2021 was an excellent year for non-fungible token (NFT) trading, with many high ticket sales driving the surge of interest in this growing crypto niche – up to $12.6 billion. Traditionally, most NFT traders buy and sell Ethereum while paying additional gas fees (up to $98.69) on the minting process. As a result, many investors tend to offload their NFTs to other markets to earn profit.
The good news is that you can earn money without trading in several ways. That’s right! You can avoid the constant stress and anxiety when actively watching floor prices, timing the market, or handling other high-tension aspects of the trade.
Intrigued? Let’s check out five ways to earn passive income from NFTs. But first, we’ll share a brief overview of non-fungible tokens for readers unfamiliar with this trading concept.
What is a Non-Fungible Token (NFT)?
Simply put, non-fungible tokens are non-interchangeable units of data stored on a publicly distributed database or ledger called a blockchain. Therefore, they can be viewed and verified at all times. Think of NFTs as digital receipts containing unique information that proves ownership of tangible or intangible items.
Examples include digital artwork, collectibles, domain names, event tickets, or even a unique pair of limited-edition shoes. The critical thing to remember is that these financial instruments don't store digital items. Instead, they point to the file's location on the internet. Moreover, you cannot use the same NFT to represent two items.
Therefore, you cannot trade it like a Bitcoin or Ethereum, hence the name "non-fungible" tokens.
How to Earn Passive Income from NFTs
Did you know that a signature was once sold as a non-fungible token for over $2.3 million? That’s right. As strange as this sounds, it’s true. This trending form of cryptocurrency is changing how we look at money. By using blockchains to certify ownership, users can sell anything they believe is valuable and earn money.
So, if you’ve already done the leg work, here are 5 ways to earn passive income from NFTs:
1. Buy a Passive Income-Generating NFT
The simplest way to earn passive income from NFTs is to buy one that generates passive income. As paradoxical as this sounds, it's pretty straightforward. Thousands of NFT projects allow users to generate regular income by staking or simply holding on to them.
They can be used as stakes or held assets to mint new collections, which increases their value over time. However, this can be incredibly risky as many NFTs either fail to deliver or don’t end up being worth much. Plus, since they’re crypto-related, you have to be more careful when buying one.
2. Renting or Lending NFTs
Perhaps, the simplest way of earning passive income with non-fungible tokens is by renting or lending them, especially if you own those in high demand. For example, many online card trading games allow you to borrow NFT cards to improve your winning chances.
What makes this option better is the blockchain-based smart contract that helps traders secure deals according to their preferred rent duration and lease rate. For example, reNFT, a leading NFT trading platform, allows lenders to set daily rates and maximum rental periods. Current rates usually fall between 0.002 to 2 Ethereum, depending on the digital item’s value.
For example, if you have high-value artwork, you can rent it to a digital art gallery for a day or week. You can also rent out music, videos, or other forms of exclusive content.
3. NFT Staking
One of the main benefits of NFT trading is its marriage with decentralized finance. This allows traders to stake tokens (or lock them away) and use the digital assets as smart deposits to generate income. Many modern platforms, such as Kira Network, NFTX, and Only1, support different NFT types and enable users to earn staking awards, especially through the governance of the digital ecosystem.
Alternatively, users can reinvest the money earned from staking into other passive income-generating protocols. However, there is a downside to this, especially if you don't own multiple NFTs. Once you initiate the staking process, you cannot use that token for a certain period. However, the good news is that it offers a relatively higher return on investment (ROI) compared to other methods.
4. Provide Liquidity to Earn NFTs
If you’re familiar with DeFi infrastructures, you’ll know that there’s an ongoing NFT integration that allows users to provide liquidity and receive NFTs in return, thus, establishing your position in that particular liquidity pool.
The NFTs used to provide liquidity represent how much you staked or how much you earned from them while maintaining ownership. The passive income benefits come from the transaction fees decentralized exchanges receive from this particular trade. The amount you receive depends on the token's value, how much you put in, or how long you could stake.
5. Yield Farming
Due to their growing popularity, NFTs are rapidly becoming a core component of automated market makers (AMMs). Therefore, you can use them to generate income using NFT-powered digital products through yield farming. This process involves leveraging different DeFi protocols to generate the maximum amount of income possible according to your assets’ value.
Think of the process as opening a savings account in a regular bank. By depositing money into it, you’re effectively loaning money to the bank in return for an interest-based monthly, semi-annual, or annual yield. However, the amount you earn depends on how much you put in and the annual percentage return (APR) set by the bank.
And there you have it – 5 ways to earn passive income from NFTs. According to Earth Web, there is around $20 million worth of non-fungible tokens sold every week in the growing crypto market. With the market set to surpass $40 billion in 2022, this is where the future of blockchain and crypto trading lies.
So, whether you're an artist, collector, or trader, NFT trading is a great way to diversify your portfolio and earn massive returns with minimum input.