The easiest ways to earn passive income from NFTs
Celebrities and crypto enthusiasts have popularized non-fungible tokens, but some remain skeptical of their value. They question how to earn passive income from these unique digital assets, despite their clear transfer of wealth and scarcity.
If you are among those who want to understand the potential of NFTs, you are in luck. This article explores the top five ways to earn passive income from NFTs or NFTs earning passive income and provides valuable insight into the lucrative world of NFT related products.
What are NFTs?
Before we get into other details, let’s explore the concept of NFTs. Non-fungible tokens represent the ownership or authenticity of unique digital assets such as artwork, music, videos or other forms of media. Unlike fungible tokens such as cryptocurrencies, NFTs cannot be replaced by others, as each NFT is unique.
As a newcomer to the NFT world, you may be curious about how the uniqueness of digital media works. Think of it like The Starry Night by Vincent van Gogh – while you can easily download an image or reproduce the masterpiece, it does not represent actual ownership or authenticity. Similarly, NFTs are used by creators, artists and individuals to monetize and secure their digital creations.
To mint an NFT, one must upload digital content to a blockchain platform that generates a unique, non-fungible token. This process makes it possible to buy, sell and trade once the NFT is created.
What are passive income NFTs?
Passive income NFTs are digital assets that cannot be changed and remain on the blockchain forever, and as time goes by, become more and more valuable, providing a passive income for the holder or holders of these assets to use them in different financial setups to earn money without much effort.
Passive income from NFTs is like earning interest on money saved in a bank account. It is a way for NFT holders to make money without actively selling their assets.
Many types of assets, such as ownership documents, patents and royalty rights, can be tokenized and turned into NFTs that generate passive income.
The easiest ways to earn passive income from NFTs
When it comes to passive income NFTs, there are some great options to get involved with because there are many NFTs generating passive income ideas out there. Obviously, some options are easier than others to increase your income.
In a nutshell, the easiest ways to earn passive income from NFTs are:
- NFT Staking;
- NFT Rental;
- NFT Lending;
- NFT Farming;
- NFT index funds;
- NFT royalties.
Let’s explore each of these NFTs that provide passive income to get a better understanding of them:
NFT Strike
Staking NFTs is a way to earn passive income from digital assets, similar to staking cryptocurrencies. Essentially, you lock your NFT with a blockchain network or liquidity pool for a certain amount of time, which helps the network process transactions and improve security. In exchange, you will receive stake rewards in the form of crypto tokens.
Many platforms offer NFT betting and you can bet a wide range of NFTs or buy their native NFTs to start betting. NFT gaming platforms are usually metaverse or P2E gaming platforms, but some DeFi protocols also offer this feature.
The rewards you receive for staking are typically denominated in the platform’s native cryptocurrency or governance tokens. You can hold onto these tokens, exchange them for other assets, or reinvest them in a liquidity pool to earn even more rewards.
NFT Rental
Although less known among users, renting NFTs is an excellent way to attract passive income. Like renting out a physical property, you can let other users use your digital assets for a specified period of time in exchange for a rental fee. Renting out NFTs has become a popular way for NFT owners to generate income without selling tokens.
Platforms like Nifty Gateway, SuperRare and RENFT allow NFT owners to rent out their assets. To rent out your NFT, you simply set a rental price, specify the rental period and state the terms and conditions of the rental agreement. When the rental period is over, you can either rent out the NFT again or keep it for yourself.
The gaming industry is one where NFT rental has become quite in demand. Many games have replaced in-game items with NFTs, which can have a real-world value.
When you rent out your NFTs, a smart contract will automatically find a renter and keep a secure, auditable, temper-proof record of ownership. You will receive a flat deal or a cut of the tenant’s in-game rewards as your passive income. However, it is important to assess the demand and rental value of your NFTs before renting them out.
NFT Lending
Some platforms offer NFT loans, an excellent option to earn passive income from NFTs.
NFT lending involves using your NFTs as collateral to secure a loan in either cryptocurrency or fiat money.
