Non-fungible tokens (NFT) are unique cryptographic assets that represent the ownership of a tangible or intangible asset and are hence stores of value. The rarer the asset, the dearer the NFT. But what's more important is that they are blockchain-based assets that can also be staked, just like other cryptocurrencies to make sizeable gains.
NFT has been the buzzword this year, literally. But NFT has gained popularity not just because it is the first of its kind to provide provable digital asset ownership, but also because it can generate good returns. They have changed how we collect things in such a way that there are now entire platforms built around them.
Some NFTs come with a hefty price tag like the Cryptopunk catalogue. Ever since Quantum, the first-ever NFT, got sold for over a million dollars, people have been scouring the internet for their own non-fungible set of pixels.
NFTs come in many shapes and sizes, sometimes even colours. They appear across a multitude of platforms in different forms, but the most popular incarnation is online game assets.
Getting your hands on one of the high-tier NFTs is exciting, but for a lot of us, that’s where the journey usually ends. People often find themselves either selling their NFTs, trading them for another rare item, or simply marvelling at the masterfully crafted 1KB image. Now, there is a way for NFT owners to put their items to better use, and it’s called staking.
How can you make money on NFTs?
If an asset has qualities that are both unique and desirable, then there is an opportunity for monetization.
Assets that are in a cryptographic digital format may be rented or leased to third parties through specialized marketplaces and thus can create a stable stream of income.
However currently, liquidity is a major challenge for NFTs, partly because the ecosystem is underdeveloped. Also, most NFTs are purchased to hold them for a long period until they sufficiently appreciate in value while others are gained for being burned/destroyed to increase their scarcity. These actions naturally limit NFT liquidity. So how do we get around this issue of liquidity?
NFT Staking: How does it WORK?
When you stake an NFT, the staking platform determines its worth based on the rarity and arrives at an annual percentage yield (APY). The rarer your NFT, the higher the APY you get. The value of an NFT also depends upon its capacity to generate a stable revenue stream, such as royalties.
NFT staking intends to let you earn more with your asset while retaining ownership of it - literally the better outcome of having your apple and eating it, too. This is like the Liquid Earn program, where you can earn rewards but for your cryptocurrency, rather than NFTs.
It’s a new mechanic in its early stages but has a promising foundation and has already produced results. What you do is put an NFT on hold on either its native blockchain or a platform that supports staking to earn a yield. Think of an account that generates yield, but there’s only a single bill of one-of-a-kind money in it.
Another thing about NFTs is there are sealed in a smart contract - the ERC-721. There are mechanisms within the contract that help the token interact with other tokens and the blockchain they’re in. This works with all NFTs, including the ones you earned from online games. That said, when you stake your NFT, it’s the contract that does the work and handles your earnings.
Platforms where you can Stake (your) NFTs
Here are some of the leading blockchains that support NFT staking. You may have heard of them or even played some of their games.
Onessus is a decentralized gaming platform that runs on NFT creation. One of its featured titles, the HodlGod, has the community racing for a piece of the iconic Immortal Gear sets. Onessus has a separate solution called WhenStaking dedicated to NFT staking. You can save NFTs acquired in Onessus games here to earn VOID tokens, a native currency.
This is a crypto trading card game we suspect would gain more attention with new NFT staking options. Each card you collect in the game is an NFT and you can stake what you have in a library so other players can borrow and play with them. It's like a liquidity pool where you earn passive transaction fees.
This game runs on the Hive blockchain which has over 120 other titles you can play with.
NFTs are continuing to disrupt the crypto markets as organisations infuse funds into their development. Although in its nascent stage, NFT staking is catching the fancy of investors who may get lured by high APYs. It is always advisable to read up on the fundamentals of cryptocurrencies and blockchains before investing in NFTs or staking them.
NFT staking puts a pleasant touch on what it means to own an undefeated set of pixels. One thing it needs to do, however, is establish an audience and cater to that. Right now, it’s hard to say who will truly benefit from locking away their precious and one-of-a-kind tokens.
Smaller NFT owners don’t quite find more reason to stake their assets, either, since the returns might be so low that selling them would be more profitable. Without enough incentives, the whole idea will probably remain just an idea.
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