Fees

This last point applies primarily to NFT creators. Artists, singer-songwriters, and other NFT creators can set royalties to ensure they continue to receive passive income from their NFT even after the sale. To do this, they need to set up a royalty function in the smart contract when minting the NFT. Then, each time the asset changes hands, they get a percentage of the sale proceeds, usually 5 to 10 percent of the amount.

Conclusion

Thanks to these novel investment opportunities, NFT holders can continue to earn passive income without selling their assets even though the NFT bubble bursts. However, most of these platforms are relatively new and due diligence should be exercised before tying one’s NFT to such protocols

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