Most people think the only way to earn with NFTs is selling them. Forget it. Now, you can make your unique digital items work for you. Yes, you can earn passive income with NFTs.
In 2021 the non-fungible token (NFT) went viral.
But in 2022 NFT is really becoming a thing. It has now grown into a major sector of the crypto industry. Majority of NFTs are still minted, bought and sold using Ethereum blockchain.
And users still think NFTs are all about buying cheap, holding and selling later at a higher price. Much like Bitcoin or any other crypto.
But there are a number of ways to generate an income from NFTs than selling them.
All investors dream of passive income. That is why the idea of holding or staking crypto has become so popular. And NFTs are perfectly good for it.
What is NFT?
Let me briefly remind you what NFT is.
The best way to describe a non-fungible token is to think of it as a tradable digital receipt, called a token, stored on a blockchain.
Tokens contain unique information that can be used to prove who the sole owners of certain items are, whether they be tangible or intangible. As for NFTs they usually describe ownership of a certain photo, picture, video etc.
NFTs actually do not store the digital item they represent. Instead, they simply point to the file’s location which exists somewhere else on the internet.
Because no two items represented by NFTs are ever the same, it means NFTs cannot be traded in the same way you can trade one bitcoin for another. That is exactly what the term “non-fungible” token means. All NFTs are unique.
What is with all the hype around NFTs?
Since the beginning of the NFT hype in 2021 the total amount spent on purchasing NFTs has surpassed $12.6 billion.
That is a massive sector of the crypto economy now.
NFTs are mostly minted on Ethereum blockchain. Which is quite pricey. It has become a popular option to generate NFT without actual minting to avoid additional costs until someone buys it. As soon as the buyer makes a final clock the NFT gets minted and only then the fee is paid to the network.
Is it possible to earn passive income with NFTs?
The question might seem rather strange. Most users sincerely believe that the sole purpose for NFTs to exist would be selling them at a higher price than you paid or created them for.
But in fact it is possible to earn passive income from NFTs. And it is easier than you might think. Let’s discuss some of the ways to do that.
Rent out NFTs
You can simply rent your NFTs, particularly those in high demand. And that would be the simplest way to earn passive income with NFT.
Crypto gaming has become the first industry to adapt this.
In some card trading games players are allowed to borrow NFT cards to boost their chances of winning. The terms of the deal between the two parties are governed by smart contracts.
You can set the preferred duration of the rental agreement and the lease rate for the NFT.
But there is a generally bigger market for renting NFTs. There is a service called reNFT. It allow lenders to set maximum borrowing periods and set daily rates. You have to user WETH (wrapped Ethereum) token to be able to use the platform. It is not a problem as WETH can be easily swapped for ETH or other cryptocurrency.
NFT royalties
There is another way to earn passive income from NFTs.
The underlying blockchain technology of NFT allows creators to set terms that impose royalty fees for the secondary market.
Simply put, whenever your NFT changes hands on the secondary market you get a fee. Thus the creators can receive passive income even after selling their creations.
You will get paid every time the NFT is sold again. That is a great opportunity for those who create NFTs that are in high demand for a long period of time.
Not only is this a perfect option to earn passive income, but it can also be a real way to get income in the years to come.
You can create your NFT, sell it for, say, $10,000 and years later its price might jump to $100,000. That would be rather disappointing for you, right?
Not in the case with the royalties. If you initially impose a royalty fee of 10% for the sales on the secondary market, you will get additional $10,000 when the next owner decides to sell you NFT.
Awesome, isn’t it?
But what is even more breathtaking is that you wouldn’t even have to track your NFTs to check if you missed the pay. Everything will be taken care of by the smart contract.
Stake NFTs to earn passive income
Decentralized finance (DeFi) is beyond any doubt, a technical marvel. And of course, DeFi offers a lot of options for staking. One of them is the possibility of staking NFTs.
Staking is basically the process of depositing digital assets into a DeFi protocol smart contract to generate a yield. You can stake NFTs just as easily as any other crypto asset.
Some platforms support a wide range of NFTs. Others require you to purchase native NFTs in order to earn staking token rewards. In any case the reward is usually paid in a platform’s native token.
If you are interested, take a look at Kira Network, NFTX or Splinterlands.
Provide liquidity to earn NFTs and passive income from them
There is one more opportunity to earn passive income from NFTs with DeFi infrastructures.
You might have heard of liquidity pools, which are basically a way to provide liquidity for cryptocurrencies.
Some platforms that use liquidity pools allow their users to get NFTs in return. In some cases those NFTs actually serve to establish your position in a given liquidity pool. You can always sell this NFT to liquidate your position on liquidity pools.
Try NFT-powered yield farming
Yield farming refers to the method of leveraging multiple DeFi protocols in order to generate the highest possible yield with your digital assets.
And as it turns out it is possible to farm for yields using NFT-powered products now. And that’s a way to earn passive income with NFTs.
For instance, you can stake the NFT tokens issued by liquidity pools providers to earn additional yields. It is a kind of double staking. You are earning a yield on top of another yield-generating protocol. This is a relatively new yet quite promising way of earning passive income with NFTs.
Sources: Coindesk
