NFTs have a lot more value than meets the eye.
The hidden value of NFTs lies beneath the surface in their intrinsic utility, and that's something that can't be captured with a screenshot.
Another thing that most people don't know about NFTs is that they have the ability to earn passive income
Many collections allow users to stake NFTs to earn rewards. There are also NFT staking platforms designed to enable NFT holders and non-holders alike to make the most of these digital assets.
In this article we'll look at several promising NFT staking opportunities and how you can earn passive income via NFT staking rewards.
What is NFT staking?
NFT staking refers to an NFT owner locking up their digital asset for a certain period of time, earning passive income in the form of cryptocurrency while doing so. Some collections allow users to stake their NFT for an indefinite lockup period, while others have strict limits for how long NFTs must be staked before unstaking.
To facilitate this, there are also dedicated, collection-agnostic staking platforms that reward NFT collectors with tokens in exchange for staking NFTs from multiple projects and blockchains. But more on those later.
How does NFT staking work?
Staking is a key feature of many different blockchains. With NFTs, staking is the action of depositing your digital asset onto a secure platform that will earn yield in the form of cryptocurrency. The longer you lock up your NFT, the more rewards you will earn.
Traditional cryptocurrencies like Ethereum implement a Proof of Stake (PoS) mechanism that secures the blockchain via validators having their vote weighed in accordance with how many tokens they have staked.
There are also riskier decentralized finance (DeFi) protocols such as yield farming and liquidity pools, which allow you to pair equal amounts of tokens in swapping pairs to earn a percentage of total network transaction fees.
But the most basic way to earn interest on your crypto is by staking your coins for a determined lockup period in order to earn more coins, like earning interest on your funds at a traditional bank.
The good news is that staking is also available for NFTs from many different collections.
You can earn passive income from certain NFTs by staking them on a compatible platform. This can be a beneficial tool for long-term NFT holders, who can generate passive income from their assets instead of simply holding them in a cryptocurrency wallet.
How are NFT staking rewards calculated?
Every collection that offers staking will have its own rewards rate, which incentivizes NFT holders to lock up their assets for as long as possible.
Just as you can view the annual percentage yield (APY) on traditional cryptocurrency staking platforms, so too can you preview returns on NFT staking sites. However, not every site will show an exact APY, but instead may display the expected token rewards (e.g. 10 tokens per day) that can be earned during the staking period.
Again, the exact reward value will vary by NFT, but the common factor uniting most projects is that they will compensate users that stake NFTs by rewarding them with a utility token. This token may have additional perks such as voting, governance, and general decentralized autonomous organization (DAO) benefits. Some NFT collections will even let you stake these earned tokens, allowing users to compound returns!
Is NFT staking profitable?
NFT staking can be a worthwhile endeavor given the right conditions. Before staking an NFT there are several factors you should consider.
1) Annual NFT staking yield/APY
The first question an NFT staker may ask themselves is: what are the expected staking returns of the project? Some NFT collections may promise lofty interest rates. While this may be tempting initially, you should be cautious of returns that appear too good to be true. These rates can fluctuate drastically and often won't hold up for very long.
Some projects will increase APY rewards for staking multiple NFTs or NFTs with a higher rarity score. If you're planning to hold more than one NFT from the same collection, then you can check to see if it's worthwhile to stake them for better interest rates.
2) NFT collection price
Experienced NFT traders will know when to hold and when to sell. If you plan on flipping an NFT, it may be better to sell than stake, especially if the collection has seen recent price volatility.
While staking can be a good hedge against short term price movement, in some cases higher returns can be achieved simply by selling when the floor rises. Timing this perfectly, however, is very difficult, and even the most seasoned traders will have difficulty getting it right 100% of the time.
3) Cryptocurrency price movement
Besides the floor price of the NFT collection itself, you should also keep in mind that the cryptocurrencies associated with NFTs are volatile as well. For example, if you buy an NFT for 1 ETH when Ethereum is $3,000, and sell for 1.1 ETH when Ethereum is $2500, you'll actually be selling at a loss (of $250).
4) Percentage of total NFTs staked
If you're hesitant to stake an eligible NFT, you can take a look at the project's website to see the percentage of all NFTs that are staked. A higher number will indicate a healthy signal that NFT owners are dedicated to holding for the long run. Although not a guarantee, there is a lower chance of a mass sell and price dump if a large percentage of total NFTs are staked—especially if there is a longer required lockup period.
5) Lock up period
There may be strict lock up period rules, depending on the NFT collection or staking platform used. If you prefer to have quick access to your NFT, then it's best to choose an NFT staking option that carries a shorter lock-up period; anything from hours to days is preferable to a lock-up period that lasts up to weeks.
The best NFT staking platforms
If you own an NFT eligible for staking, you can check the official collection website for complete instructions on where and how to stake it.
There are also collection-agnostic platforms built to allow users to stake NFTs from multiple NFT projects.
Here are some of the top staking platforms:
NFT assets from these games can be staked on WhenStaking to earn passive income in the form of $VOID, the native token for Onessus that powers current and future projects on the platform. For fans of popular blockchain games on the WAX blockchain, both Onesssus and WhenStaking are conveniently integrated with WAX Cloud Wallet.
