Non-fungible tokens (NFT
) are unique cryptographic assets that represent the ownership of a tangible or intangible asset and are hence stores of value. The rarer the asset, the dearer the NFT. But what's more important is that they are blockchain-based assets that can also be staked just like other cryptocurrencies
to make sizeable gains.
NFT has been the buzzword this year, quite literally. Collins Dictionary
named it the 'word of the year'. But NFT has gained popularity not just because it is the first of its kind to provide provable digital asset ownership, but also because it can generate good returns.
For example, the WhenStaking platform of Onessus Blockchain Systems based out of the US had $2 million of its native cryptocurrency, VOID, locked in 9,000 staked NFTs within the first month of its launch. The value of the NFTs has now risen to $3 million.
But what exactly is NFT staking, and how does it yield such high returns? Let's take a quick look.
What is NFT staking?
depend heavily on their global network of transaction validators who authenticate transactions before the data gets added to a block on a blockchain. These validators (or miners) are decided based on the amount of cryptocurrency they pledge towards the operation of the blockchain network. In return, miners earn rewards in the form of the native cryptocurrency for devoting resources. This model of pledging crypto assets is called the ‘Proof-of-Stake
’ model, and the process is called ‘staking’.
Similarly, you can pledge NFTs to support a project while you earn passive income in terms of rewards or fees for dedicating the asset to a blockchain. Currently, most of the NFT staking opportunities are in play-to-earn gaming
platforms such as Decentraland, Sandbox, Axie Infinity, among others. All you need to stake is a cryptocurrency wallet with NFTs.
Over 50 percent of the NFT market is attributable to in-game NFTs, which players can buy using cryptocurrencies. Axie Infinity, for example, has garnered a sales volume of over $2 billion since its launch in 2018.
However, it is important to note that all NFTs cannot be staked. So you need to check the details before buying the NFT.
How is the NFT staking return high?
When you stake an NFT, the staking platform determines its worth based on the rarity and arrives at an annual percentage yield (APY). The rarer your NFT, the higher the APY you get. The value of an NFT also depends upon its capacity to generate a stable revenue stream such as royalties.
Where can you stake NFTs?
The two most popular staking platforms are:
Onessus: The WhenStaking platform allows all types of in-game NFTs from the Onessus blockchain games to be staked via its native currency, VOID. Depending on the staking period, it offers up to 80 percent APY on NFT staking.
Only1: This platform has a unique staking system based on social engagement. It allows multiple users to stake its native currency $LIKE on NFT creators of their choice. If the creator has great social media engagement with the stakers, the APY offered is higher.
There are also a few others such as MOBOX and Zookeeper. In India, Zionverse is one such platform where you can buy digital assets and stake them to earn a return.
NFTs are continuing to disrupt the crypto markets as organisations infuse funds into their development. Although in its nascent stage, NFT staking is catching the fancy of investors who may get lured by high APYs. It is always advisable to read up on the fundamentals of cryptocurrencies and blockchains before investing in NFTs or staking them.
(Edited by : Yashi Gupta)