The concept of NFT is becoming more and more entrenched in the cryptocurrency industry, the options for using irreplaceable tokens are constantly expanding. And of course, there are many different opportunities to make money from such assets.
In this article, the digiitallife.com editorial staff talks about how to make money from NFT tokens. Many of these ways of earning can be described as passive, and they also vary in their degree of risk.
Table of Contents
What are NFTs
Technologically speaking, NFTs are cryptographic tokens that, unlike conventional tokens, are strictly unique: each token is different from and cannot be replaced by another, hence the name (irreplaceable tokens). Accordingly, the value of each token is determined individually, based on what it contains, who the author is, etc. It’s like with works of art.
The NFT format can include:
- Digital paintings and animations.
- Video and audio.
- In-game items for blockchain games – weapons, decor, etc.
- Plots of land in meta universes.
- In addition, any real objects of the physical world can also be tokenized, then the buyer of NFT gets the right to the real object.
The important advantage of NFT is that the user’s rights are hardwired into the blockchain. Whoever holds the token in the blockchain wallet is the sole owner of the tethered object. That said, for example, pictures other people are free to copy and save, but that would be like making reproductions of artists’ paintings. The original is still considered to belong to the NFT owner,
Ways to earn on NFT
Let’s look at the main methods of earning on NFT. Their list is constantly growing in the last couple of years.
Creating and trading on NFT-marketplaces
The first thing that usually comes to mind is to create your own NFT token and put it up for sale. It’s not hard to do. However, there is no guarantee that the token will interest buyers
Examples of marketplaces that provide functionality for creating and buying/selling NFT: OpenSea, Binance NFT, Rarible, Solanart. Note that a transaction fee will need to be paid by the network when putting it up for sale. On the Ethereum network, it can be quite high. This should also be taken into account when setting the starting price.
A little bit about the issue of pricing. How to evaluate your first NFT so as not to make it too cheap and not to scare away customers with a high price? There is no formula or plan to solve this problem. Experts give two basic pieces of advice:
Start with low prices, but carefully monitor the market situation and do not be afraid to raise the price if you realize that the product you offer in the near future will be relevant.
Experiment. Tempt customers in different ways, such as discount codes for future purchases, adding nice bonuses and even physical souvenirs, merch. It is possible to make tokens unlockable, that is, the user can see some of the content only after the purchase.
It is also common practice to resell other people’s NFTs, because they can grow in value over time. But again, there are no guarantees of this growth. Nevertheless, many celebrities invest, investing millions of dollars in digital art.
When creating an NFT, the creator can set terms under which they receive royalties whenever their creation changes hands. This is an ongoing passive income if the works are in demand.
There is no time limit on the royalty program. If a 10% royalty is set at creation, the author receives that 10% always, no matter how many times the token is resold. The process is fully automated and is done with smart contracts. The author does not need to track the payments manually or confirm them every time.
Most modern blockchain games with a Play-to-Earn mechanism allow you to earn on NFT.
In the format of irreplaceable tokens are pets, weapons, equipment, territory areas, skills, and more. By obtaining these items during the game, participants can sell them in the built-in marketplace. Also, some projects provide the ability to create their own items, usually decorative ones, using an integrated “constructor” and sell the results of their creativity.
Examples of blockchain games with NFT:
- Axie Infinity.
- My Neighbor Alice
- Alien Worlds
Renting out virtual plots or things
Another interesting way to generate passive income is to rent out your NFTs. For example, in some collectible card games on blockchain, you can rent or lease individual rare cards to help increase your chances of winning. Users set the fee and duration of the transaction themselves.
Or leasing virtual land plots that the tenant can use as they see fit: place advertising structures, other commercial objects. Read more about it in our article.
Supply of liquidity
Based on the pool and the parameters selected in the liquidity provision interface, a unique NFT representing a position in that particular pool is minted. The owner of an NFT can change or redeem the position or can sell it on any marketplace on the ether blockchain, for example OpenSea.
Visually, NFTs look so that you can immediately identify the basic information on them:
- At the top is the trading pair, on the sides of the card are pool addresses and token tickers.
- In the center is a curve, the shape of which is determined by the concentration of liquidity, as well as the ratio of the initial deposit of tokens.
- The NFT color scheme is based on two basic tokens, so it is unique for each pool, but in the same style.
- Below the curve is the NFT identifier and the range of the minimum/maximum price set by the LP.
- The icon at the bottom right indicates the liquidity provider’s position based on their activity in the pool.
- Above this icon on some NFTs you can see another small flash icon. This is a rare attribute whose generation chance increases as the token ID increases (about 10% at ID 100, about 3% at ID 100,000).
Stacking with NFT allows you to earn in a relatively new way, made possible by the close connection between irreplaceable tokens and the decentralized finance industry. Stacking involves depositing or “freezing” digital assets in a DeFi-protocol smart contract to generate passive income.
Examples of platforms that support such functionality:
- R-Planet .
- Kira Network
The assets in which rewards are paid out can vary – for example, ether or the platform’s own management tokens. In addition, it is often possible to reinvest coins earned on NFT into different yield farming protocols.
Investing in NFT startups
This method can be called more of an indirect way of earning from NFT. Nowadays, new projects that use the concept of irreplaceable tokens are regularly launched. These are applications in a wide variety of industries, from games to data storage. Investments in the most promising projects can pay off repeatedly in the future.
Platforms such as Binance Launchpad, Bybit Launchpad, etc. will help select the really worthwhile startups. Tokensales on these exchanges take place in a subscription format, ensuring a simple and fair distribution between users. In addition, the exchanges conduct a thorough analysis of each startup, as they value their reputation. But you should also do your own research to invest wisely.
What is NFT?
Cryptographic tokens, each of which is unique in its properties, pegged value, and relevance. They represent the ownership of a digital/real object.
What are the main ways of making money from NFT?
The most commonly used options are trading or use in blockchain games. But the range of functionality of tokens is steadily expanding.
What are royalties?
Author royalties. The author sets them at the time of token minting, such as 5% or 10%. The corresponding royalty will be received in the future from each resale of the token on the secondary market.
What marketplaces can I buy or sell NFT on?
The most popular marketplace today is OpenSea. It works with assets on the Ethereum blockchain. Other blockchain platforms are appearing too, it gives an opportunity to avoid the high fees of the Ethereum network.
How can Uniswap liquidity providers make money on NFT?
On Uniswap v3, liquidity provider positions are presented in NFT format. You can profit from them or sell quickly with any suitable marketplace to withdraw assets.
Is it safe to invest in startups with NFT?
There is always a risk that the project won’t take off and there will be minimal or no profit at all. To minimize the risks, it is recommended to consider projects backed by well-known cryptocurrency exchanges.
NFT is much more than just another trend in the blockchain industry. The technology has many applications, they are being revealed gradually, and clearly there will be many more in the long run. New individuals and organizations alike are constantly entering the field. At the same time, the process of making money from NFT is not as simple as it seems at first glance. Minting and selling entails the cost of network fees. And the volatility of a young market carries risks for investors. If you have spare cash, you can buy a token that you think will be in increasing demand in the future, but no one can guarantee that.