Non-fungible tokens (NFTs) become one of the most popular trends in the crypto space in recent years. The realm of digital art and collectibles has been revolutionized by the inception of non-fungible tokens (NFTs). In many ways, you can make money with crypto assets. Using NFTs, users can make passive income. Investors often trade their NFTs to make returns. Trading is the process of purchasing an asset at low prices and waiting for it to appreciate to make profits. But trading NFTs sometimes won’t give you profits. Your funds might be idle instead of generating rewards elsewhere. However, It allows you to earn money by depositing your NFTs on decentralized finance (DeFi) without selling your assets. NFT staking allows users to overcome the illiquidity of NFTs.
In this article, we will discuss NFT staking, including its workings, the ways to make money with NFTs, and the pros and cons of NFT staking.
What is NFT Staking?
In cryptocurrency space, staking typically refers to the process of locking up crypto assets with a particular blockchain or protocol to earn rewards. Ethereum is a Proof-of-Stake (PoS) blockchain, which leverages staking to validate transactions and help ensure the security of the blockchain.
Similarly, Staking of NFT is the process of locking up your NFT assets on a decentralized finance (DeFi) protocol in exchange for staking rewards and numerous other benefits. Staking allows individuals to generate yield from their NFTs while maintaining their ownership. When you stake your NFTs, you are actually committing them as collateral to earn rewards. The rewards will be in the form of a native token associated with the staking platform.
How Does it Work?
If you want to participate in the staking of NFT, the first thing you need to do is to own an NFT that is eligible for staking. Not all NFTs are eligible for staking, so you may have to check whether the NFT you own is eligible for staking or not. If your NFTs are eligible for staking, you can stake them by holding them in a platform that allows staking.
Staking your NFTs means you are locking them up for a certain period of time. Therefore, you will not be able to sell or transfer those NFTs during that time. The length of the lock-up period may change depending on the project.
By staking your NFTs, you can not only earn rewards, instead, there are many other benefits. Staking of NFT allows you to earn rewards without doing much work. By staking your NFTs, you are showing interest in the project and the community and are willing to help the project grow.
Liquidity is the main problem that comes with NFTs. Since NFTs are non-fungible, it is hard to sell them. However, the value of an NFT is largely subjective, meaning that its value is whatever a person is willing to pay for it. Staking of NFT allows holders to earn money from their NFTs without having to directly find a buyer. In this way, staking eliminates the liquidity problem associated with NFTs.
How NFT Staking Can Help You Earn Money in the Crypto Space
It allows you to maintain ownership of your digital collectibles while generating passive income. Staking of NFT also contributes to the usability and security of blockchain, similar to cryptocurrency staking.
It has some similarities with depositing money in a bank savings account. You will get interest on the money that is held for a given period of time. In the case of NFT staking, the primary concept is the same. But when you stake your NFTs, you are actually locking them up in a smart contract and committing them as collateral. It allows you to earn rewards for the period of time you are staking.
This process typically involves a few steps. Follow the below steps to make money with NFT staking:
- The first step of Staking of NFT is to identify an NFT stalking platform that supports your NFTs.
- After finding the right Staking of NFT platform, the next step is to connect your Web3 wallets, like MetaMask or Trust Wallet to the protocol. Connecting your wallet will allow you to transfer your NFTs from your wallet to the NFT staking platform.
- Once you successfully connect your wallet, the next step is to select the NFTs that you want to stake. Always note that the requirements for staking your NFTs might vary from one platform to another. So it is important to check the rules of the platform before staking your NFTs.
- After choosing your NFTs, you have to transfer them to the platform and specify the time period you want to stake them.
- Once you have staked your NFTs, you will be getting rewards. The number of rewards you make will be calculated based on the value of your NFTs and the length of time that you choose to stake them. Your rewards can be withdrawn anytime you want but you must wait until the end of your staking period to withdraw your NFTs.
Advantages and Disadvantages of NFT Staking
Similar to cryptocurrency staking, It has its own advantages and disadvantages.
Advantages of NFT Staking
- Engage in Projects and Communities: Most projects provide certain rewards for individuals who commit their non-fungible tokens (NFTs) with utility tokens. The rewards may vary depending on the project. These tokens offer advantages like voting and governance rights to users, enabling them to make an impact on the future direction of the project.
- Leverage Idle Digital Assets: Staking allows you to make the most of your unused digital assets. Suppose you own an irreplaceable NFT for a while and do not want to sell it, you can consider staking it. By locking up the NFT on a staking platform, you will be able to earn rewards while maintaining ownership and without giving it up.
Disadvantages of NFT Staking
- Price Volatility: The value of your NFTs can vary significantly while it is locked in for staking because the market conditions and trends fluctuate rapidly in the digital art world. Once you set the duration of your NFT staking, you won’t be able to withdraw until the period ends. However, if your goal is long-term, short-term market changes will not affect your staked NFTs.
- Potential for Fraud: The crypto industry is a high-risk area. You may receive rewards for staking your NFTs but always be aware of the associated risks. The NFT space is still in its early stages and it is extremely difficult to differentiate between genuine and fraudulent platforms. There might be unethical staking platforms and they may try to steal your funds and tokens. So it is important to conduct thorough research before committing your NFTs. research about the staking platform and the team behind it.
Conclusion
It presents a unique and fascinating way to make money from the cryptocurrency world. If you want to make money by staking NFTs, it is crucial to understand NFT staking and its workings. Staking has unlocked new applications for NFTs that weren’t available previously, offering them utility beyond uniqueness. While this staking allows you to make money, there are some risks involved with NFT staking. Always be aware of the potential risks related to NFT staking and conduct thorough research before committing your NFTs. it is important to make your digital assets and money safe.