Home
NFT

How does NFT staking work?

0 Comment

The indivisible nature of NFTs is the biggest drawback of this asset class for some investors. Most of the time, this requires an either-or investment decision. What if you want to HODL while still profiting from your NFTs?

One solution is NFT staking which is a way to generate passive income from your assets. It’s like cryptocurrency in that you lock up your holdings in a DeFi platform or a protocol to earn rewards for a certain period of time. This way, you can earn extra income while still owning your NFTs.

NFT Staking and Proof-of-Stake

When you own NFTs or other crypto assets, the blockchain supports the operation of the network by agreeing not to withdraw them for the duration of their operation. Thus, it verifies that the new transaction is valid.

Blockchain networks establish consensus mechanisms to achieve this. Protocols that allow staking implement a proof-of-stake mechanism for this purpose. By contributing resources to the pool, you become a participant in the process and can be selected as a validator. Since staking serves as a guarantee of the validity of NFT transactions, you are rewarded for being a validator.

NFT staking rewards and related metrics

Reward amount depends on rarity and number of NFTs staked, lock-up period, as well as Annual Percentage Rate (APR).

APR is the most important staking metric; It shows the interest rate you earn on your assets over a year. Unlike APY (annual percentage yield), it does not include compound interest.

Another essential metric, Total Value Locked (TVL), refers to the total amount of assets deposited by liquidity providers in protocols. A higher TVL means more capital is locked into that protocol; It is therefore a useful indicator for exploring projects with high yields.

NFT staking platform

You can’t bet every NFT you hold, so it’s a good idea to check platforms to learn about NFTs.

One of the most popular platforms is NFTx, whose pool includes NFT vaults from popular collections ranging from Mibits to Chromium Squill. Users who own NFT assets from available vaults deposit them into the respective vaults and, in return, receive fungible ERC-20 tokens. Users can create new vaults to store their own NFT collections.

NFTX is particularly attractive because it also offers inventory staking along with liquidity provision. This allows owners of floor-priced NFTs to receive a yield on their assets. Liquidity providers earn an 80% percentage, while inventory providers earn a portion of 20%. Nevertheless, the latter eliminates risks associated with liquidity providers, such as temporary losses.

Other NFT staking platforms worth noting are OneStaking by blockchain company Onesus and Kira Network.

The play-to-earn game offers NFT staking opportunities

NFT staking is a common topic among blockchain games. You can find staking-related opportunities in almost any P2E game; Here are some examples:

  • Mobox players can share Momo NFTs to earn crypto rewards.
  • The open-world combat game Samurai Saga has a native staking platform.
  • Splinterlands NFT cards collected during gameplay can be placed into the Liquidity Pool.
  • League of Ancients players can wager NFT skins to earn in-game tokens LOA.

Towards the future of governance

Finally, we would like to mention that it is also possible to integrate NFT staking into the DAO. As usual, resource holders can lock resources into pools, but this time in DAOs. The difference is that in addition to monetary incentives, they can also gain voting power and influence the future of the DAO’s ecosystem, paving the way for new NFT utilities in the crypto ecosystem.



https://ift.tt/Jj1mUGM

Baca juga

Post a Comment

Post a Comment