NFT Staking
By: Abubakar Maruf O.
Tags: Staking, Nft Marketplace, Nft Collectibles, Blockchain, Nft

Beyond arts collection.

Gone are the days when you only stuff your portfolios with unique, rare NFTs arts and collectibles, waiting for a buyer on Opensea, Rarible, or other NFT marketplaces to make a purchase before you can make money on these assets. As the explosion in the NFT market continues, the growing utility of NFTs increases.

The latest novel use case is NFT staking, also known as NFT farming — where holders of NFTs can both generate passive income on their NFTs and still maintain their unique ownership of these assets at the same time.

For those unfamiliar with NFTs, NFT is short for Non-fungible tokens; NFTs are unique, digital, non-interchangeable, and cryptographic assets with unique identifiers and metadata that certifies the digital assets to be unique. They are stored on a blockchain, the same technology that underpins Bitcoin and other cryptocurrencies.

“Non-interchangeable” is a distinct property that differentiates NFT from other cryptocurrencies, which are identical to each other (known as fungibility). Hence the name — “non-fungible.”

What do we mean when we say cryptocurrencies are fungible and NFTs are non-fungible?

Like fiat (physical paper money) can be traded, replaced, and exchanged, cryptocurrencies can also be traded, replaced, and exchanged.

For example, a $100 bill is identical to another $100 bill both in appearance and value at any time. When you lend a friend $100, he does not have to return the same note, but any $100 bill since both have the same value and appearance. In crypto likewise, 1 Bitcoin is equal in value or unit to 1 Bitcoin at any time. This fungibility property makes physical paper money and cryptocurrency a medium of transaction.

In contrast, NFTs are unique, non-interchangeable: non-fungible.

Now back to NFT staking.

NFT staking works similarly like DeFi yield farming; it simply means locking up your NFTs the same way you lock your Bitcoin or Ethereum for a specific time, on a platform or protocol to receive earnings or rewards.

As mentioned earlier, Locking NFTs does not deny the holders the ownership; instead, ownership is still maintained when the assets are locked.

Rewards and other compensations to be received by holders from staking NFTs are dependent on:

The APY (annual percentage yield)

the staking duration, and

the number of NFTs staked.

As we all know that not all cryptos can be staked; likewise, not all NFTs can be staked or locked too, a reason to double-check the type of NFTs if it can be staked before acquiring them.

WHERE TO STAKE NFTS

As mentioned earlier, NFTs are different from other cryptocurrencies; hence, they cannot be staked on most DeFi platforms.

There are some platforms solely for creating protocols for NFTs. Below are some NFT staking platform

-MOBOX

- Zookeeper

- For “Onessus” blockchain games, “WhenStaking” is the NFT staking platform.

- Kira Network

LIQUIDITY AND NFT STAKING

A major limitation of NFT at the moment is the lack of liquidity.

What is liquidity? Liquidity is the ability of a coin or an asset to be easily converted into cash without causing a negative impact on its market price. Low liquidity shows market volatility is present, while high liquidity is a pointer to market stability.

Thanks to NFT staking, as NFTs are locked, the Liquidity of NFTs will surely increase, meaning that there will be a stable market with little fluctuations in price, which will attract more investors.

Summarily, with NFT staking, Investors can hold and earn passive income from their digital assets while maintaining their ownership.