What Is Staking an NFT?

Bryan Healey14 Jun 2022

Non-fungible tokens (NFTs) continue to grow in popularity and curiosity, and a new way of generating money from these tokens has emerged: staking.

As soon as the subject of NFTs is broached, most people immediately associate them with the notion that they could one day increase in value much like the tangible items they represent like artworks and other collectibles. A great percentage of NFT projects are based on this premise. But as the NFT market picks up steam, more and more people are finding creative ways to put them to use. "Staking," or keeping a collection in a pool and earning rewards from the staking platform, is a new use case for NFTs.

What Does It Mean To Stake an NFT?

Staking NFTs on an NFT platform or protocol in order to gain staking rewards and other benefits is known as NFT staking. This is a great way for NFT owners to make some extra money while still keeping control of their NFTs.

Although NFT staking is still relatively new, it functions like other DeFi yield farming methods. Depending on the annual percentage yield (APY), staking period, and amount of NFTs staked, you can get benefits for locking up NFTs on a platform.

Since NFTs are so rare, most investors and collectors choose for HODLing and speculating instead. They now have a new way to make money off of their assets thanks to NFT staking, which could encourage more individuals to get involved and raise the market demand for stakable NFTs.

In the same way that you would stake Bitcoin or Ether, you could stake an NFT as well. A cryptocurrency wallet with NFTs is all you need. Some NFTs, on the other hand, cannot be staked to get rewards. Before purchasing NFTs, it's a good idea to evaluate the specifications of the projects you're interested in.

How Does NFT Staking Work?

There is a staking pool in which the assets are held, and then a random selection of validators is made, who is responsible for mining or confirming transactions. Those who pledge more have a greater chance of succeeding.

Tokens are created and awarded to validators as staking rewards each time a new block is introduced to the chain. The number of coins the validator is staking, the staking period, and how many coins are staked on the network, and more affect how much the validator earns as a staking reward.

Coin holders could make their money work for them by staking their coins and becoming validators in return for rewards and passive earnings. Furthermore, the cryptosystem is safe, and all user transactions are verified. It's a win-win situation for all parties. According to the cryptocurrency protocol, those who stake coins are still in the ownership of those assets and are free to withdraw them out of the staking pool at any moment.

As tokenized assets, NFTs could be staked using the same approach. Staked NFTs are eligible for rewards depending on the annual percentage yield (APY) and the amount of NFTs a user has.

It's important to remember that not all NFTs can be staked for rewards, just like cryptocurrencies. Before purchasing any NFTs, make sure they meet the specifications of the project you've chosen.

How To Stake NFT

Unlike well-known cryptocurrencies (such as ETH and BTC), NFTs cannot be pooled together for staking. Because NFTs are not a cryptocurrency like EHT or BTC, they are non-fungible. As a result, numerous blockchain platforms have developed new ways for evaluating NFTs and determining their particular reward to build a staking utility for NFT assets.

An NFT's value and annual percentage rate (APR) can be determined by the staking platform when you stake an NFT. The value of the NFT will be impacted by several variables, including its rarity, its capacity to produce recurring revenue in the form of royalties, and the presence of other investors.

Staking platforms include built-in systems that evaluate your NFTs, estimate their value, and provide a yield value based on the length of time they've been in existence. As long as you conduct your research and make sure that the smart contracts have been audited, you can be certain that you'll be able to keep your assets safe until you're ready to release them.

Many well-known NFT artworks and NFT game assets could be staked for an annual percentage payout of up to 100%.

Where Can You Stake NFT?

Considering that NFT staking is a recent development, there aren't too many platforms that support it across various NFT collections.

NFTX

NFTX enables holders of specific NFT collections to store their NFTs in a vault. In exchange, NFTX provides an ERC20 token known as a vToken. To be clear, it is a 1:1 swap. This implies that staking one NFT in the vault earns you one representative vToken. The vTokens may then be staked to earn rewards, used to buy additional vault NFTs, placed in liquidity pools, or auctioned on decentralized exchanges.

NFT Worlds

Users could now acquire the platform's native token WRLD by staking their world NFTs on NFT Worlds. Users who are fortunate enough to own one of the 10,000 NFT Worlds can receive WRLD tokens regularly. Stakeholders across the world can collect their WRLD rewards at any time.

How To Stake Directly Within an NFT Collection

The basic kind of NFT staking occurs inside NFT collections that explicitly enable this capability. Staking NFTs inside a collection earns benefits for holders who would otherwise keep their NFTs in their wallets. Furthermore, it naturally reduces the supply of that NFT. In principle, this raises the NFT collection's floor price.  Staking NFTs is particularly frequent in blockchain-connected collections, such as play-to-earn (P2E) games.

Axie Infinity

The immensely popular P2E game has added a staking option. Players can stake Axie Infinity Shards ($AXS). At the moment, $AXS staking rewards have an annual percentage rate of 80%. It means that stakers would get roughly double the amount of $AXS staked in a year.

Splinterlands

Splintershards (SPS) token holders should stake their NFTs to winning rewards, participating in governance, or participating in special offers and promotions. SPS can be staked in either a Binance Smart Chain wallet or directly through a Splinterlands gaming account.

You could use NFT staking to put your NFTs to good use. Staking allows those who own NFTs to earn even without ever having to sell their NFTS, making it a viable way to earn passive income.

Bryan Healey

Bryan Healey

Bryan, known by his friends as 'blockchain bryan' has been playing with crypto since 2014, early in it's inception. He wants to share what he's learnt over these years, and hopes you'll get some value out of it.

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