Many investors and enthusiasts made a fortune during the NFT bubble when creators reeled out innumerable aesthetically glamorous NFTs. In addition, several NFT icons and reputable figures also debuted a series of exciting NFTs into the ecosystem, making the NFT atmosphere lively and boisterous. However, an unprecedented bear market has now set in, leaving many NFT collectors searching for alternative uses for their now dormant assets. Here, we take a look into the untapped potential of NFTs, and how owners can earn passive income from their non-fungible tokens.

What is a Passive Income?

We all know passive income doesn’t need much explanation for those familiar with NFTs, but let’s go through some descriptions to highlight a few things. A passive income is earned from a financial tool, asset, or enterprise without putting too much effort into earning. It is a continuous stream of extra income that arrives periodically (daily, weekly, monthly, or annually). This term became notable in the decentralized space with the advent of DeFi protocols which allows crypto holders to make a stream of income on their idle crypto assets.

This passive income model is also suitable for idle assets like NFTs. Instead of holding onto NFTs that earn nothing while waiting for another NFT bubble or a bullish crypto market, investors can use them to earn passive income in several ways. Read on to discover the best ways to can earn passive income with NFTs in 2023

NFT Royalties

NFTs are unique digital items defined by their distinct properties, making each one individual and unique. This uniqueness has led to a surge in demand among decentralized investors, who are eager to own these highly sought-after digital items. Consequently, the buying and selling of NFTs has emerged as a profitable opportunity for creators, investors, and enthusiasts alike, offering them a chance to earn income passively through royalties. A royalty, in this context, refers to a payment made to the original creator of an NFT at the point of a resale on the secondary market.

This royalty mechanism is usually defined upon creation of the NFT within the its metadata, and generally ranges between 0-10%. Following the initial sale of the NFT, subsequent trading on secondary marketplaces that honor royalties will trigger the smart contract, and automatically distribute funds to the original creator. This payment will continue indefinitely, even if the creating wallet becomes inaccessible.

How to Earn Royalties from NFTs?

Earning royalties on NFTs doesn’t require sophisticated knowledge; creators can easily mint their NFTs and set the preferred royalty terms for sales on the secondary market. One of the most profitable NFT royalties fetched Beeple over $600k when the “Crossroads” NFT was resold to another buyer at $6.6 million in February 2021.

Where to Earn Royalties?

It is worth noting that royalties are paid automatically without getting involved directly in the sales of an NFT following its creation. For an in-depth guide to NFT marketplaces that honor royalties, take a look at our Guide to Marketplaces that Honor NFT Creator Royalties.

NFT Rentals

NFT rental is another attractive passive income-earning model to make money with idle digital items. It involves lending NFTs to other users for a predefined duration in exchange for previously agreed financial terms. This model resembles renting physical assets like cars and real estate properties, except within the digital realm. NFT renting became notable with P2E games, where players can rent in-game collectibles like avatars and weapons in order to play without a costly initial outlay. NFT rental also applies to the Metaverse, where users can rent fashion accessories and virtual properties like LAND, office space, and more!

What are the Best NFT Rental Services?

There are reputable dapps suitable for NFT rentals, including IQ Protocol, UnitBox DAO, Trava Protocol, Vera, ReNFT, Double Protocol, N3RP, Renfter, Zharta, and Darkblocks. Each rental platform has its guide on how to start an NFT rental; the basic processes usually involve setting a price, rental duration, and agreement terms.

NFT Staking

Staking is a popular terminology in the DeFi ecosystem, which involves locking crypto tokens in a smart contract vault to earn passive income. However, the staking initiative has found another use case in the NFT ecosystem. NFT staking involves locking an idle NFT in a special smart contract for a predefined duration to earn passive income. Aside from these special smart contracts, some NFT projects support staking their native NFTs in liquidity pools to earn rewards from the ecosystem’s transaction fees. In contrast, some projects allow NFT holders to lock the asset in the DAO pool to participate in governance. However, owners should fully research the compatibility of their NFTs within the desired staking platform. Examples of NFT staking platforms include Binance NFT PowerStation, Splinterlands, BAND NFTs, NFTX, KIRA, and Polychain Monsters.

P2E Games

Play-to-Earn (P2E) games are decentralized games that reward players with crypto tokens and digital collectibles. Some P2E platforms require having some particular NFTs to play their games; as such, players can use their NFTs to play decentralized games and earn more NFT, which can be exchanged for crypto tokens. Meanwhile, some earned in-game collectibles can be staked on some gaming platform or loaned to another player to maximize profits. This process can easily transition into another episode of NFT farming.

Furthermore, some NFT projects operate like a gaming platform where users’ NFTs can earn other NFTs for participating in the NFT ecosystem daily. Some NFTs also breed and produce other NFTs and crypto tokens for holding them. These collectibles can be exchanged for crypto tokens on custom marketplaces. Examples of P2E games in this category include Axie Infinity, Aavegotchi, Galaxy Fight Club, Zed Run, Gods Unchained, and Aurory.

NFT Farming

Yield farming or farming is another DeFi protocol incorporated into the NFT landscape. It involves depositing crypto assets into several DeFi protocols like staking, lending, and liquidity mining. This initiative is modeled into NFT farming, where investors can offer liquidity to NFT pools in DeFi protocols. Owners can also deposit their NFTs into a liquidity pool to earn new NFTs or ERC-20 tokens. Since yield farming is to reinvest earnings in another passive earning protocol to maximize profits, rewards earned from NFT farming can also be reinvested into other NFT liquidity pools or DeFi pools to maximize yields. Platforms suitable for NFT farming include MOBOX, Bunicorn, Pulsar Farm, and ZooKeeper.

Conclusion

The era of NFTs sitting idle in wallets has ended by incorporating DeFi protocols into the NFT ecosystem. As such, NFT owners can earn passive income with their NFTs while holding onto their coveted collectibles. However, potential investors seeking to adopt any of the above-highlighted methods should research how the respective platform works. This will also shed more light on the compatibility of their NFTs with platforms and the feasibility of profit-making.

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*All investment/financial opinions expressed by NFT Plazas are from the personal research and experience of our site moderators and are intended as educational material only. Individuals are required to fully research any product prior to making any kind of investment.