As we live in a world where digital art takes us by surprise, the inception of non-fungible tokens is not new. Moreover, many celebrities and crypto enthusiasts have popularized non-fungible tokens, aiming to monetize their work further.
As some still need to be convinced about their value and this passive income strategy, they question how to earn passive income with NFTs despite their clear transfer of wealth and scarcity.
But striking is that these digital and physical assets managed to disrupt the art industry, pushing further the limits. As a result, Collins Dictionary officially introduced the word into its dictionary, making NFT the word of 2021.
So, what’s left to wonder if not to take advantage of earning a passive income with NFTs? If you’re among those seeking to understand the potential of NFTs, you’re in luck!
This article explores the top five ways to earn passive income from NFTs, providing valuable insights into the profitable world of these digital assets. Although you want to create an NFT collection, wish to benefit by generating passive income, or invest in diversifying your portfolio, we’ve got you covered!
What are NFTs?
Non-fungible tokens represent the ownership or authenticity of unique digital assets like artwork, music, videos, or other forms of media. Unlike fungible tokens such as cryptocurrencies, NFTs cannot be replaced by another, as each NFT is one-of-a-kind.
As a newcomer, it may be challenging to understand the uniqueness of this digital asset, and we recommend you explore the concept of NFTs fully.
Think of it like The Starry Night by Vincent van Gogh – while you can easily download an image or replicate the masterpiece – it doesn’t represent actual ownership or authenticity. Similarly, NFT projects are being used by creators, artists, and advocates to earn a passive income stream.
To mint an NFT, one must upload digital content to a blockchain platform that generates a unique, Non-fungible token. This process allows for buying, selling, and trading 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. As time passes, the NFT projects become more and more valuable, bringing passive income opportunities to the holders. As such, NFTs can serve as a recurring income stream.
For NFT holders, earning interest from these NFT projects acts as a traditional savings account. It’s a way to make money without selling their assets actively.
Many types of assets, such as ownership documents, patents, and royalty rights, can be tokenized and turned into NFTs that generate passive income.
6 Easy Ways to Generate Passive Income from NFTs
When thinking about passive income ideas, NFTs could be great options to get started as there are lots of NFTs that generate a passive income for NFT holders. 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 one of these passive income ideas to have a better understanding and earn rewards!
NFT Staking
Staking NFTs is a way to earn passive income from digital assets, similar to staking cryptocurrencies. Essentially, you lock up your NFT with a blockchain network or liquidity pool for a staking period, which helps the network process transactions and improves security. In exchange, you’ll receive staking rewards in crypto tokens.
Many platforms offer NFT staking, and you can stake a wide range of NFTs or purchase their native NFTs to begin staking. NFT staking platforms are usually Metaverse or P2E gaming platforms, but some DeFi protocols offer this feature.
The rewards you receive are usually denominated in the platform’s native cryptocurrency, NFT game coins, NFT platform coins, or governance tokens. You can hold on to these tokens, trade them for other assets, or reinvest them into a liquidity pool to earn even more rewards.
NFT Rental
Although it is less known, renting NFTs could be an excellent way to make passive income. You can think of it as virtual real estate, where you can allow other users to use your digital assets for a set period in exchange for a rental fee. Renting out NFTs has become a popular way for NFT owners to generate income without selling their tokens.
Platforms like Nifty Gateway, SuperRare, and RENFT allow NFT owners to rent out their assets. All you need to do is simply set a rental price, specify the rental period, and provide terms and conditions for the rental agreement. Once the rental period is over, you can either rent out the NFT again or keep it for yourself.
The gaming industry is one industry where NFT renting has become quite in demand, and many games have replaced in-game items with NFTs, which can have real-world value.
Also, this virtual real estate requires smart contracts that will automatically find you a renter and keep a secure, auditable, tamper-proof record of ownership. You will receive a fixed agreement or a cut of the renter’s in-game rewards as your passive income. However, it’s essential to consider the demand and the value of your NFTs before renting them out.
NFT Lending
Lending is an excellent option for earning passive income from NFTs, and it involves using your NFTs as collateral to secure a loan in either crypto coin or fiat money.
One of the main advantages of NFT lending is that it allows you to earn a return on your NFTs without selling them outright. By locking your NFTs as collateral for a loan, you can still hold onto your valuable digital assets while using them to generate income.
Additionally, you can borrow funds against your NFT and receive a loan-to-value. You can then use these funds to enter a liquidity or staking 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’s conditions. Once the loan term is due, the borrower must pay back the capital plus interest and get their locked NFTs returned. In the event of late payment, the lender may take possession of 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. While it requires more active participation than staking, 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 like yield farming, but instead of staking tokens, you’re staking NFTs.
NFT farming can be profitable, as the rewards earned can be sold for a profit or reinvested into 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.
Remember that NFT farming is still in its early stages of development and is 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 dApp’s smart contract code vulnerabilities and market volatility, which could lead to a loss of funds or a decrease in token value.
NFT Index Funds
NFT Index Funds are another excellent option for earning passive income from NFTs. These funds allow investors to invest passively in diversified portfolios 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 artwork or a type of collectible. By investing in an NFT Index Fund, you can get exposure to the NFT market and potentially earn returns on your investment.
To invest in an NFT Index Fund, you’ll typically need to purchase shares through a broker or investment platform specializing in NFTs. The percentages 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 you continue receiving a passive income from your NFT even after it’s sold. This can be done by including a royalty feature in the smart contract when you create the NFT.
Every time the NFT is sold on a secondary market, you’ll 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.
Earning NFT royalties is relatively hassle-free, as they’re paid automatically. Many NFT marketplaces offer this feature, making it easy for creators to earn passive income. To earn NFT royalties, you need to mint your work and set the royalty fees you want to receive for every 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 staking, NFT rental, 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, you can support the network’s transaction processing and enhance its security. As a reward for this service, you will receive crypto tokens.
Ending Notes
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 about the value of NFTs, they offer a clear transfer of wealth and scarcity, making them ideal for monetizing and safeguarding digital creations.
NFT staking, NFT rental, NFT lending, 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’s crucial to research and understand them before deciding which to use.
