How does NFT staking work?

How does NFT staking work? – Mail Bonus

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The indivisible nature of NFTs is the biggest drawback of this asset class for some investors. Most of the time, either or investment decisions have to be made. What if you like to keep your NFTs while still profiting from them?

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

NFT staking and proof of stake

When you stake NFTs or other crypto assets, you support the operation of the network by agreeing not to withdraw them during the period in which the blockchain deploys them. Thus, it verifies that the new transaction is legitimate.

Blockchain networks employ consensus mechanisms to achieve this. The protocols that allow staking use a proof-of-concept mechanism for this purpose. By contributing assets to the pool, you become a participant in this process and can be selected as a validator. Since the pledged NFT acts as a guarantee of the legitimacy of the transaction, you are rewarded for being a validator.

NFT staking rewards and related metrics

The prize amount depends on the rarity and number of NFTs pledged, the lock-in period, as well as the annual percentage rate (APR).

Yield is the most important metric for a mortgage; it shows the interest you earn on your property per year. Unlike APY (annual percentage rate of return), it does not include compound interest.

Another important metric, Total Value Locked (TVL), refers to the total amount of assets deposited into the protocol by liquidity providers. A higher TVL means more resources are locked up in that protocol; therefore, it is a useful indicator for exploring projects with higher returns.

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NFT Stake Platforms

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

One of the most popular platforms is NFTx, whose group includes NFT vaults from popular libraries, from Meebits to Chromie Squille. Users who own NFT assets from available vaults deposit them into the corresponding vault and in exchange receive volatile ERC-20 tokens. Users can also create new vaults for their own NFT collections.

NFTX is of particular interest because it also provides inventory status along with liquidity provision. It allows holders of NFTs at floor prices to earn a return on their holdings. Liquidity providers earn an 80% percentage, while inventory providers receive a 20% percentage. Nevertheless, the latter excludes risks associated with liquidity, such as permanent losses.

Other NFT staking platforms worth mentioning include Whenstaking by blockchain company Onessus and Kira Network.

Play-to-Earn games offer NFT betting options

NFT staking is common among blockchain games. You can find mortgage related opportunities in almost any P2E game; here are some examples:

  • Mobox players can stake Momo NFTs to earn crypto rewards.
  • The open world fighting game Samurai Saga has its own native betting platform.
  • Splinterlands NFT cards collected during gameplay can be deposited into a cash pool.
  • League of Ancients players can gamble NFT skins to earn the game token LOA.

Into the future of administration

Finally, we would like to mention that it is also possible to integrate NFT staking into DAOs. As usual, asset owners can lock the assets in the pool, but this time the DAO. The difference is that along with monetary incentives, they can also gain voting rights and influence the future of the DAO ecosystem, which paved the way for new NFT tools in the crypto ecosystem.

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