Alex Lielacher
Published on 06.08.2021
Learn about the latest crypto trend that combines elements of decentralized finance (DeFi) with the world of NFTs.
NFT farming is one of the latest DeFi trends that connects yield farming to the world of non-fungible tokens (NFTs). In this guide you will learn what NFT farming is, how it works and how you can participate in this new opportunity to earn crypto.
Yield farming & NFTs explained
Before we can talk about NFT farming, we first need to define yield farming and talk a little bit about NFTs.
What is yield farming?
Yield farming, also known as liquidity mining, is the process of generating income from digital assets by locking them as a stake in a DeFi trading or lending pool to act as a liquidity provider.
On PancakeSwap, the market-leading AMM on Binance Smart Chain, users must deposit two BEP-20 assets into a trading pool to receive a Liquidity Pool (LP) token, which must then be used in a farm to earn farming income achieve CAKE tokens.
Yield farming has grown incredibly popular since mid-2020 when the concept first appeared on leading DeFi platform Compound. Since then, hundreds of yield farming DApps have been launched on blockchains like Ethereum and Binance Smart Chain to enable investors to earn double-digit returns on their digital assets.
What is an NFT?
Non-fungible tokens (NFTs) are blockchain-based digital tokens that represent a unique physical or digital asset with verifiable ownership.
NFTs (non-fungible tokens) allow artists, brands, and creators to tokenize their work and sell it in digitized form to fans, followers, and collectors.
For example, leading digital artist Beeple sold NFTs at auction for over $69 million at Christie’s, setting the standard for anyone looking to make an income as a crypto artist.
While NFTs — as a technology — have a wide range of use cases, including copyright verification, providing pedigrees for physical products, and representing real-world assets like real estate from physical collectibles, today’s NFT market is fueled by crypto art, virtual collectibles, and items in the game.
NFT farming: creating value and liquidity for NFTs
Given the rapid development of crypto markets, it probably comes as no great surprise that a handful of creative developers have managed to combine the concepts of yield farming and NFTs to create “NFT farming” as a new source of income in the DeFi markets.
NFT farming refers to staking an NFT to receive rewards in tokens, or staking tokens to receive an NFT as a reward.
Unlike “traditional” yield farming, where you deposit digital assets into a liquidity pool to receive tokenized rewards, NFT farming uses NFTs instead.
The idea behind NFT farming is to create utility and liquidity for NFTs.
Until the advent of NFT farming, NFTs were almost exclusively digital collectibles bought, traded, and held by crypto-savvy collectors. Now NFTs can be used to earn tokens, creating this new type of utility for digital assets and improving their liquidity.
Currently, NFT farming mainly takes place in blockchain games, where users can stake in-game items to get tokens, or vice versa.
Axie Infinity is a prime example of a blockchain game with NFT farming capabilities. In the Ethereum-powered game, players earn SLP tokens, which they can then use to mint NFTs in the form of new Axies.
Aside from Axie Infinity, other DApps that offer NFT farming opportunities include Aavegotchi, Mobox, and SuperFarm.
The risks of NFT farming
NFT farming is as fresh as it gets in the cryptoverse. That means it’s also one of the riskiest ventures in crypto.
Many NFT farming opportunities are still in the experimental phase and the jury is still out on whether or not this new type of crypto-earning opportunity will stand the test of time.
In addition, similar to conventional yield farming, NFT farmers face potential risks Vulnerabilities in DApp smart contract codewhich could result in a complete loss of funds, as well as the Risk of volatility in the platform tokenwhich could result in significant losses in converting the earned tokens back into stablecoins or fiat currency.
NFT farming on SuperFarm with Trust Wallet
Arguably the easiest way to dip your toes into NFT farming is with the recently launched NFT farming DApp, SuperFarm, which you can easily access using the Trust Wallet DApp browser.
The cross-chain protocol allows you to stake its platform token SUPER to earn GEM tokens which can then be used to purchase NFTs that are regularly released during NFT drops.
You can get SUPER tokens in Trust Wallet by exchanging an ERC20 token (assuming you are using the Ethereum version) for SUPER. You can then securely store and deploy your SUPER tokens in SuperFarm, all within the Trust Wallet app.
Once you’ve accumulated enough GEM by depositing your SUPER tokens into the SUPER pool, you can “harvest” NFTs on the next drop.
Alternatively, you can use SUPER as a medium of exchange on SuperFarm and vote on governance matters as the platform evolves towards a more decentralized model over time.
Trust Wallet: Your gateway to DeFi and NFTs
With Trust Wallet, the world of Web 3.0 is at your fingertips. Trust Wallet’s DApp Browser allows you to access a wide range of DApps, DeFi protocols and NFT platforms to explore the exciting crypto-powered earning opportunities in this brave new world.
Download Trust Wallet to access Web 3.0 in minutes.
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