NFT staking is the process of locking up non-fungible tokens on a platform or protocol to collect staking rewards and other benefits. While retaining ownership of their collection, staked NFTs allow holders to receive income from their collection.
The process of staking
Validators are chosen randomly from a staking pool and tasked with “mining” or confirming blocks of transactions, as per the blockchain protocol. Users who pledge more have higher chances of being chosen.
Tokens are minted and distributed to validators as stake rewards every time a new block is added to the chain. What a validator receives as a staking reward is determined by several factors: how many coins the validator is staking, how active the validator has been, how many coins are staked on the network, and more.
Cryptocurrency transactions are confirmed, and the protocol is also secured. This benefits everyone. Coin holders who stake their coins remain in control of their assets and are free to remove them from the staking pool, depending on the cryptocurrency protocol terms and conditions.
Since NFTs are essentially tokenized assets, staking on them works similarly. NFTs can be stored on specific platforms for user safety, and users can earn rewards based on the set annual percentage yield (APY) and the number of NFTs they stake.
Unlike cryptocurrencies, not every NFT can be staked for rewards. Before you acquire any NFTs, check the conditions of the project you’re interested in first.
Rewards for staking NFTs
Staking NFTs can result in a variety of rewards, depending on the platform and the type of NFT staked. Most platforms allow users to take their staking rewards every day or every week. In most cases, stake rewards are offered in a platform’s native utility token, which is listed on exchanges and can be exchanged for other cryptocurrencies or fiat.
NFT holders can lock up their assets in the DAO pools of some staking platforms so they can participate in the governance and vote on platform proposals.
The majority of the NFT market is represented by in-game NFTs. Therefore, most staking opportunities are on play-to-earn platforms such as Axie Infinity, The Sandbox, Polychain Monsters, Splinterlands, etc.
Hottest platforms for NFT staking
- NFTX – a platform used to create ERC2 tokens which are backed by NFT collectibles.
- Splinterlands – an online card game where players can build their collection decks and play matches against other players.
- BADN NFT – a platform where users can trade music NFTs.
- Polychain Monsters – a blockchain platform for collecting animated NFTs.
Investing in NFT staking
Staking NFTs is still a relatively new idea. Understandably, liquidity is a concern for NFTs – partly because the ecosystem is underdeveloped and partly because most NFTs are purchased for HODLing as long-term investments. Yet, the hype surrounding NFTs has piqued the interest of novice investors who are exploring and potentially earning rewards from NFT platforms for the first time.
Although NFT staking is not yet as popular as cryptocurrency staking, it has tremendous growth potential in the near future. This is especially possible when Eth2 successfully implements a PoS mechanism, replacing mining with staking.
There is already evidence that staked NFTs produce results. One of the biggest advantages of NFT staking is that you don’t have to transfer ownership of your collection. In order to earn rewards, all you need is to deposit your assets in a staking pool.
Simple as that!
Investing in NFT staking allows you to make extra passive income from idle NFT collections. This has given rise to new use cases for NFTs that have never been imagined before. The concept is still in its infancy, but it is likely to spur more staking of NFTs.
NFT staking brings much potential for profit, especially for the play-to-earn gaming industries.