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Staking NFTs – A Beginners Guide

If 2021 was still the year in which the NFT world became mainly known for the successful flipping of tokens, then 2022 may well be the year of NFTs staking.

But what exactly is it, discontinuing NFTs? Why should I discontinue my NFTs and for what purpose? Can I earn passive income by staking my NFTs? Many NFT collectors have made huge profits by selling their assets with big profits.

Simply put, it means that you buy cheaply via minting or via the secondary market to later sell at a higher price. A simple market mechanism that we in real life. Buying and selling NFTs does come with some tension.

When is the right time to buy? How high is the gas fee that I have to pay for the transaction? What is the price of ether or ETH when buying and selling?

At what point in the bull market should I sell? Do I wait a little longer for an even higher floor price or will it tilt back down again?

The value of NFT art is very subjective

Quite a few things you have to take into account to flip NFTs successfully. And not everyone can handle that, not everyone has a commercial spirit. To be successful in this market you sometimes have to have nerves of steel.

With the big breakthrough of the NFT world in ’21, it was also a lot easier to sell your “Jpeg” for a profit.

In addition, much of the value of an NFT is highly subjective.

In other words, the value is determined by what someone is willing to pay for it. What the madman gives for it, so to speak.

This is in contrast to, for example, cryptocurrency that has a market-related value depending on fiat currencies and other cryptocurrencies.  

Bear market

At the time of writing, we are in ’22 and we have been dealing with a bear market for several months!

This makes it a bit more difficult to be able to sell easily. It is clearly a buyer’s market, not a sales market. Of course, there are exceptions to the rule, the Blue Chip projects like BAYC, Azuki, and CryptoPunks are still very valuable.

In addition, there are also new sets that score high marks due to hype.

The average NFT trader sees his or her portfolio quite submerged at the moment; the present value is (much) lower than the purchase value!

And no one knows how long this bear market will last and when we will return to an uptrend.

So how can I still make money with NFTs? This can be done by discontinuing your NFTs on an external platform or directly in the relevant project.

NFT bear market

What is staking?

Simply explained, stopping an NFT means ‘locking’ it for a certain period of time.

During this period you cannot sell the NFT, while you still retain ownership of the NFT.

It is positive for the project if many of the NFTs are staked because this creates scarcity on the market and therefore often a higher floor price. 

Scarcity means that higher amounts are paid for the NFTs, which benefits the liquidity of the project. Higher sales amounts mean higher royalties for the project.

Liquidity is often a big problem for a project and so people are willing to compensate you for discontinuing your NFT.

In another word, we also call this Utility.

Striking rewards

The fees that are paid when you stake an NFT are called ‘striking rewards’. Staking rewards are often paid out in the form of specially created tokens.

These tokens are usually paid out periodically, daily, weekly, or, for example, monthly. You usually have to claim the tokens before you can exchange them for crypto or other benefits.

You can actually compare it with your savings which are fixed in your savings account. You actually lend this money to the bank and you receive compensation in the form of interest.

The higher the interest on your savings account, the more money you are willing to invest.

The term staking comes from the cryptocurrency world, where you also lock (a part of) your crypto coins in a wallet. 

Stakes on an external platform

There are a limited number of platforms that specifically focus on the staking of NFTs.

This undoubtedly has to do with the (still) relatively early phase of the discontinuation of NFTs. Perhaps more external staking platforms will be added in the future. The most well-known external staking platforms at the moment are NFTX and KIRA. NFTX allows holders of certain NFTs to secure their NFTs in a safe or vault.

Typically, for every NFT you stake, you will receive 1 or more tokens as a reward. You can then stake this token again for rewards, you can use it to purchase NFTs that are stored in other vaults, put them in a liquidity pool, or sell them on a cryptocurrency exchange.

KIRA uses its own staking options again.

Staking within the NFT project

Many NFT projects now have their own staking options. By offering this form of utility to the community, they are able to cultivate an even closer bond with their supporters. The discontinuation of NFTs within the project offers direct benefits to both the holder and the project itself. 

Because the NFT is fixed, scarcity arises, which in most cases results in a higher floor price. This allows a set of NFT stakers to reward and replenish the project’s liquidity pool. In this case, we speak of a win-win situation.

We often see staking systems in blockchain P2E gaming projects, although there are also NFT sets without a game that offers this. 

Tokens and coins

Very often own tokens are created that are somehow related to the name of the set.