One of the main benefits of NFT lending is that it allows you to monetize your NFTs without selling them directly. By locking your NFTs as collateral for a loan, you can still hold onto your valuable digital assets while using them to generate income.
You can borrow funds against NFT and receive a loan for value. You can then use these funds to enter a liquidity or stake pool and earn more crypto, which can cover your interest payments while earning passive income from your NFTs.
NFT lending platforms typically have an APR rate and loan term as the loan terms. When the loan term is due, the borrower must repay the principal plus interest and get back locked NFTs. In the event of delayed payment, the lender can take over the locked NFTs.
NFT Farming
This strategy involves staking your NFTs in a decentralized finance (DeFi) platform, providing liquidity to a pool of NFTs and earning a portion of the platform’s revenue in return. Although it requires more active participation than effort, it can result in higher returns.
To get started with NFT farming, you deposit your NFTs into liquidity pools in a DeFi platform and in return you receive rewards in the form of new NFTs or the original token used for staking. Think of it as yield farming, but instead of staking tokens, you’re staking NFTs.
NFT farming can be profitable, as the rewards you get can be sold at a profit or reinvested in other NFT or DeFi platforms. It can also increase the value of NFTs by providing liquidity to the market and supporting dApps, contributing to their growth.
Keep in mind that NFT farming is still in its early stages of development and is primarily used in blockchain games like Axie Infinity, where players can earn tokens or stake in-game items to receive tokens and vice versa. However, farmers face the risk of vulnerabilities in the dApp’s smart contract code, which could lead to the loss of funds.
NFT index fund
NFT index funds are another excellent option to earn passive income from NFTs. These funds allow investors to passively invest in a diversified portfolio of NFTs without actively managing individual NFTs.
Like traditional index funds, NFT Index Funds aim to track the performance of a specific index or market segment of NFTs, such as a collection of rare and valuable works of art or a type of collectible. By investing in an NFT index fund, you can gain exposure to the NFT market and potentially get a return on your investment.
To invest in an NFT index fund, you usually need to buy shares through a broker or investment platform that specializes in NFTs. The shares represent fractional ownership of the underlying NFTs held in the fund, and the value of the shares will fluctuate based on the performance of the NFTs.
NFT royalties
If you’re an artist, singer-songwriter, or other NFT creator, setting up royalty payments can ensure that you continue to receive a passive income from your NFT even after it’s sold. This can be done by including a royalty function in the smart contract when creating the NFT. Every time NFTs are sold on a secondary market, you will receive a percentage of the sale proceeds, usually around 5 to 10 percent. This means you can earn passive income by collecting royalties every time your NFT is resold without being actively involved.
The process of earning NFT royalties is relatively hassle-free, as they are paid automatically. Many NFT marketplaces offer this feature, making it easy for creators to earn passive income. To earn NFT royalties, you must stamp your work and specify the royalty fees you wish to receive for each secondary sale.
FAQ
Can you earn passive income from NFTs?
Yes, it is possible to earn passive income from NFTs. Some ways to earn passive income from NFTs include NFT betting, NFT rentals, NFT lending, NFT farming, NFT index funds, and NFT royalties.
How does NFT Staking work?
As mentioned above, by staking your NFT on a blockchain network or liquidity pool for a predetermined period of time, you can support the network’s transaction processing and improve security. As a reward for this service, you will receive crypto-tokens.
Endnotes
Passive Income NFTs can provide a lucrative source of income for those willing to explore the world of unique digital assets. While some remain skeptical of the value of NFTs, they offer a clear transfer of wealth and scarcity, making them ideal for monetizing and securing digital creations.
NFT Betting, NFT Rentals, NFT Loans, NFT Farming, NFT Index Funds and NFT Royalties are some of the easiest ways to earn passive income from NFTs. Each method has unique advantages and disadvantages, and it is crucial to research and understand them before deciding which one to use.
* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making any financial decisions. Please acknowledge that we are not responsible for any loss caused by information on this website.
