The world of DeFi is continually evolving, and with that, newer blockchain-based technologies are introduced to give users a chance at earning passive income. NFT staking is one such opportunity.
NFTs have been all the rage over the last year, and we’ve seen plenty of new NFT projects come to cryptocurrency. Some NFT projects are exciting and deserve a closer look. One way that NFTs have recently gained traction is through staking.
In this article, we cover what NFT staking is and some of its benefits, and how you can start staking your NFTs.
What is NFT?
NFTs are non-fungible tokens that can represent digital or physical assets. They’re unique, and each NFT is stored on a blockchain, making them tamper-proof. NFTs have been gaining traction in the last year as more people become interested in collecting and trading them.
What Is NFT Staking?
NFT staking means locking your NFT in a DeFi platform to earn rewards in vital resources or cryptocurrencies. In return for staking their NFTs, users are typically rewarded with either more NFTs of the same type or a different type or some cryptocurrency token.
Staking adds to the liquidity of the NFT ecosystem, and it is a way to earn passive income from your NFT investments. By locking up your NFTs as collateral, you can delegate them to validators who will do the work for you and earn rewards in return. While there are risks involved, such as the platform going bankrupt or the value of your NFT decreasing, there are also many benefits, such as earning passive income, promoting adoption, and increasing liquidity.
The concept of staking is not new and has been around for quite some time now. However, it was only recently that the idea was applied to NFTs. And since then, we’ve seen a number of platforms emerge that allow users to stake their NFTs.
How Does NFT Staking Work?
NFT staking can be compared to Proof-of-Stake, a consensus mechanism used by some cryptocurrencies in which token holders who stake their coins gain the ability to validate transactions and earn more cryptocurrency for doing so.
In most cases, you will be able to deposit your NFT into a smart contract and start earning rewards right away.
You could start with free tokens from the top NFT platforms then use these tokens as collateral to take out a digital loan on an NFT lending platform. You could sell your new assets for cash or use them to take out more loans and buy more NFTs. If you wish to keep using these assets as collateral, they must be kept in a secure wallet.
It’s worth mentioning that not all NFTs can be staked. Only those issued by protocols that support NFT Staking can be staked. In addition to Flow and Boosted Finance, these include Binance Smart Chain-based projects such as PancakeSwap, which recently launched an NFT staking platform called BakerySwap.
Some NFT staking platforms have rules and requirements, such as:
- You can only stake if you NFTs to add to a staking pool.
- You have to have up to a specific value of NFTs in before you can start staking
- You must stake it for a particular time before redeeming your rewards.
Benefit Of NFT Staking
The primary benefit of NFT staking is that it can earn you passive income.
That is possible for two reasons: transaction fees and other rewards. When you stake your NFTs, you are locking them down so you can validate NFT transactions. Although you don’t have to do the work (that is what validators are for), you can delegate your NFTs to a validator to do the work through NFT staking platforms.
For doing so, you earn a fraction of the transaction fees on NFT transactions that are approved based on your pool stake. Those fees are usually in the native tokens of the NFT platform or some NFTs. Tokens are utilities used to pay for a product or service, such as transaction fees on the platform. You can also swap them for other cryptocurrencies.
Since NFTs are still a relatively new asset class, there is potential for high returns. It offers a better return on investment (ROI) than letting them sit doing nothing.
Furthermore, NFT staking can also help to promote the use and adoption of NFTs. By providing users with an incentive to stake their NFTs, more people will likely use and trade them. And as more people use and trade NFTs, the more mainstream they will become.
There’s also the benefit of increased liquidity. When more people stake their NFTs, it adds to the overall liquidity of the ecosystem, making it easier for others to buy and sell NFTs.
Lastly, by staking your NFTs, you are effectively showing your support for the project and helping to grow the community around it, leading to greater engagement and possible growth in value for your NFT.
Risks of Staking NFTs
Staking your NFT is just like staking your Bitcoin, CELO, or other cryptos, as explained in our guide to staking. It also carries similar risks.
Of course, as with any investment, there are risks involved in staking your NFTs.
The most obvious risk is that you could lose your NFTs if the platform goes bankrupt or becomes insolvent. While this is a possibility with any platform, it’s important to remember that NFT staking platforms are still in their infancy and have yet to be tested by time.
Another risk is that the value of the NFT you’re staking could go down. This would result in you losing money on your investment. However, this risk can be mitigated by doing your research and investing in well-established projects with a strong community backing them.
Lastly, there’s always the general market risk that the price of NFTs could go down, regardless of the project or platform you’re invested in. However, this is more of a risk in the short term and is not indicative of the long-term potential of NFTs.
How To Start Staking Your NFTs?
Now that we know what NFT staking is and some of its benefits, let’s look at how you can start staking your NFTs.
The first step is to find an NFT staking platform that supports the type of NFT you want to stake. As mentioned earlier, not all NFTs can be staked.
Once you have found a platform that supports the type of NFT you want to stake, the next step is to create an account and deposit your NFTs into the platform.
If it is a centralized platform, it will likely offer some sort of KYC (know your customer) to comply with anti-money laundering regulations. However, most DeFi staking platforms don’t.
After your account has been created and verified, you will be able to deposit your NFTs into the platform and start staking them.
The final step is to sit back and wait for your rewards to come in. Depending on the platform, you may be able to withdraw your rewards at any time, or you may have to wait for a particular time before you can redeem them.
Top NFT Staking Platforms
There are a few different NFT staking platforms that you can choose from. Here are some of the most popular ones:
NFTX is a DeFi staking platform that allows you to stake your NFTs to earn rewards. Stakers earn 100% of the protocol fees and also get an ERC20 xToken.
On its platform, you can browse various NFT staking pools and choose the one that best suits your needs.
To stake, you must obtain a vault token based on the value of your NFT, then add liquidity to a pool, and then stake the tokens. NFTx also offers a marketplace where you can buy, sell, or swap your NFTs.
Zookeeper is a gamified platform for investing in NFTs. It provides NFT staking and farming opportunities. To increase your APYs, you may keep your tokens for a specific length of time, up to 180 days. To improve your earnings and minimize the time it takes to unlock, you can stake ZooBoosters, which are NFT cards that may be obtained in gold chests purchased using ZOO coins or staked ZOO tokens.
Mobox is a gaming metaverse for DeFi yield farming with NFTs. It has play-to-earn features that allow users to stake NFTs to earn rewards in MBOX, its native cryptocurrency. NFTs on Mobox are called MOMOs; you can mint, earn or purchase them in its marketplace.
NFT staking is a great way to earn passive income from your NFTs. Not only that, but it can also help promote the use and adoption of NFTs while providing liquidity to the ecosystem. So if you’re looking for a way to maximize the value of your NFTs, NFT staking could be the perfect solution.
Have you started NFT staking yet? If so, what platforms are you using? Let us know in the comments below.