NFT Staking Guide: What It Is And How It Works

One of the hottest trends in the industry today is the idea of “NFTs”. What is NFT? It is a special kind of token that represents a digital asset or physical item.

For example, a token that represents a digital art piece that you’re selling on the NFT marketplace could be considered an NFT. Non-fungible tokens are an interesting concept because they represent a way of adding utility to something — in this case, art. it then becomes a digital asset and can be sold.

The token’s identifying information is stored in a decentralized registry, in the form of Smart Contracts. These registries, similar to the ones used for decentralized apps, enable developers to digital assets directly to users.

As opposed to cryptocurrencies like Bitcoin where one BTC has the same value as another, non-fungible tokens are all unique in their own right. Furthermore, they are not divisible like fungible tokens. In this guide, we will explore NFT with regards to staking and the mechanics of how it all works.

NFT Staking

One of the thoughts that come to mind is the prospect of staking them for additional profits. Let’s start with the basics, and build from there.

What is Staking?

Among many other things a user can do with NFTs is the idea of staking, which allows you to lock up some of your NFT tokens in a proof-of-stake crypto wallet to secure and govern a blockchain network. It is done in exchange for rewards, rather than a simple deposit or withdrawal model. It’s like a spin-off from mining, but not the same thing.

Why Stake NFTs?

The NFT ecosystem is hampered by low liquidity. At present, it is underdeveloped, as most users purchase the tokenised asset for long-term appreciation. Others do so to burn them, which creates scarcity, and, in turn, increases the value. Staking comes into play to resolve this problem. Staking a non-fungible is no different from staking a cryptocurrency.

Once you’ve found, for example, a digital asset with a revenue-generating potential, stake your tokens and receive incentives. The fee and block could come in the form of an annual percentage yield (APY) of the staked token, depending on the lock option duration. It could feature additional network validation, to ensure transaction integrity and confirmation.

Read: How Yield Farming Works With MoonSwap

Staking rewards depend on a variety of factors. Among them is the NFT asset’s potential to generate considerable income streams. NFT crypto staking can provide rewards up to 100% APY. Besides generating income for users, NFT staking also increases liquidity and attract more investors to the ecosystem. In turn, this will further facilitate the ecosystem’s growth.

Projection of the NFT Ecosystem

At the moment, NFTs encapsulates crypto, gaming, and digital artwork collectibles. However, content creators are currently hopping on the bandwagon, incorporating NFT into their products. For instance, artists who are into oil painting can create a digitized version of their works and even earn royalties.

Notable brands current license their NFTs, including Kellogg’s, Pizza Hut, Ubisoft, MGA Entertainment, and Taco Bell. As of June 2021, Twitter launched its NFT collections. If there’s any better time to become a part of the NFT ecosystem is now!

Conclusion

If you are already an NFT enthusiast who’s short on ideas for how to generate additional income other than HODLing long-term, NFT staking may be the answer. Look for NFTs with the potential to create good returns and invest your money. What makes staking interesting is that you don’t need to purchase your asset of choice outright; yet, you can partly own it and still earn high ROIs.