"How does NFT make money? The first thing you can think of may be to buy low and sell high in the secondary market, but this is not easy. In addition to earning the price difference in the secondary market, here are some other ways you can make money from NFT 5 ways."
In 2021, the NFT market has developed into a major sector of the encryption industry. At the end of 2021, the total amount of NFT transactions exceeded US$12.6 billion, a 77-fold increase from US$162.4 million at the beginning of the year.
Although the vast majority of NFTs are created on the basis of Ethereum, and then traded. But the whole process will generate high gas fee. According to Raribleanalytics data estimates, the cost of minting a single NFT on Ethereum is about $98.69, while the cost of minting a collection of NFTs averages $900.
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01. What is NFT?
For those unfamiliar with the concept of NFTs, NFTs are tradable digital receipts stored on the blockchain, visible and autonomously verifiable by all. These digital receipts (NFTs) contain unique information that can be used to prove who the sole owner of certain items, whether tangible or intangible, is.
But it's worth noting that NFTs don't store the digital pictures they represent themselves. NFT just marks an address on the blockchain, which is unique.
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02. 5 ways to earn passive income from NFT
1. NFT leasing
Renting out NFT is a way to earn passive income, especially for those who have a high demand for NFT. For example, some card trading games allow players to rent NFT cards to increase their chances of winning in the game.
In the process of leasing NFT, the terms of the leasing relationship involving transactions between two parties will be governed by smart contracts, so NFT owners are usually free to set the duration of their leasing agreement and the leasing rate of the NFT.
In the market, reNFT is a typical platform that supports users to rent or lend NFT. Lenders can set the maximum borrowing period and daily interest rate, currently the average is between 0.002 and 2 WETH.
2. NFT royalties
NFT creators can set their own terms through the underlying technology of NFT, so that they can get corresponding royalties every time NFT changes hands in the secondary market. In other words, the creator can earn passive income even after the work is sold to a collector.
Therefore, NFT creators can obtain a certain share of the sales price of NFT indefinitely. For example, if the NFT's royalty is set at 10%, then each time the work is resold to a new owner, the original creator will receive a 10% profit on the total sale price.
It should be noted that NFT creators usually set these predetermined percentages when creating NFTs. In addition, smart contracts will manage the entire process of royalty distribution. This means that, as an NFT creator, you don't need to enforce your royalty terms or track payments manually, as the entire process is fully automated.
3. NFT pledge
One of the great benefits of combining NFT with DeFi (decentralized financial protocol) is that it makes it possible to pledge NFT. Staking refers to the process of depositing or “locking” NFTs into DeFi protocols to generate yield.
While some platforms support most NFTs, others will require you to purchase the original NFT in order to receive staking token rewards (usually denominated in the platform’s native token).
Platforms with NFT pledge function include:
Kira Network
NFTX
Splinterlands
Only1
In some cases, some of the rewards distributed to miners are denominated in governance tokens. This protocol gives token holders the right to vote on the future development of their ecosystem. Typically, we can reinvest tokens obtained by staking NFTs into other yield-generating protocols.
4. Provide popularity to earn NFT
Due to the continuous integration of NFT and DeFi infrastructure, it is possible to obtain NFT income by providing liquidity in a given liquidity pool.
For example, when you provide liquidity on Uniswap V3, an AMM (automated market maker) will issue an ERC-721 token, also known as an LP-NFT, which will detail the amount of the total amount you have locked in the pool share. Information such as your stored currency pairs, token symbols, and mining pool addresses are also stored in LP-NFT. You can sell this NFT to quickly close your position in the liquidity pool.
5. Liquidity mining of NFT
As NFTs are rapidly becoming a core component of AMMS, currently, users can use NFT-supported products for liquidity mining. Yield farming refers to the method of using multiple DeFi protocols to use the NFT you hold to generate the highest possible yield.
From our example above, the token LP-NFT, which serves as a liquidity provider on Uniswap, can be further used as collateral or pledged on other protocols to earn additional income. LP-NFT tokens are equivalent to earning income again on the basis of another income generating agreement. For liquid mining users, this opens up an ideal model for stratified income generation.
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