The purpose of investment is the creation of wealth. One of the perfect means to achieve this is through earning passive income. In simpler terms, passive income can be referred to as the process of making your money useful for you through investing in assets such as NFTs.
Although NFT trade is not the only way to earn returns, the fact remains that assets that are blockchain-based, such as NFTs, can serve as passive income for you in more than one way, coupled with specific principles borrowed from traditional assets such as real estate and bank deposits.
In this article, therefore, is the description of the ways you can earn income passively from NFTs.
5 Ways to Earn Passive Income With NFTs
By Staking NFTs
One of the advantages of the union between NFTs and decentralized finance (DeFi) protocols is the likelihood to stake NFTs. Staking can be defined as the process of locking away or depositing digital assets to a DeFi protocol smart contract to develop a yield.
Although certain platforms are in support of a wide range of NFTs, some others will need you to buy native NFTs so as to earn staking token rewards, which are usually denominated in the native utility token of the platform.
Those platforms that are in agreement with NFT staking include NFTC, Kira Network, Only1, Splinterlands, etc. Sometimes, a part of the rewards shared to stakers is usually in the denomination of governance tokens. Protocols as such then strengthen those token holders with the right to vote over the future growth of their ecosystems.
Typically, it is possible to reinvest coins gained through staking into some other yield creation protocols.
Furthermore, the amount of staking rewards you get may differ from one platform to the other. The rewards for your staking are based on specific factors such as how rare your NFTs are. The more your NFTs are rare, the higher your staking rewards will be.
By Renting Out NFTs
Renting out NFTs is one of the most recent passive income streams for NFT holders. Play-to-earn style games enable the monetizing of skills, thereby creating a market for gamers looking for a way to optimize their performance by gaming assets.
Meanwhile, the explosion of the name Metaverse has generated a whole universe of digital citizens searching for how to curate a digital living for themselves, considering all the trappings of reality. This has naturally led to a marketplace of cars, houses, fashion, and furniture, all of which have become NFTs.
However, not every gamer and Metaverse resident can afford the cost of owning their NFTs. Here is where renting out NFTs can help you maximize whatever you have in your wallet.
Platforms for NFT rental enable you to set the lending rate as well as the duration for renting your NFTs, with specific upper limits being on both of the parameters. The interaction is then regulated and managed through smart contracts, which automatically end the lease at the set time and then return the NFTs to your wallet.
After that, you will get passive income for renting out your NFT. Meanwhile, the gamer will have more chances of playing and winning the game. Note that renting your NFTs is a win-win circumstance for you and the gamer.
Through Royalties From NFTs
This method makes it possible for you to earn passive income via your NFT creations, even after other people have owned them.
The underlying technology powering NFTs enables creators to set terms that enforce royalty fees anytime their NFTs change hands on the secondary market. Likewise, the creators can obtain passive income even after they have sold their creations to collectors.
With that, it is possible for them to earn a part of the sales price of the NFTs indefinitely.
Bear in mind that creators usually set those predetermined percentages while minting the NFTs. In fact, smart contracts, that is, self-executing computer operations, govern the whole procedure involved in sharing royalties. This means that as a creator, there is no need for you to enforce your royalty terms. You do not also need to manually track payment, as the procedure is entirely automated.
A liquidity pool is the collection of digital assets locked up in a smart contract that various investors pledge. This locked-up pool of assets can be utilized by the platform for handling loans.
NFT liquidity Pools give room for you to unlock the worth of your NFT without necessarily selling it. The advantage of this is that you can, thereafter, make use of that value on other platforms to create passive income while still maintaining a similar collection.
You can deposit your NFT into a platform’s vault (there is a vault specific to a particular NFT collection). You will then earn the native vToken of the platform (ERC20), which is valued at the NFT’s collection’s floor price.
After that, you can deposit those vTokens into DEX liquidity pools like Uniswap and Balancer, then gain rewards. Nevertheless, after you have made a profit, you return your vToken, pay a small amount to the Vault, and claim an NFT from the exact collection again.
Through NFT-Powered Yield Farming
NFT users now have the ability to farm for yields by using NFT-powered products.
Yield farming can be described as the means of leveraging several DeFi protocols so as to create the highest possible yield with the aid of the digital assets you possess.
Earning passive income is a great way to maximize your returns on what you already own. And now that you are aware of the several options, you can put your NFTs to work in ways you may not have imagined.
Do Necessary Research
It is critical that you thoroughly carry out research concerning every platform before you decide to make use of it. You should also wholly comprehend the tactics behind whatever you are doing.
One of the ways you can successfully carry out your research is by considering the Steemit crypto group. Furthermore, always bear in mind to maintain the security of your private keys as you make use of the space.