Non-fungible tokens (NFTs) have gained popularity in the crypto-verse since the announcement of Metaverse by Meta, formerly known as Facebook. According to CNBC’s report, NFTs’ trades exceeded over $17 billion in 2021 alone.
Whether you are an individual, entrepreneur, or crypto investor, NFTs can help you create a passive income stream. However, you have to choose your options wisely when it comes to affordable NFT creation platforms and marketplaces.
So, wondering how you can start earning passive income from NFTs? Without further ado, let’s dive right in.
What are NFTs?
New to the concept of the non-fungible token? Well, think of your NFTs as digital assets you can trade for money or exchange for other digital commodities. You store your NFTs in publicly distributed blockchains simply known as databases.
Everyone in the blockchain world can see your NFTs and independently verify them. These digital assets contain unique information that anyone can use to determine the sole ownership of the NFTs in question. The information can also provide information on whether the digital assets are tangible or intangible.
That said, you have to remember that an NFT only represents a digital item and does not store it. Your NFT will simply identify your file’s location that exists somewhere on the Internet.
Ways to Earn Passive Income from Your NFTs
Apart from selling and buying non-fungible tokens, there are alternative methods to start generating revenue from your digital assets. Here are some of the most popular and easy ways to do so.
Charging Royalties on Your NFTs
As an NFT owner, you can use the technology to add certain terms and conditions to the usage of your NFTs by a third party. You can incorporate a royalty fee whenever someone uses your NFT or even whenever your NFT changes hands.
This way, you will not only cover the cost of creating NFTs but also continue to generate passive income after selling your non-fungible token. Every time a person who owns your NFT sells it, you are going to receive a royalty. This can be a fixed amount or a percentage of the amount your NFT was sold for in the secondary marketplace.
This way, even when you sell your NFTs, you retain a shareholder in future sales. For instance, you added a term that states that “10% of any future sales of the NFT in question will go to the original creator.” This will ensure that every time any future owner of this particular NFT sells it, you will get 10% of the selling amount.
Liquidity Pool
The integration of DeFi protocols and NFTs allow you to receive liquidity. This means you will be able to receive a percentage by establishing your position in an NFTs liquidity pool. Several platforms are well known for rewarding NFT owners/holders with liquidity in return for NFTs.
As an NFT owner, you can sell your NFT reward when exiting the liquidity pool. Here a liquidity pool refers to a collection of all digital assets locked within a specific smart contract with a pledge from multiple investors. The platform uses a locked digital assets pool to hand out loans.
Renting Out Your NFTs
Renting out your NFTs is one of the best ways to generate an alternate income stream, especially if they are high value or in demand. For instance, you can rent an NFT card in a game to gain an advantage over other players and win a game.
As your NFTs are blockchain-based, smart contracts govern the deals between NFT owners/sellers and buyers. You enjoy the freedom to set the terms, conditions, and durations of your NFT rental agreement. Moreover, you can also determine the lease rate for each NFT or an NFT series.
Staking Your NFTs
Thanks to the blockchain platform, NFTs share a harmonious correlation with the decentralized finance (DeFi) protocol that enables you to stake NFTs. The term staking means you can deposit or lock away your digital assets (in this case, NFTs) into a DeFi protocol within a smart contract in order to generate revenue.
Some platforms offer support to a wide selection of NFTs. However, others only allow you to purchase their native NFTs to claim your staking NFT rewards. If you are wondering which platforms to sue for staking NFTs, you can start with Kira Network, NFTX, Splinterlands, and Only1.
There is also a chance that a part of your NFT staking reward may come in the form of governance tokens. This allows the NFT owners the right to vote on how they want the ecosystem to develop in the future.
However, in most cases, it is also possible for you to reinvest the rewards you earn from staking NFTs into other revenue-generating streams.
Yield Farming
NFTs are becoming an integral component of Automated Market Markers (AMMs). Therefore, as an NFT owner, you can now farm for yields via NFT-powered digital products. The process of yield farming is all about using multiple decentralized finance protocols to generate the maximum possible yield from the NFTs you have.
The Bottom Line
Think of this process as a way to generate money on top of an already revenue-generating protocol. This process unlocks an additional income generation stream for you. However, you have to remember that both NFTs and smart contracts governing digital assets are relatively new.
Therefore, most of the above-mentioned ways to earn passive income from your NFTs are open to further evolution. However, if you wish to explore options, any of the methods mentioned in the post are an excellent place to start.
Last but not least, it is always good to do your research and proceed with caution and due diligence. Gauge your risks involved before going all in to create an NFT-based passive income stream.
