According to research, a vast majority of NFTs are minted, bold and sold using Ethereum where gas fees are typically high. Statistics show that minting a single NFT on Ethereum can cost around US$98.69 in gas fees. To make up for high gas fees, many creators and investors alike try to offload their NFTs on secondary marketplaces. Fortunately, there are other ways to earn some streams of passive income from non-fungible tokens or what most people referred to as NFTs. We are not just talking about selling NFTs. In fact, NFT trading is not the only way to earn returns.
Read on to find the list of passive-income generating opportunities you can get from NFTs.
How to Earn Passive Income From NFTs
There are many ways to make passive income with NFTs. While some require a large sum of money such as minting your own artwork, memes or music and buying your own virtual land in the Sandbox metaverse, others ask for time commitment like play-to-earn NFT games. The good news is there are also other simpler ways to earn passive income from NFTs.
One way to earn passive income easily is to stake your NFTs. Staking NFT means “depositing” or “locking away” digital assets into a decentralised finance (DeFi) protocol smart contract to generate a yield in return. The yield generated in staking is typically distributed in a form of tokens. You can then use these tokens to earn in various ways such as selling, swapping or trading.
Staking NFTs is one of the most popular ways to earn passive income as it allows you to retain full ownership of your NFT while giving you an opportunity to earn at the same time. Staking is a great option for users who are planning to hold their NFTs for a longer period of time as staked NFTs cannot be traded. However, one major downfall of staking is that there’s a chance that you would miss an opportunity to sell your NFTs during a surge in the market.
Renting Out NFTs
Another way to earn passive income through NFT is by renting them out, especially those that are in high demand. Several GameFi platforms allow users to rent out NFT cards to improve their overall gaming experience and boost their chances of winning. Users can borrow different NFT items such as character skins, weapons and tools that they can use to unlock in-game features. To keep the deal secured, all the NFTs are governed by smart contracts. This provides users the freedom to set the duration of the rental agreement and the lease rate.
Earn via NFT Royalties
Setting up a royalty on your NFTs is another way to earn consistently on metaverse. With NFT royalty, you can earn a share of the sales every time your digital asset is resold to another owner. You can set royalty for your NFT at 10%, which entitles you to 10% of the actual sales each time your NFT is traded in a secondary market.
The great thing about NFT royalties is that the entire process from setting royalty terms, tracking payment and distributing royalties is fully-automated through smart contracts. Once you have set your royalty agreements, you can now sit back, relax and enjoy as you watch your income grow.
Another way to earn passive income is to adopt NFT-powered yield farming. This involves the process of staking an NFT to receive rewards in tokens or stake tokens to receive an NFT as a reward.
A great example of a blockchain game that has NFT farming capabilities is Axie Infinity. In this game, players earn SLP tokens that they can use to mint NFTs in the form of new Axies.
Providing Liquidity Pool
Given the integration of NFTs and DeFi infrastructures, users can now provide liquidity and earn NFTs in return.
For instance, when you provide liquidity to Uniswap V3, a cryptocurrency exchange that uses a decentralized network protocol, you will serve as a Uniswap V3 liquidity provider (LP) and will be given LP-NFT tokens. You can sell this NFT on the secondary market to liquidate your position in the liquidity pool.
Like any other income-generating opportunities involving NFTs, the methods listed above also come with relatively high risk. To avoid these risks, understanding NFT, how to secure them and the common NFT scams is necessary.
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