For example, we know the $Ape or Apecoin from BAYC, the $Alpha coin from the AlphaKongsClub, or the $world from NFTWorlds.

For every NFT you stake, you will be paid a certain number of coins, usually on a periodic basis. You can claim these tokens and have them paid out or you can leave them in the project for even higher earnings.

A very good example of a P2E game with a staking system is Axie Infinity.

Players of this game can stake the special token they earn, the Axie Infinity Shards or $AXS, to reap rewards. The annual percentage ratio on this would now be around 80%, almost doubling!

Gaming can therefore generate a nice passive income!

Virtual ‘world’ MetaVerse

If you are not a gamer but you still want to earn passive income with your NFTs, fortunately, there are also non-gaming NFT sets that offer this.

For example, there are sets that specifically respond to the Metaverse, the virtual world.

They are buying digital land on which to build and live, which is expected to be very valuable in the near future. Examples of these types of sets are NFTWorld, DecentraLand, Somnion Space, and CryptoVoxels. They all offer the buyers of the NFTs the opportunity to organize their ‘country’ as they see fit.

You have to think of interactive gaming, entertainment, real estate building, and interactive experiences. Everyone is able to contact others in the metaverse in their own way. Due to the decentralized, autonomous nature of the Metaverse, nobody is bound by rules or governments.

Everyone is free to give their own interpretation of the MetaVerse and you can decide for yourself what you will do with your acquired land. 

Internal ecosystems

In recent months, many sets have been working on their own ecosystem, where eco stands for economy.

Partly to ensure the liquidity of a project for the future and partly to build a close-knit community. A healthy ecosystem has a positive effect on 2 sides; on the one hand, the liquidity of the project and on the other, utility for the community members.

Because flipping NFTs and making big profits from them is labor intensive and stressful, it may be advisable to focus more on passive income from the utility. Of course, you will also have to do research for this, it does not come naturally.

In addition, it is not without risk, no one can tell you which projects will succeed and which will not. Even though golden mountains are promised, there is always a chance that the project will fail.

Passive Income from NFTs

That is why it is important to spread your risks here too. Don’t bet all your money on 1 project, but spread your investments over several. This way you run the risk of losing your invested capital to 1 project that fails.

Research different sets and get involved on social media such as Twitter and Discord. Here you can find valuable information that will help you earn a successful passive income with NFTs.

Ask yourself how much passive income you want to bring in based on your unique situation. Then look for projects you are confident in and figure out how much you need to invest to achieve your goals.

Most projects offer multiple opportunities to earn passive income. 

Alpha Kongs Club

Withdrawing from NFTs is one of the many options. Often you can also buy tokens issued by the project which you then lock in for a periodic fee.

There are various safes in which you can store the tokens, each with its own revenue model. A good example is the staking project of the Alpha Kongs Club. 

By staking your Kong in a tribe you earn a certain number of Alpha coins per day. The more expensive the tribe in which you have staked your Kong, the higher the yield per day. The project gives you the calculation models per day, per month, and per year, very well-arranged and clear. You will usually receive an explanation about these types of projects on a project’s website.

If you have staked your NFT between 2 certain dates, you will also receive a serum that will qualify you for an Omega Kong, a new NFT within the project.

You can also stake this Omega Kong for even more passive income.

FAQ

What is the risk of staking an NFT?

There is no risk of losing your NFT. There is however a risk of losing money in the sense that if you stake your NFT you will “lock” it for a period of time and if in that time the price of the project drops, you will not be able to sell it and lose (potentially a lot) of money!

Do you lose your NFT if you stake it?

No, you do not lose your NFT. It will be “locked” for a period of time but you remain the holder of your NFT at all times.

Conclusion

It is important that the team behind the project is actively involved in liquidity. After all, without liquidity, there is nothing to pay out! For this, each project has a so-called liquidity pool (LP).

To get started, ETH must be deposited into the pool that accounts for the value of the issued tokens. Actually a bit the same as with the monetary system of banks.

If you are looking for passive income NFT sets, it is important that you know how a project can keep the Liquidity Pool healthy. If you know how to find these projects and distinguish them from underperforming teams, then you are a merchant.

Then you will receive a nice passive income by ceasing your NFTs.

Josephine Tsang

Josephine Tsang

Software Engineer, Blockchain enthusiast, Bitcoin miner, gamer and anime fan. Love to share knowledge on the web (on my own blog, for immla, on twitter or reddit). Always on the look for the coolest and newest Web3 updates. Hope you guys enjoy my writing!

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