0
Oxalus Insights

NFT Staking Explained & How Does It Make Money?

Guides Nov 4 2022
 nft staking

Among the blockchain industry’s assets, cryptocurrencies like Bitcoin and Ethereum are perceived as liquid, while NFT is considered illiquid. Previously, NFTs even had the issue of not producing cash flows until they were sold, making them less attractive assets in comparison to cryptocurrencies.

Fortunately, the recent boom of NFTs has given birth to NFT staking, a new use case for NFTs that enables their owners to generate passive income from them. Since then, NFT staking has gained traction among investors and developed into a fascinating sub-trend in the cryptocurrency market.

In this article, let’s find out what NFT staking is, how it works, and what are the top NFT staking platforms!

What Is NFT Staking?

NFT staking is the practice of keeping non-fungible tokens locked up on a platform or protocol in order to earn staking rewards and other benefits. By staking their NFTs, owners can profit from their holdings without giving up ownership.

Staking in general is similar to putting money into a bank’s time deposit account; the money you put in will grow interested over time. With NFT staking, you stake NFTs rather than fiat currency and receive rewards and other privileges without a middleman since NFT staking is part of the decentralized finance (DeFi) world.

Despite the undesirable qualities of NFTs as an asset class, NFT staking gives collectors a new way to make money off of their NFT holdings. NFTs are especially well-suited to wait-and-HOLD strategies due to their unique features, even if it may be some time before such investments bear fruit. It takes a lot of time and resources to mint, buy, and trade NFTs, and there are often significant gas fees involved, especially on Ethereum. Furthermore, there is no telling if the value of an NFT will rise or fall over time. Therefore, NFT staking is a measure of hedging against loss and creating profit for NFT investors.

How NFT Staking Works?

Although NFT staking is still in its infancy compared to DeFi yield farming and crypto staking, it functions similarly to DeFi protocols. It boils down to this, in essence: First, you send your NFTs to a liquidity pool smart contract (a DeFi protocol); then, you receive incentives in the DeFi platform’s native token, other tokens, or other NFTs. The criteria and incentives for participating in a certain staking procedure can vary significantly. Some staking platforms even involve you depositing NFTs in DAO to have a say in the platform governance.

It’s something to keep in mind that not all NFTs are stackable. As the rules and regulations of various staking platforms may vary, it is a good idea to see what kinds of NFTs are supported before choosing an NFT staking platform.

How To Stake Your NFTs

First, if you want to stake NFTs, you’ll need to store them in a cryptocurrency wallet that is compatible with both the NFTs’ blockchain and the staking platform.

The next step is linking the wallet to the staking platform so that you can send your NFTs to the platform’s smart contract. This process is analogous to staking your crypto.

As soon as the NFTs are locked in on the staking platform, you will begin to get incentives. The rewards you earn depend on the platform you’re using and other factors.

>>>Join us on Oxalus Wallet App to receive more NFTs news, helpful hints, and hidden gems.

Is NFT Staking Profitable?

May or may not be. In theory, if your NFTs increase in price after the lock-up period in the staking pool, you will make a profit, and vice versa, if the value of NFTs drops sharply during the lock-up period and your staking profit is not enough to cover the loss, you will lose.

Here are some factors to consider to maximize profits before you stake your NFTs.

Are Your NFTs Stakable?

As mentioned above, not every NFT is stakable. Make sure the NFT you intend to purchase or mint can be staked before making your move.

Lockup Periods

On some platforms, staked NFTs will be subjected to lockup periods where you can not access or unstake your assets. If their value drops during the period, your holdings may be negatively affected.

Periodic Rewards

You may have to wait a while before you can cash in your rewards from some NFT staking platforms, as they do not immediately distribute incentive payments. Many NFT staking platforms have weekly or daily payout schedules for their incentives. Therefore, the returns are not constant and may fluctuate over time.

For example, your chosen staking platform rewards depositors with the platform’s native token. Suppose, after 1 month you can claim the reward and the value of that token compared to the time of staking has decreased by 50%, your profit is also significantly reduced compared to receiving daily rewards.

