You will be sadly disappointed if you expect to learn about farming or online farming in video games. NFT farming combines DeFi with NFTs.
Do you know anything about NFT farming?
The purpose of NFT farming is to stake NFTs for rewards or stake tokens for an NFT. In some ways, it is like yield farming. Although NFTs are illiquid digital assets, it creates liquidity and utility for NFTs by either staking them or rewarding them.
Because NFT farming is almost an extension of yield farming in the crypto world, it will be easier for people who are familiar with yield farming. These NFTs, however, earn you rewards just like other NFTs.
As a result of NFT farming, HODLers’ digital assets gain liquidity while being put to use. They will be able to earn better returns and acquire new NFTs as a result. So if your next question is,
What is the process?
Let’s get started. Considering that NFTs are also digital assets, NFT farming works much like yield farming, where you must place your token in a pool to earn APY.
In addition to Ethereum, NFTs can also be found on Solana, Cardano, and others. Modern blockchain networks include NFT functionality into their infrastructure, making them interoperable with various applications due to the common standards they follow. An interoperable system connects various systems – or in this case, multiple smart contracts and programs – together.
Where do I begin?
NFT farming requires a few things before users can get started
- An electronic wallet
- Connecting their NFTs with a blockchain network
- On the platform of your choice, you will have a certain token in your wallet.
A proportion of the token pool will be staked to earn rewards based on its value.
By using a stake portal, you can earn rewards from NFTs that are compatible. On NFT marketplaces such as OpenSea or Raible, you can farm limited edition NFTs with stake portals.
Users can claim NFTs using the tokens generated by that particular portal by generating rewards in that token. The MEME portal has several guides for getting started with NFT farming. Before you decide to wade into this sea of opportunities, these guides should be a helpful starting point.
A few other noteworthy developments
In the gaming community, more attention has been paid to gamified NFT Farming, which adds one more layer to the combination of DeFi & NFT. For an in-depth description of the current state of crypto gamification, read Binance’s explainer.
Axie Infinity is one of the most famous games that has captured the interest of millions where players can earn and sell SLP (Smooth Love Potions) tokens in the game.
Identifying the drawbacks
Despite how helpful this information sounds, there are a few cons to keep in mind. In the same way that every other phase of blockchain has its risks, NFT farming is a brand-new and innovative way to diversify your crypto portfolio.
Composability is its greatest strength and its greatest weakness. The NFT platform consists of build-up blocks, so if one block acts up, other blocks could also crumble. Since many of these technologies are still in their infancy, smart contract bugs are also a significant risk. As well as the fault in operations, there is the risk of hacks and other attacks.
In summary, NFT farming represents an exciting and innovative technology that is evolving rapidly. Traders and holders of NFT tokens now have additional options besides buying and selling them. Besides being able to convert their NFTs into liquid assets, they can earn rewards by monetizing them. Meanwhile, we can only hope that the hype and attention they are receiving will help the industry mature into one with rapid improvement.