Rather than just a simple APY projection, rewards on WhenStaking vary by NFT rarity, collection value, and the platform's unique level system. On WhenStaking, users can earn more rewards over time, with NFTs leveling up and increasing APY the longer they are staked. Stakers can also rest assured that they will still be able to use their NFTs as an asset in the game of their choice, through a leased version of the staked token.
NFTX is a liquidity protocol that allows users to buy, sell, stake, and swap NFTs all in one platform.
Its main appeal is a twist on traditional NFT staking that allows users to gain exposure to blue chip NFT projects without having to purchase an actual NFT from the collection.
Just like Robinhood allows investors to buy fractional shares of blue chip stocks—e.g., $100 of a $2700 Amazon share—NFTX also allows users to purchase fractionalized NFTs in the form of ERC-20 tokens. Effectively, the platform is a DeFi protocol that enables the creation of personalized NFT stock portfolios. If you believe in a certain project, you can “invest” in its future by buying tokens representing the floor price.
With NFTX, anyone can be an NFT investor, whether they are an actual holder or not. NFT holders can deposit their NFTs in a vault to earn interest on assets that would otherwise sit idly in a wallet.
Non-holders can gain exposure to any NFT project by purchasing the corresponding ERC-20 token. When the floor price of the collection goes up, so too does the portfolio value.
Let's say you believe in the long-term viability of CryptoPunks but don't have the means to shell out the dozens of Ethereum tokens to purchase one. You can bet on the future by purchasing $PUNK, the project's token. Now you can invest in NFT projects just as you would buy shares of a company that you value highly.
Staking liquidity pool (LP) tokens
You can use NFTX to stake in pools using NFT tokens paired with Ethereum. The platform's liquidity pools allow you to earn a percentage of trading fees whenever a user transacts between the two pairs you've pooled together.
For example, let's say you wanted to stake $PUNK, the NFT token for CryptoPunks. You could do this by providing equal liquidity amounts of $PUNK and Ethereum. When someone swaps between the two on the platform, you will receive a weighted percentage of total network fees, as well as any fees that accrue when users mint a new NFT or redeem a specific NFT from the staking pool.
If you don't have the funds to purchase a floor price CryptoPunk, Cool Cat, or Doodle, fret not. You can use a DeFi application like Sushi to purchase NFT tokens. Then, simply pair your selection with Ethereum and stake on the platform!
The $NFTX token
In addition to ERC-20 tokens for staking, there is also a native $NFTX token with governance utility that is crucial to the platform's functionality and community. Though it is not required for staking NFTs on the platform, users that own $NFTX gain weighted voting power on proposals and the direction of the project.
“The idea is that our token will be used as a bootstrap mechanism for liquidity pools, quite similar to how Bancor or Synthetics work and how they use their own token to bootstrap their platform,” NFTX founder Alex Gausman said in an ETH Global NFTHack session. “It can be difficult to do, but if done well it can make the token a much stronger moat.”
NFTX has the remarkable potential to take an incredibly illiquid asset and make it liquid. If you own an NFT, there is no guarantee that it will ever sell. Even if you list on a marketplace at a low price point, NFTs need a buyer willing to make an offer in order for them to sell. And if the floor price of a project starts tanking, it is unlikely that there will be many buyers.
But by creating ERC-20 tokens pegged to NFT collections, NFTX is actually making NFTs fungible. If at any point you wish to sell, you can swap your tokens out for other crypto assets at a given price.
LooksRare is an NFT marketplace that doubles as a staking service. During its launch in January 2022, LooksRare airdropped 120 million of its native $LOOKS token to entice NFT traders to use its platform. All users that had made a certain amount of trades (in excess of 3 ETH) on OpenSea were eligible to claim the airdrop.
Rewarding traders continues to be an integral part of LooksRare's functionality. Users can earn more $LOOKS tokens just by buying and selling NFTs on the marketplace. $LOOKS can then be staked directly on the platform to earn more $LOOKS tokens and wrapped Ethereum (WETH).
Though the incentive to earn $LOOKS is mainly for users that trade NFTs, the token is also available on decentralized exchanges like Uniswap.
Shortly after launch, the annual percentage yield for staking $LOOKS rose as high as 9000% APY, though it eventually leveled off at just under 200%. Currently, the APY sits around 9.24%, though it's always subject to change based on volume and market dynamics.
This list is by no means exhaustive, and in the quickly-evolving NFT space, you can bet that many more will emerge. Other platforms built for NFT staking include:
The best NFT collections for staking
Disclaimer: This is not an endorsement to buy or investment money into any of the listed NFT projects. Users should always do their own research before making any financial decision.
The Sandbox is popular metaverse platform built on the Ethereum blockchain. This blockchain-based game allows cryptocurrency staking for holders of its native $SAND token that vary based on how many LAND NFTs a user holds.
For example, users that hold up to 5 LAND NFTs can stake a maximum of 10,000 SAND tokens using the Polygon (MATIC) blockchain. At the time of writing, one SAND token equals approximately $0.28, meaning that users can stake up to $2800 worth of cryptocurrency.
