What Is NFT Staking? How To Make Money Staking Your NFTs!

Did You Know You Can Make Money Staking Your NFT?

Many people flip and trade NFTs for a profit, but if you are a long-term investor you can often receive a reward (income) from simply staking your NFT.

Staking is particularly useful during a bear market.

This way your NFT is not sitting idle during a bear market, it is earning you a small income while you wait. When the bull run returns, you not only have an NFT that you can sell for a profit, but you also have some tokens you can profit from too.

What Is NFT Staking?

NFT staking involves staking (locking up) your NFT on a DeFi platform. The NFT project rewards you for doing this with either more NFTs from their collection, a native token, or sometimes a popular top cryptocurrency like Ethereum.

NFT staking is similar to cryptocurrency staking.

Staking allows you to generate a return from your NFT while still retaining ownership over it.

One such example is the Ethereum BAYC NFT collection. They reward holders with their native token APECoin.

Finding An NFT You Can Stake

Not all NFT collections have staking options.

You will need to spend some time researching and finding the best NFT projects to stake.

To help get you started, we have created a list of Staking platforms and projects here.

Staking Tip

When you find an NFT you want to stake, please ensure you only use the project’s official staking link. There are scammers out there that will post links to popular NFT projects that take you to a malicious (non-official) staking site, and they will drain your NFT wallet of its contents.

You will find a project’s official links on their social media like Twitter or in their Discord Channel.

Stay safe!

Things To Consider When Staking Your NFT

There are risks and important factors to consider when staking your NFT, and it is important to know these beforehand.

NFT Royalties

Over the past few months (2023), NFT investors have been bypassing the royalties owed to projects when purchasing and selling NFTs by utilising swap platforms.

To counter-act this swap movement, some projects have implemented a new staking system that does not allow NFT holders to stake if they have not paid full royalties.

Royalty Tip

If you are purchasing an NFT simply to flip, then you can increase your profit by not paying royalties.

However, if you wish to hold this NFT for some time and stake, it may be worth paying the royalties to ensure you have full access to the project’s ecosystem and staking platform.

NFT Lock-Up

Many NFT projects have a lock-up period for staking.

Before you stake you need to know how long the lock-up period is.

The time period can range from days to months.

Some projects reward holders with more tokens the longer they lock up their NFTs.

It is important to note that while your NFT is locked up, you will not be able to sell it. In a down market, many holders have seen the value of their NFT drop, and they were not able to sell it before the dip. If you are a long-term holder and believe in the project, then this is not an issue.

However, if some big event happens to your project that is negative, you will not be able to exit fast.

You receive your NFT back into your digital wallet when the time period for the lock up ends.

Lock up Tip

During a bull market, it is important to not lock up your NFT for a long period because if it dramatically increases in value you will not be able to take advantage of the pump and sell.

NFT APY

APY stands for annual percentage yield. This is the expected yearly return you can expect from staking your NFT. If you want to stake your NFT for a month, then simply divide the APY by 12 to understand your monthly reward.

APY Tip

Some projects reward holders with a higher APY if they hold rare traits. Before you purchase an NFT for staking purposes, it is worth researching if different rarity or traits give you a higher return.

Reward Volatility

For example:

If an NFT pays out rewards on a weekly basis, investors sell all their tokens weekly regardless of the price. This way, investors take profits and sometimes receive a higher token profit and sometimes lower. But, the important thing is they take profits!
The reason you stake is to gain token rewards. Investors expect the token to increase in value.

Native reward tokens are notorious for large swings in their value, both up and down.

It is important to understand that if the NFT decreases in value, the token reward investors receive will often follow suit and drop in value, and vice versa.

One method investors use is to DCA (dollar cost average) their profits.

Tax Tip

In many jurisdictions, staking rewards are viewed as income tax when you sell them. We recommend finding out how rewards are taxed in your Country.

Added Benefits

Some projects not only reward their staking holders with tokens, projects sometimes give bonuses and added benefits. It could well be worth finding NFT projects that do this.

Token Utility

It is wonderful to receive a staking token reward, but what can you use the token for? If there is not much use for the staking token, then expect holders to sell which leads to downward (selling) pressure. Tokens with little to no utility do not fair well long-term and often become worthless.

The more utility and volume a token has, the more chance others will invest in the NFT project, thus more chance the NFT will increase in value.

Escrow Or Non Escrow NFT Staking

This is actually an important factor to consider when choosing an NFT project to invest in, especially, if it is a new NFT projects with anon founders.

Some projects insist you use their staking platform and actually send your NFT from your wallet to their platform. This means you no longer hold your NFT, the staking platform does. We have seen countless projects scam their holders and disappear leaving investors NFTs locked-up (lost) forever.

We are seeing new NFT projects allow staking with non-escrow. This means you stake your NFT, but it remains in your wallet and under your control.

It is up to you to decide which you prefer.

Now that you understand the pro’s and con’s of staking let’s look at staking rewards!

The rewards you receive from staking an NFT differ for each project and smart contract.

Typically, rewards are paid out daily, weekly, or monthly.

The most popular methods of rewarding holders:

  • A projects native token that is used in their ecosystem.
  • NFTs from the projects collection. This is usually for metaverse or P2E projects because the NFTs given as rewards can be used in the game. For example, an avatar, upgrade, or skin.
  • Revenue share. Some projects don’t offer staking, rather they reward holders with a profit share. This is especially true with gambling NFT projects.

Reward Tip

If you see a project promise a ridiculously high APY. Please be careful. No project, however good, can offer an sustainable high APY. High APY’s are often used to sucker investors into a project and overpay for an NFT.

Finally …

Why Do NFT Projects Offer Rewards?

There are two main reasons NFT projects offer rewards to their holders for staking with them.

  • To entice new investors

When NFT investors are debating purchasing an NFT, they will look at all aspects of the project. If staking is part of a project’s ecosystem, some investors will invest in this over an NFT project that does not offer holders a reward.

  • Increase the NFT’s value

The more NFTs in a collection that are staked, the fewer NFTs there are for sale. This usually helps increase the value of the NFT collection’s floor price.

We hope you have enjoyed reading this article about NFT staking and have found it useful for your investing journey.

You can read more articles about NFTs in the blog section of our website.

You can also visit our NFT resource directory to find useful links to help you invest in NFT more effectively.

Visit us today at spendingcrypto.com

Author:
Jonathan Titley

Founder:
spendingcrypto.com

Co-founder:
https://fomomagazine.io
(NFT industry magazine and project reviews)

Disclaimer:

All information in this article is for educational purposes only.

Jonathan Titley
Author: Jonathan Titley