How To Earn Passive Income With NFTs? (5 Common Ways)
Buying an NFT is an investment, and you likely want to get the maximum possible returns. Read on to learn how you can earn passive income with NFTs.
NFTs are everywhere these days – even if you’re not into crypto but immerse yourself in the internet from time to time, you must have heard about this phenomenon so many people are crazy about.
In fact, NFTs are such a hot topic right now that the global trading volume of non-fungible tokens has increased by 337.84% compared to January 1, 2022, growing from $16.94 billion to $57.23 billion on April 28.
Since you’re reading this article, we’re guessing you’ve got one too. Although NFTs have many different use cases, you can also just wait until it increases in value and sell it for profit. But before it does that, you are probably interested in ways to earn passive income with NFTs.
Find 5 of the most common ones below.
Passive income & NFTs explained
The term passive income usually goes hand-in-hand with such expressions as “make money while you sleep” or similar, which is not entirely wrong. What this sentence really means is that you can earn money with little to no effort (and no direct involvement), usually regularly, from something that you already own or have invested in.
In other words, it’s a way of maximizing returns, or making your money work for you.
Some examples of passive income include:
- Renting your property
- Creating an online course
- Writing an e-book
- Investing in stocks
- Selling stock photos, etc.
Meanwhile, NFTs, or non-fungible tokens, are unique digital assets stored on a blockchain (publicly distributed database) that you can buy, sell, or trade.
There are many different types of NFTs, including art, sports, music, and even domains, but the key point here is their authenticity. While everyone can technically see and access the NFT you bought (e.g., digital illustration), the purchase that you have made gets recorded on a blockchain, therefore, it treats you as the owner of that specific NFT. It's kind of the same as buying a painting made by Salvador Dali – anyone can have copies of it, but only you have the original.
As blockchain technology continues to develop, new opportunities to make passive income from NFTs emerge as well. So if you have a couple of them just lying in your crypto wallet, why not consider making them work for you?
How to make passive income with NFTs?
If you’re wondering how do NFTs generate passive income, trust us, you’re not alone.
So here’s a quick list of a few simple ways to earn passive income with NFTs.
1. Earn royalties
Royalties are common in industries that revolve around intellectual property. It’s a percentage of the sale price that you, as a creator, get each time someone resells/uses your work. For instance, rightsholders receive royalties when we play their songs on Spotify.
It’s the same with NFTs. Even though you buy an NFT and become its rightful owner, creators don’t lose the commercial rights to their artwork. Not only that – they can also receive royalties every time their NFT gets a new owner. Those are the NFTs that make passive income.
How does it work? When you’re minting a new NFT, you get to set your own royalty terms. For example, OpenSea (an NFT marketplace where you can also mint your NFTs) allows you to set up to 10% royalty fee, meaning that you get 10% of the sale price every time someone else purchases your work.
This way, you create and sell the artwork once and don't need to do much else after to earn more money from it – if someone resells it, of course.
2. Stake your NFTs
Whether you create your own NFTs or have a few that you've purchased from someone else, you can stake them to earn passive income.
Staking is a way to earn rewards (in the form of cryptocurrency) for temporarily “locking up” your crypto assets on DeFi platforms. As for NFTs, you just put them in the contract and it generates a token which is a part of the ecosystem of the project. You can “unlock” your NFTs anytime.
Let’s take Blocksmith Labs, for instance. If you own the Blocksmith Labs NFT and you stake it, it generates you 8 FORGE tokens a day. You can use it in raffles for NFT whitelist sports or NFT whitelist spot auctions, for example. The token itself is currently worth $1.1 so you can earn around 10USD every day.
Another example could be Smoked Heads’ $wpuff token. With one level 1 Smoked Head NFT, you can generate 4.20 wpuff, which is currently worth $7 US dollars. Moreover, they have different levels that allow you to earn more.
Staking is especially beneficial for long-term holders who do not plan on selling their NFTs and just hold them in their wallets. Instead, they can stake their NFTs for some time and receive incentives while also retaining full ownership.
3. Rent your NFTs
Another option to earn passive income with NFTs is to rent them. Yes, you’ve read that right.
NFT renting doesn't have any hidden meanings; it is exactly what you think it is. People who would like to use or experience some particular NFT but can't afford it (or don't want to invest in it) can just find one that's up for rent and borrow it for a certain period of time, thanks to smart contracts.
Similarly to NFT staking, this strategy is great for NFT owners who are not using their assets and have no interest in letting them go but wouldn't mind generating some extra money from them.
NFT renting is currently a growing trend in the gaming industry, more specifically, play-to-earn games which can be disappointing if you don’t have bags of money to spare. Having an NFT to help you get further in the game, like particular skin, tool, or creature can be truly costly, so basically, if you can't afford it, you can't play.
Players can solve this problem by renting an NFT that is required to get an advantage in the game. This way, they can continue with their mission without spending hundreds or even thousands on particular NFT, and lenders get a cut of what they earn online. Win-win!
4. Provide NFT liquidity
To understand NFT liquidity, let’s quickly go through how liquidity pools work in decentralized finance.
Put simply, to enable cryptocurrency trading, decentralized exchanges (DEXs) need people to provide funds. It is done through liquidity pools where users stake their crypto assets, become liquidity providers (LPs), and receive something called an LP token that represents how much they have staked.
When people trade on DEX, liquidity providers can earn passive income based on how much they’ve put in a liquidity pool. It comes from transaction fees that everyone has to pay when trading.
With NFTs, it’s more or less the same.
Since NFTs are non-fungible, their liquidity level is low compared to cryptocurrencies. By contributing to an NFT liquidity pool (e.g., where you can buy and sell fractionalized NFTs), you can increase that liquidity and get rewarded for it.
5. Look for utility NFTs
Usually, when you buy an NFT, you’re not just buying a simple image or some other file – you’re also purchasing the value, or utility, that comes with it.
For instance, you’re likely familiar with one of the most famous, Bored Ape Yacht Club NFT collection. You might wonder why anyone would buy a JPEG of an ape for so much money, but it comes with an array of perks that all add to its value.
Like, BYAC NFT holders can access an exclusive members-only space, merchandise store, exclusive Discord server, and even attend parties with the whole community. Moreover, the creators keep dropping more exciting benefits regularly.
As for the passive income, some projects include this option for holders to earn money in their NFT utility. So just like you can get invited to exclusive meetups, you can also earn passive income with particular NFTs. For example, when an NFT is sold on a secondary market, every NFT holder of that utility can receive royalties.
Make your NFTs work for you
Non-fungible tokens are an investment, so make sure it's a good one.
Good NFTs with a growing value can help you reap decent profits in the future and be nice for generating passive income "while you sleep."
Always remember, though, that the tips above or anywhere else on the internet are just that – tips that you can take into consideration, but it's always best to do your own, more thorough research before making decisions. This way, you will be sure you're doing what's really best for you.