So you bought your first NFT and are wondering, now what? Well, what if I told you that you could be earning rewards with little to no effort. That’s right, in this article we will be looking at 5 ways to earn passive income from NFTs.
In this article:
But before we start you might be wondering, what exactly are NFTs?
Put simply NFTs are proof of ownership. It is a record on the blockchain which cannot be falsified or duplicated. Think of them as digital receipts which are recorded on a public ledger. Every transaction on the ledger is open to the public making it completely transparent. Each NFT is a unique asset with specific metadata. With the basics out of the way, let’s dive right in.
1. Staking NFTs
The easiest way to earn income from NFTs is staking. So how does it work? staking is used in many protocols to reward users who secure the network. In the case of NFTs it rewards the community who pledges their assets. The rewards are can be upwards of 10% and in most cases, the reward is in a governance token.
This token is used to vote on proposals that ultimately shape the development of the collection. However, there are some downside risks. First of all, if a staking smart contract fails you could lose your funds. Secondly, there is usually a lockup period which can be anywhere from 3 days to 4 weeks.
2. Lending NFTs
Another way to earn rewards is through lending. Platforms like reNFT allow you to lend your NFTs on a peer-to-peer protocol. They can be either collateralized rentals or collateral-free rentals. NFT owners also decide the time and duration of the rental contract.
3. Earning Royalties
Marketplaces and the underlying NFT smart contracts allow NFT creators to set royalty fees for every transaction. Once the NFT is minted the creators earn passive income usually between 5% and 10% for each sale. A portion of this income can then be distributed among holders. Not every project does this so you should do your research before buying.
4. Provide Liquidity
Thanks to the continued development of the DeFi ecosystem users can now provide liquidity to a platform to earn rewards. NFT holders deposit funds into a smart contract and get an ERC20 token in return. They can then use this token to generate yield.
Although this method is not entirely passive as there is some research involved, it can be extremely lucrative. So what are airdrops? Essentially airdrops are free rewards.
How do you get them? Often times you get an NFT airdrop just by holding an NFT. In the case of Bored Ape Yacht Club, holders were airdropped a mutated version of the original. Teams often airdrop NFTs to valuable community members and through marketing campaigns such as giveaways.
So to find an airdrop you need to keep your ear to the ground. You can also get access to an NFT project through a whitelist which guarantees you a mint.
As you can see there are plenty of ways to earn passive income from NFTs. From staking rewards to crypto lending the choice is yours. With platforms making it easier than ever there is no longer an excuse to leave your NFTs sitting idly in a wallet.
Want to sell your own NFT, check out my article How Hard is it to Sell an NFT?