6 Ways to Earn Passive Income With NFTs
NFTs represent the ownership economy in crypto. Despite ups and downs in sales, this sector has been evolving and introducing new use cases. Beyond representing art and collectibles, NFTs allow owners to generate income by putting their assets to work within financial markets.
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Financialization of NFTs
Like other asset classes, NFTs can be traded and exchanged for cryptocurrency, fiat money, and other NFTs. However, trading NFTs is different because these tokens are unique and don’t have identical equivalents. This characteristic brings liquidity problems, making it difficult to convert NFTs to other assets and agree on fair prices. Plus, the NFT market is still in its early stages of development, with a relatively small number of buyers and sellers. Using NFTs in the financial context is one of the approaches to address the liquidity issue. NFT financialization refers to strategies and tools to integrate NFTs into financial applications, thus increasing market participation and expanding use cases. For NFT owners, financialization creates new opportunities for investments.
6 Ways to Make Passive Income With Your NFTs
NFT platforms, crypto exchanges, and DeFi protocols, like UniSwap and AAVE, provide users with tools to gain more value from their assets. Below are 6 popular ways to earn passive income with NFTs through different platforms.
- NFT Royalties
One way to make a profit from NFTs is by creating and selling your token and earning fees and percentages from secondary sales. On average, NFT royalties range between 5% and 15%. NFT marketplaces where you can set up royalties include OpenSea, Mintable, Rarible, and others.
- NFT Staking
If you want to earn income with your NFT without selling it, staking is an option. NFT staking is similar to cryptocurrency staking. Typically, you deposit assets to a DeFi protocol smart contract (staking pool) and earn income automatically. The interest may be in the form of a cryptocurrency or another NFT.
- NFT Lending
You can lend out your NFT in exchange for a fee or interest. Borrowers agree to the loan terms and can temporarily use the borrowed assets in applications like gaming, trading, or content creation without being granted ownership rights.
- NFT Renting
Similar to lending, NFT renting involves providing assets to others for temporary use. The key difference is that in renting, both collateral and loans are in the form of NFTs. In addition, renting typically includes the temporary transfer of ownership rights. Mainly, NFT renting is used in peer-to-peer games, virtual land ownership, and popular artworks.
- NFT Rewards
Many brands, both within and outside the crypto space, offer NFT-based loyalty programs. One such example is Starbucks’ Odyssey initiative, which allows members to earn rewards for completing “digital journeys.” Participants can earn digital stamp rewards in the form of NFTs and sell their assets on marketplaces. Or you can complete tasks and receive NFTs as rewards in Whitechain’s recently launched quest “Coloured Launch Boxes”.
- NFT HODLing
This is a long-term strategy where you buy and hold an NFT for a long time. HODLers believe that the value of their NFT will increase over time allowing them to profit by eventually selling the assets for a higher cost.
Things to Consider When You Plan to Make Passive Income With NFTs
Blockchain technology and NFTs allow everyone to take part in the financial market, unlocking new revenue streams. As the NFT market evolves, more investment opportunities emerge. However, as with any financial aspect, earning income with NFTs presents challenges. It's important to consider the market volatility and its potential impact on your finances in different situations. Another factor to be aware of is the risk of NFT fraud and scams. Before making a purchase, carefully check the information about the token, its creator, transaction history, and the platform you use. Making passive income with NFTs successfully requires research, an understanding of market trends, and a strategic approach.
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