Cryptocurrency, since its inception, has progressed beyond its conventional use as a unique form of currency with benefits ranging from exchanges and transactional purposes. However, in recent times, the advent of different blockchain technologies and other innovations such as NFT have given a new variety to the merits of cryptocurrency. But NFT staking is what we'll talk about here.
Now, there is more than just a way users can reap the whole fruits of crypto. NFTs are so much more than unique items buzzing in the creative world, and they are also accompanied by immense income. Apart from their pre-existing advantages of payments and exchange, NFT users can now make income differently. In this article, we'll be discussing one of them. Yes, you guessed right.
Related: What are NFTs Games? And understanding Their Impacts In the Cryptoverse
What Is NFT Staking?
It's easy to attach creativity to NFTs anytime people mention them. Non-Fungible Tokens are no news to creatives worldwide, as they're gaining ground in different spaces. Many define them as digital collectibles. Others see them as representations of art pieces that carry a value that can increase with time. In all, these unique tokens simplify a lot of existing processes and change art in ways that you have never seen before.
As a result of the buzz around these unique tokens, many people lose themselves in the worth of their collectibility, uniqueness, and benefits of the token's ownership exclusivity. What most don't know is that some unique platforms have used staking to improve the utility of NFT ownership.
An accompanying rare item comes with every NFT minted on a blockchain. These unique tokens carry a lot of investment promises, and they're spread in several places. Many collectors have recently found that they can get a lot of value just from reselling their tokens months after they're bought. But do you know that now, you can earn passive income by just holding these precious tokens? That's what staking is about.
NFT staking is just like the name implies. You can define this process as the confinement of NFTs on a platform to receive staking rewards. In other words, staking can be defined as arranging these tokens on a protocol to make them eligible for staking rewards and a couple of other opportunities. This process opens the door for NFT holders to earn a passive income while owning their ownership.
Read: Non-Fungible Tokens (NFTs) -The Trending Crypto Phenomenon
How Does Staking Work?
NFT staking works similarly to other DeFi yield farming concepts, and though it's still growing compared to them, its applications aren't that far. As NFTs are also tokenized assets, there's an ease with their transfer to a protocol that ensures their protection and other affairs. So when you keep NFTs on these platforms, you can get rewards depending on factors such as the annual percentage yield (APY), the staking duration, and the amount of NFTs staked.
The unique qualities embedded in NFTs make it a promising venture for investors and collectors. It makes it a preferable asset compared to HODL and gives room for speculation. Staking paves the way for them to convert their assets to money. This development becomes a magnet for more people to engage, which is also a means to increase the market demand for stackable NFTs.
As NFTs do not possess features similar to many common cryptos such as Bitcoin and Etherum, their eligibility for staking comes with some conditions. NFTs are not native cryptocurrencies and are non-fungible creates an avenue for them to be staked.
Several blockchain platforms, in recent times, have created new patterns to ensure a staking utility for NFT assets. This development helps to examine these NFTs and assess their yield.
How the process work?
The process of NFT staking starts with the staking platform determining the asset value and establishing the annual percentage rate (APR) you will earn. The rarity level is one of the factors on which the NFT value is dependent. The other factor is bringing out a flowing source of income to attract more investors and royalties.
In simple terms, the staking protocol possesses a system that will evaluate your NFT, gauge its value and put a yield value based on different time durations. A couple of platforms are usually decentralized and, according to them, provide a considerable amount of protection for your assets. Well, that's until you're ready to bring them out.
Many famous NFT art pieces and game assets can be staked and bring about profits up to 100% APY, though not all can get rewards from this. The primary requirement for staking is a cryptocurrency wallet with NFTs. In all, it's also essential to verify any project you plan to embark on before getting the NFTs. But the question about places to make it work also stands.
Where Can Staking Happen?
As a result of the non-fungible nature of NFTs, DeFi platforms that accept other cryptocurrencies cannot support their staking. Therefore, till December 2021, a lot of NFT staking opportunities stem from play-to-earn games. MOBOX and Zookeeper are two common instances of this.
A couple of projects are creating NFT staking ability on their platforms. Betting on these platforms starts by transferring your NFT to them. You can also mint an NFT connected to a staking pool. But to make this whole process a success, it's essential to confirm if you can stake your NFT on a particular platform. Below are some of these platforms:
- Doge Capital
- Onessus
- Only1
- Splinterlands
- KIRA
In other NFT collections, owners can "stake" their NFTs and earn rewards in tokens that can purchase future qualities. In all, NFT collectors can earn passive income by staking their NFTs and, more importantly, still get more benefits.
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Merits Of Staking
NFT staking, as discussed before, can be a magnet for investors. Through lending their tokens to the blockchain network, they receive interest in more tokens. The primary objective of staking is to earn passive income through rewards, which could come in the platform's NFTs or freshly minted ones.
The collector or holder gets more income by earning rewards up to 100% APY just for lending their NFT to another user for being part of a liquidity pool.
These profits earned through staking can come in the form of more NFTs. In addition, many NFT staking platforms give rewards in the form of other unique NFTs. Exclusive ownership benefits are also qualities embedded in these new NFTs.
The lack of liquidity has always been a problem that has affected NFTs. However, staking in NFTs has not increased the liquidity of these unique items; it has brought about more investors.
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Conclusion
The need to earn more income is rising now more than ever. And with the different innovations springing up, finding a way to be part and benefit from them is a thought in the minds of several people. NFT staking has brought this thought to reality and created an avenue for cryptocurrency users.
By allowing participants to make an extra income from their idle NFT collections, staking has brought about sustainable solutions in the cryptocurrency world. As much as it might be in its early cases, it counts as a great inclusion to asset growth.
But in all, NFT staking is creating new use cases and advancements for NFTs that change a lot, not only for NFT users but also among the gaming industry and other sectors associated with blockchain technology.
