The popularity of non-fungible tokens (NFT) increased in 2021 after the pandemic forced people to go digital. As a result, NFT sales in 2021 were approximately $17 billion, approximately 21,000% higher than the previous year.
With advancements in the crypto world, new passive income opportunities have emerged and we have four ways you can earn passive income from your NFTs.
What are NFTs?
Non-fungible tokens are unique digital assets based on blockchain technology. These digital assets range from artwork to music, videos, memes and more. One of the main features of NFTs is that they are unique and cannot be replicated.
NFTs differ from fungible tokens because they have a unique value; therefore you cannot exchange them for another. As a result, artists and content creators can now have their works tokenized and retain their full ownership.
The distinctive feature of NFTs has attracted many people, making them look for ways to earn passive income while holding them. So let’s look at how you can earn passive income from NFTs.
1. By renting out NFTs
You can generate passive income by renting out your NFT. Renting can be very profitable if you have an NFT in high demand.
To rent out your NFT, you must list your asset on an NFT marketplace where potential buyers can register their interest. Next, you need to enter your negotiation terms, such as the rental price, rental duration, fee and other necessary terms, as allowed by your smart contract or the platform you are on. Some smart contracts require a borrower to provide security before entering into an agreement. The agreement only comes into force when the conditions have been met.
NFTs with multiple use cases have more long-term profit potential than those that apply to only one purpose. Using NFTs as an example, those that work with a particular game will not be useful when the game is no longer played. Thus, you will stop earning passive income from them since they are not in demand and no one borrows them. For this reason, it is usually better to have an NFT with multiple use cases.
Some platforms where you can rent NFTs include reNFT, UnitBox DAO, IQ Protocol, Vera and Trava NFT.
2. By depositing NFTs
The process of staking NFTs works similarly to staking cryptocurrency, where you bet to earn rewards. However, staking NFT requires locking your non-fungible token to an NFT staking platform to get certain rewards.
The reward for the staked NFT depends on the length of the stake period, the platform’s daily or weekly rate, and the number of NFTs staked. Also, the type of NFT you intend to lock and the platform you are betting on can determine your reward. Rewards are distributed in a platform’s native token, which can be traded for crypto or fiat currency.
To start betting, you need a wallet to receive the reward and connect it to the platform you intend to use.
Platforms offering NFT staking include MOBOX (MBOX), Zookeeper (ZOO), NFTX, BAND NFTs and the Kira network.
3. By earning NFT royalties
If you’re an artist or content creator, you might want to know more about NFT fees. NFT royalties are the fees or percentages given to content creators every time their works are resold on NFT marketplaces. NFT royalties allow you to earn continuously from your assets even when you no longer have access to them.
To earn NFT royalties, you need to get your work noticed. That is, register your digital asset on a blockchain network to make it unique and secure ownership. When you stamp your work, you can specify the percentage you want as interest on each secondary sale. As a result, when your work is resold, the special fees you set will be awarded to you as royalties. The usual percentage creators receive as NFT royalties varies between 5% and 10%. Platforms offering NFT royalties include Opensea, Rarible and SuperRare.
4. By lending NFTs
Some platforms allow NFT holders to submit assets to obtain loans from lenders who receive interest as a reward during the loan period.
The lending process puts you in a position where you give loans to other users. The borrowers must present their NFTs as collateral to gain access to the loans. The value of NFT used as collateral will also be assessed by checking past performance and other factors. A borrower can then secure up to 50% of the value of the NFT as a loan, with an interest rate of between 20% and 80%, depending on the NFT value.
So once an agreement is reached, the borrower’s collateral will be stored in a digital vault for the duration of the contract. If the borrower defaults on the contract, i.e. does not fulfill the stipulated agreement, they risk losing the asset, as the lender can take ownership of the collateral at a significantly discounted price, which adds up to the overall profit from the loan. the lending process.
NFT loans help to increase liquidity in the NFT market. They also offer the holder the opportunity to put their assets to work, rather than simply buying and holding the asset. NFT lending platforms include NFTfi, LendNFT and Drops.
Be aware of the risks
Since you now know the various ways you can passively earn from NFTs, it is still important that you research and understand which method you want to get involved with.
NFTs are highly volatile, meaning their prices can fluctuate rapidly. Thus, there is no guarantee that the NFT you are involved in will maintain its value over time. In addition, lack of clarity about what you want to do can turn a potentially profitable process into a losing one.
Finally, you need to be aware of scammers and other nefarious actors who roam various NFT platforms and try to steal your assets. For this reason, you must be patient when making decisions.
NFTs are still in the early stages and there are different ways to earn from them without spending much time. As it progresses, we can only expect more passive income opportunities from it.
