4 ways to earn passive income from your NFTs

Source: iStock/rzelich

You probably don’t know it yet, but non-fungible tokens (the NFT) are a way to generate passive income.

NFT Stacking

The NFTX website

The convergence of NFT technology and decentralized financial protocols (DeFi) has led to the possibility of stacking NFTs.

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 other forms of staking as well, such as locking crypto assets in a DeFi protocol smart contract to generate a return in return.

Similar to cryptocurrency staking, NFT staking allows you to generate passive income in the form of rewards while retaining ownership of your tokens.

Stakeout NFTs can be a good strategy if you intend to hold them for the long term, as you cannot trade your staked NFTs. NFT staking platforms often look at the scarcity of the NFT and calculate the APY (annual percentage return) accordingly. The higher the rarity, the higher the APY and the higher the rewards for staking.

Currently, several platforms support NFT staking, including: Kira NetworkNFTXAxie Infinityetc.

The rental of his NFTs

The reNFT website

Several GameFi platforms allow you to earn passive income from your NFTs by renting out your digital collectibles to other players. In particular, you can rent your NFTs to enhance your overall gaming experience.

You can rent items such as: skins character sets, weapons and unique tools that can unlock new in-game features. For example, some card games allow you to rent NFT cards to increase your chances of winning. Smart contracts are used to control the terms of the agreement, such as the duration of the lease and the rental rate.

reNFTfor example, is a rental protocol that allows NFT assets to be rented and lent. You can lease NFTs by specifying the lease term, paying the collateral posted and receiving your borrowed NFTs.

Earn Royalties with NFTs

The rare website

The NFT industry is estimated to have generated billions of dollars in revenue by 2021. Makers want to get a share of that profit by marketing their digital artworks. One way to do this is to generate passive income through NFT royalties.

As a creator, you can set terms that impose royalties every time your NFT trades on the secondary market. This way you can earn a share of the selling price of the NFT over time.

For example, you can set the royalty for your NFT at 5%, which means that you will receive 5% of the actual sale price every time your digital artwork is sold to a buyer.

The fascinating thing about NFT royalties is that the whole process of enforcing royalties, tracking payments and payouts is automated by smart contracts. NFT marketplaces such as: special allow creators to collect royalties from artworks.

Providing liquidity with NFTs

The Uniswap website

By integrating NFTs into the DeFi ecosystem, you can provide liquidity in DeFi pools and earn NFTs in return.

For example, when you provide liquidity to the decentralized exchange Uni Swap V3, you will receive LP-NFT tokens, an ERC-721 token that represents the amount you have locked into the pool. You can sell this NFT on the secondary market to liquidate your position in the liquidity pool.

Other than earning royalties from your own NFTs, all other current passive income strategies that involve NFTs involve a relatively high level of risk as you typically deposit your NFTs in smart contracts in DeFi markets. As with all DeFi and investing activities, there are risks that investors should be aware of before committing capital or NFT.

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