Annualized Percentage Yield (APY)

The APY measures how much money an NFT will make each year if it is staked. The staking platform determines the appropriate APY for staking an NFT based on its rarity and market value. Your APY will increase in proportion to the rarity of your NFT.

Even though the annual percentage yield (APY) on a particular project is exceptionally high, it may not be sustainable in the long run. Methods for determining APY vary between protocols. The APY may be affected by the NFT’s rarity and cost.

Falling NFT Prices

The biggest danger of NFT staking is the volatility and potential drop in asset value. If your compensation for staking assets is 10%, and the value of those assets drops by 40% over a year, you will lose money. Choosing a trustworthy NFT asset to stake requires knowledge of how to do it safely and profitably.

Cryptocurrency Volatility

Staking rewards are likewise paid in the cryptocurrency that the NFTs are pegged to. NFTs and the incentives gained for them can be significantly impacted by the volatility of the token.

Top NFT Staking Platforms

Because of the growing interest in NFT staking in the cryptocurrency industry, many NFT staking platforms have emerged in recent years. Before placing any staking, you should get comfortable utilizing the most well-known and trustworthy exchanges. Let’s take a look at the best NFT staking sites out there.

NFTX

The mission of NFTX is to bring transparency and stability to the opaque NFT market. Here, when a user stores NFTs in an NFTX vault, an ERC20 token that is both composable and fungible is created at a 1:1 ratio. Nonetheless, you can use this vToken to withdraw certain NFTs from a vault, or bet it for yield rewards. Similarly, vToken holders can form AMMs to pool their tokens and create a more liquid market for trading. Investors trying to determine the value of their NFTs will appreciate the fact that vTokens with high trading volume and liquidity are assigned a “floor price,” or the lowest market price for an NFT.

Band Royalty

The music industry’s NFTs celebrate the dawn of a new age in which creators have unrestricted power over distribution. BAND- The royal family is at the forefront of this uprising. Users can stake their music NFTs in royalty pools in exchange for a cut of the earnings from their songs and albums, however, this is an NFT market. The larger the music library on the platform, the better the royalty income stream for NFT investors.

Lucky Block

The Lucky Block, which was released in 2022, is an NFT staking project that allows users to stake their NFTs for some time in exchange for rewards proportional to the amount they stake.

To get started, a Lucky Block NFT is required. You can buy them on the Lucky Block website or at several cryptocurrency exchanges. You must deposit your NFT into the Lucky Block smart contract for a period ranging from 1 week up to 12 weeks after you receive it.

Quint

If you’re looking for a new NFT project, you should check out Quint. There are a few standout elements in this ecosystem, such as the NFT market and the Quint store. This initiative is unique, though, because of its staking pool. Rewards for participating in the Quint staking pool are not limited to digital tokens; they also include exclusive real-world items like free stays at 5* resorts, supercar experiences, and discounts on hotel bookings, restaurants, and homes.

Additionally, Quint hosts high-end raffles for unique prizes. Investors can get their feet wet with a purchase of bespoke NFTs from the platform’s market. Quint is dedicated to providing high-end NFT services, such as framing and home delivery of freshly minted NFTs to investors.

The Future of NFT Staking

The concept of staking NFTs is in its beginnings. Given the immaturity of the ecosystem and the fact that most NFTs are bought with the goal of HODLing as long-term investments, it is not surprising that liquidity is an issue for NFTs. Still, the buzz surrounding NFTs has drawn the attention of crypto market newcomers who are interested in exploring NFT platforms in the hopes of earning rewards.

We are approaching a tipping point when NFTs can finally get the respect they merit. There is still a lot of room for growth in this area of technology. Investors can benefit from the development of the NFT staking platform, and with further enhancements, the NFT staking platform will become even more powerful. When it comes to the future of the NFT industry as a whole, staking platforms stand out from the crowd because of their ability to draw users and make productive use of the NFT space.


Free Newsletter

Always stay up-to-date with the latest news

Maybe you like

My Cart (0)

Empty cart

Add items, and see how much

gas you can save

Connect Wallet