Blog > Trading Tips > Articles
NFT Staking - Earn Passive Income With Your Digital Collection
Table of Contents
We’ve all heard of NFTs and their exclusive grandeur. They have changed how we collect things in such a way that there are now entire platforms built around them.
Some NFTs come with a hefty price tag like the Cryptopunk catalog. Ever since Quantum, the first-ever NFT, got sold for over a million dollars, people have been scouring the internet for their own non-fungible set of pixels.
NFTs come in many shapes and sizes, sometimes even colors. They appear across a multitude of platforms in different forms but the most popular incarnation is online game assets.
There are card games, in which you collect rare cards that can be sold on the game’s blockchain for cryptocurrency. Variations of adventure games like MIR4 allow you to collect in-game resources and items that can be minted as NFTs and traded as you see fit.
Getting your hands on one of the high-tier NFTs is exciting, but for a lot of us that’s where the journey usually ends. People often find themselves either selling their NFTs, trading them for another rare item, or simply marveling at the masterfully crafted 1KB image. Now, there is a way for NFT owners to put their items to better use and it’s called staking.
How Does NFT Staking Work?
NFT staking intends to let you earn more with your asset while retaining ownership of it - literally the better outcome of having your apple and eating it, too. This is similar to the Liquid Earn program where you can earn rewards but for your cryptocurrency rather than NFTs.
It’s a new mechanic in its early stages but does have a promising foundation and has already produced results. What you do is put an NFT on hold on either its native blockchain or a platform that supports staking to earn a yield. Think of an account that generates yield but there’s only a single bill of one-of-a-kind money in it.
Another thing about NFTs is they are sealed in a smart contract - the ERC-721. There are mechanisms within the contract that help the token interact with other tokens as well as the blockchain they’re in. This works with all NFTs, including the ones you earned from online games. That said, when you stake your NFT, it’s the contract that does the work and handles your earnings.
There’s another type of smart contract that tokenizes NFTs, which is the ERC-1155. It is supposedly more efficient than the ERC-721 but completely disregards the exclusive element of a rare item. If you’re wholesaling your NFTs like Costco and need to move them as fast as possible then ERC-1155 might be perfect for you. In any other case, stick with the 721.
There’s a couple of ways you can stake an NFT, but the most common practice is to earn yields. If you do it this way, the NFTs you can stake are usually the ones exclusive to their own blockchain. This means you will earn the tokens generated by that blockchain.
For example, you’re playing CryptoBlades, a P2E game, and pick up a grade-A item. If you decide to stake it, the CryptoBlades blockchain will lock up that item and pay you SKILL tokens, which is a native currency of the game.
The idea here is to keep some of the rarest items out of circulation so the developers can make more of the same, which would bring more players and earn more revenue. That said, some platforms will allow you to use the NFT in their games at the same time as staking them.
For NFTs that don’t belong to any exclusive blockchain (well, except Ethereum), you can stake them for validation rights.
Modern cryptocurrencies are shifting towards the Proof of Stake system where users stake a portion of their own coins to validate transactions on a blockchain and earn rewards. Validators are selected randomly each time a new transaction is created. The more you stake, the higher your chances of acquiring the right to validate that transaction.
NFT Staking Platforms
Here are some of the leading blockchains that support NFT staking. You may have heard of them or even played some of their games.
Onessus is a decentralized gaming platform that runs on NFT creation. One of its featured titles, the HodlGod, has the community racing for a piece of the iconic Immortal Gear sets. Onessus has a separate solution called WhenStaking dedicated to NFT staking. You can save NFTs acquired in Onessus games here to earn VOID tokens, a native currency.
Built on the Web3 Foundation, the Kira network connects Dapps and provides interoperability across different platforms. You can stake any kind of NFT to earn $KEX tokens and $KEX holders can stake their tokens to earn Kira’s native NFTs. Kira can also split your NFT into smaller parts and tokenize them as individual NFTs themselves. Talk about min-maxing for value.
This is a crypto trading card game that we suspect would gain more attention with new NFT staking options. Each card you collect in the game is an NFT and you can stake what you have in a library so other players can borrow and play with them. It’s similar to a liquidity pool where you earn passive transaction fees.
This game runs on the Hive blockchain which has more than 120 other titles you can play with.
NFT staking puts a nice touch on what it means to own an undefeated set of pixels. One thing it needs to do, however, is establishing an audience and cater to that. Right now, it’s hard to say who will truly benefit from locking away their precious and one-of-a-kind tokens.
For example, if you own an NFT from the Beeple collection, would you stake it on a blockchain to validate transactions? No, you wouldn’t even need to. Or if you have the “Angel” from Axie Infinity, which is worth over $100,000, would you put it in a pool so someone else can use it? Probably not.
Smaller NFT owners don’t quite find more reason to stake their assets, either since the returns might be so low that selling them would be more profitable. Without enough incentives, the whole idea will likely remain just an idea.
If you want to invest in cryptocurrency and don't know where to start - join Liquid! Founded in 2014, Liquid is one of the world's largest cryptocurrency-fiat exchange platforms serving millions of customers worldwide.