The NFT market has grown massively over the last two years, and we saw a lot of transformations that led to this change. A lot of prominent artists used NFTs as a medium to sell their art, and we saw a massive increase in the popularity of NFT games which led to this sudden rise.
While the media might tell you all about selling NFTs for quick money, very few people might be aware of investing in assets like NFTs for generating passive income. In this article, we will talk about the top 6 ways to generate passive income from NFTs so you can make money while you are chilling. Without waiting further, let’s get started.
NFTs and Passive Income Explained
NFT stands for Non-Fungible Token, which is hosted on the blockchain and allows you to claim ownership of digital assets like art, music, videos, and even clothing and real estate in the metaverse. On the other hand, Passive Income stands for the income which is earned automatically with minimal labor involved. The methods from which you can generate passive income with NFTs are listed below.
1. Staking NFTs
Stacking means locking your NFTs for a fixed time to make money. Crypto staking has been popular for a while, but users can also stake their NFTs. When you stake your NFTs, you get paid back in a cryptocurrency that you can sell on the market for real money, which you can transfer into your bank account. It kind of works like a fixed deposit, but instead of getting low-interest rates, you get paid back in cryptocurrency that offers better returns.
This is one of the most popular ways to generate passive income because the owner doesn’t lose his own; however, it also comes with some downsides. When you stake your NFT, you lock it, making it impossible for you to sell it on the market. This means that you have to bear the risk of prices of your NFTs dropping significantly and leading to a loss. However, if you plan to hold your NFT for the long term, staking can be a great option.
2. NFT Royalties
If you know about the Royalties in the music and film industry, then understanding NFT Royalties wouldn’t be a tough job for you. The technology for NFT allows creators to set a royalty percentage that they get for every NFT sale.
For example, if the royalty for your NFT is 20%, then you’ll get 20% of the amount every time your NFT gets sold in the marketplace to a new owner. This means that if your NFT gets sold at $1000, you’ll be eligible for getting $200 from that trade. Hence, this can be an excellent source for generating passive income.
3. Liquidity Pools
Liquidity pools are stored crypto assets that are locked in a smart contract which refers to an automatically executing program based on the agreements between the buyer and seller. The platforms can use these locked assets for offering loans.
Multiple platforms award their users with NFTs in exchange for Liquidity. The user can sell the NFT reward to make money and exit the liquidity pool without hassle.
4. Renting NFTs
The rise of NFT games has led to a demand increase for in-game items, and users can now rent their NFTs to other people in order to make their gameplay experience better. These NFTs include powerful and rare weapons, tools, or skins that can help the user to make his online avatar or in-game character look better.
The transaction is based on smart contracts, and you have to type the duration and the cost at which you want to rent out your NFT for. Since the price for NFTs keeps rising, many gamers cannot own the rare NFTs, so renting them becomes an excellent choice for both parties. The person who gives the NFT on rent makes money, whereas the buyer gets a better gameplay experience.
5. Yield Farming
Yield Farming is also popularly known as liquidity mining. Yield farming in NFTs refers to the process in which investors look to earn returns on top of returns by leveraging yields achieved from one platform and investing them in another with popular methods like staking.
6. NFT Lending
DeFi makes loans possible in the crypto segment. There are multiple platforms available online that allow users to put up their NFTs as collateral in return for crypto loans. With the right usage of the loan, you can make enough money to cover interest payments while earning passive income from your NFTs.
Having a passive income source can easily make your life better and when you compare NFTs with assets like real estate you’ll see that NFTs give you the best returns. Therefore it is recommended that you keep the above tips in mind and start generating passive income through your NFTs.