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You probably don't know yet, but the non-fungible tokens (the NFT) are a way to generate passive income.
NFT stacking
The convergence of NFT technology and decentralized finance (DeFi) protocols has led to the possibility of stacking NFTs.
Stacking is commonly used in proof-of-stake (PoS) protocols, where users commit their tokens to secure a network and validate transactions. However, other forms of staking also exist, such as locking crypto assets in a DeFi protocol smart contract to generate a return in return.
As with cryptocurrencies, NFT staking allows you to generate passive income in the form of rewards while retaining ownership of the tokens.
Staking NFTs can be a good strategy if you intend to hold them for the long term, as staked NFTs cannot be traded. NFT staking platforms often consider the rarity of the NFT and calculate the APY (annual percentage return) accordingly. The higher the rarity, the higher the APY and the higher the stake rewards.
The rental of its NFTs
Several GameFi platforms allow you to make passive income from your NFTs by renting your digital collectibles to other players. In particular, you can rent your own NFTs to enhance your overall gaming experience.
You can rent items like skins unique character skins, weapons and tools that can unlock new features in the game. For example, some card games allow you to rent NFT cards to increase your chances of winning. Smart contracts are used to regulate the terms of the contract, such as the length of the rental agreement and the rental rate.
reNFT for example, it is a leasing protocol that allows you to rent and lend NFT assets. NFTs can be rented by specifying the rental period, paying the required collateral and receiving loaned NFTs.
Earning royalties with NFTs
The NFT industry is estimated to have billions of dollars in revenue by 2021. The creators seek to make a portion of these profits by pushing their digital artwork to market. One way to do this is to generate passive income through NFT royalties.
As a creator, you can set conditions that impose royalties whenever your NFT is traded on the secondary market. This way, you can earn a share of the NFT's selling price over time.
For example, you can set the royalty for your NFT at 5%, which means you will receive 5% of the actual sale price every time your digital artwork is sold to a buyer.
The fascinating aspect of NFT royalties is that the entire process of applying royalty terms, tracking payments, and disbursing funds is automated by smart contracts. NFT markets such as Extremely rare allow creators to collect copyright on works of art.
Providing liquidity with NFTs
Integrating NFTs into the DeFi ecosystem allows you to provide liquidity to DeFi pools and earn NFTs in return.
For example, when providing liquidity to the decentralized exchange Uniswap V3 You will receive LP-NFT tokens, an ERC-721 token representing the amount you have blocked in the pool. You can sell this NFT on the secondary market to liquidate your position in the liquidity pool.
Aside from earning royalties from your NFTs, all other passive income strategies involving NFTs carry a relatively high level of risk, because NFTs are usually deposited in smart contracts in DeFi markets. As with all DeFi and all investment activities, there are risks that investors need to be aware of before investing capital or NFTs.