Axie Infinity is one of the most popular blockchain-based games, with over 2.8 million daily users at its peak in 2021. Axie users collect avatar NFTs (Axies) to battle against other players to earn rewards in the form of Axie Infinity Shards (AXS) tokens. The native token allows holders to make in-game purchases in the Axie Infinity Marketplace, such as more Axies, accessories, Lands, and Land items.
Axie Infinity supports multiple versions of staking:
NFT staking: Axie Infinity has a second staking system, where Land NFT holders can stake their plots to earn additional Axie Infinity Shards. The rarer your Land NFT is, the more AXS tokens you earn per day.
CyberKongz is one of the original NFT staking collections that pays out in its native cryptocurrency $BANANA. Owners of the original 1,000 Genesis CyberKongz earn 10 tokens per day for each first-gen NFT they hold, until the year 2031.
Mutant Cats is a collection of 9,999 feline avatars built on the Ethereum blockchain. Holders can stake their Mutant Cats to earn $FISH, the native utility token of the project. $FISH tokens pay out at 10 per day for each staked cat, and represent fractionalized ownership of its vault assets.
Mutant Cats are available on OpenSea. The current staking rate yields 10 $FISH per day.
Just like the cryptocurrency it was inspired by, Doge Capital's native cryptocurrency token $DAWG is also a meme coin. According to the Doge Capital website, “$DAWG is a meme token with utility.” As the native utility token of the NFT project, $DAWG powers the Doge Capital ecosystem.
Doge Capital NFTs are available on Magic Eden. The current staking rate yields 5 $DAWG per day.
There are constantly new NFT projects launching that offer staking functionality. Some of the most popular staking projects include:
Should I stake my NFTs?
Before deciding whether staking your NFTs is the right move, you should consider the pros and cons of staking:
NFT staking pros
If you plan to hold your NFT long term, why not earn some passive income? This same principle applies to staking cryptocurrencies: While the value of the token may fluctuate in the short term, you can counterbalance this by earning more of the coin over time.
Staking reward tokens are not just crypto assets to be flipped for a quick profit. As in many of the NFT collections outlined above, native cryptocurrency utility tokens carry additional perks such as voting power and governance in the future direction of the project.
NFT staking cons
While staked, your NFT could see a significant rise or drop in value. If you're staking an NFT that has a long lockup period then you'll be unable to sell for quite some time. However, if holding long-term has always been your intention, you can worry less about temporary peaks and dips as you continue earning interest on your NFT holdings.
While your NFT is staked there are always risks of rugging. This occurs if and when the founders or developers leave the project. Sometimes they leave it in the hands of the community, while other projects disappear completely, leaving holders with worthless NFTs.
Frequently Asked Questions (FAQs) about NFT staking
How much does it cost to stake an NFT?
On most blockchain networks, transaction costs depend on how busy the network is at any given point. This could range anywhere from a few dollars to several thousand.
On other blockchains like Solana, however, transaction fees are generally negligible, usually as low as fractions of a cent. If you plan on staking and unstaking frequently, then you'll want to use a cheaper blockchain that won't wipe out your gains from multiple transactions and repeated fees.
No matter which blockchain your NFT is on, you'll always need to leave some extra crypto in your wallet to account for transaction fees, as they are always paid in the blockchain's native token (ETH, SOL, etc).
How do you earn money from NFTs?
Besides staking, there are other ways to earn money from NFTs, and not just for the buyer. Artists can sell their work as NFTs to ensure they get their fair share of royalties from sales and proceeds.
There are also NFT traders who buy NFTs to flip them for a profit. However, it is somewhat of a risky venture because NFTs are a highly illiquid asset that can be difficult to sell, especially when compared to traditional cryptocurrencies.
For example, if you want to cash out your crypto, you can head to a cryptocurrency exchange or fiat off-ramp to swap cryptocurrency for fiat currency or stablecoins. With NFTs, however, the only guarantee that they will sell is if a buyer wishes to make a purchase.
Should you buy an NFT because it has staking functionality?
If you plan to hold an NFT for a long period of time (up to several years), then purchasing an NFT to stake could be the right move. You can try calculating the projected annual yield relative to the purchase price of the NFT to see if it's viable for you.
While it's difficult to predict future NFT price movement of the collection itself, charting your purchase price and expected gains can tell you if it's a worthwhile investment to buy, "hodl", stake, or sell.
Can you claim rewards before your NFT is unstaked?
The staking rewards and lockup period will depend on the NFT project you choose. Some NFT collections may reward users with a constant source of passive income during the entire staking period, while others may only release rewards when the NFT is unstaked.
Where can you buy NFTs to stake?
Be sure to only mint, buy, and sell NFTs on legitimate, official websites only. It's easy to fall prey to NFT and crypto scams.
Buy NFTs for staking via MoonPay
Whether you want to stake, hold, or flip NFTs, MoonPay's NFT Checkout solution makes it easier than ever to buy NFTs directly using a credit card.
Just choose the NFT you wish to purchase and enter your card details to complete your transaction.