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NFT staking explained

NFT staking allows you to earn passive income with NFTs easily. But what is NFT staking exactly and how does it work?

11 Mar 2022by Corey Barchat

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NFTs have a lot more value than meets the eye.

To some they may appear to just be JPEGs, but these digital assets have the potential to transform every industry, from event ticketing to digital art and "phygital" goods.

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 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 rewards via NFTs.

What is NFT staking?

NFT staking refers to an NFT owner locking up their asset for a certain period of time, earning passive income in the form of cryptocurrency while doing so.

Some collections allow users to deposit their NFT for an indefinite lockup period, while others have strict limits for how long NFTs must be staked before unstaking.

There are also dedicated, collection-agnostic platforms that reward NFT collectors with tokens in exchange for staking NFTs from multiple projects and blockchains.

How does NFT staking work?

Staking is a key feature of many different blockchains. 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 DeFi 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 you can also stake 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 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

What are the expected returns for staking of the project? Some projects 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.

A table of Sappy Seals’ rarity chart and staking yield.
Sappy Seals is a collection that yields higher staking returns for rarer NFTs (*xtONzcFG-BN_48yn8BDvzQ.png) (Image source)

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 some of the most seasoned traders don’t get it right.

3) Cryptocurrency price movement

Besides the floor price of the NFT collection itself, you should also keep in mind that 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.

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 definite lockup period.

An image of Mutant Cats’ percentage of staked NFTs.
Mutant Cats displays the number of NFTs staked (Image source)

The best NFT staking platforms

If you own an NFT eligible for staking, you can check the official collection website for complete instructions on how to stake it.

There are also collection-agnostic platforms built to allow users to stake NFTs from multiple collections. 

Here are some of the top staking platforms:

WhenStaking

WhenStaking is a staking platform for NFTs on Onessus, the DApp development studio that has created NFT play-to-earn games such as HodlGod and the upcoming NiftyVille.

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. And for fans of popular blockchain games on the WAX blockchain, both Onesssus and WhenStaking are integrated with WAX Cloud Wallet.

An image of WhenStaking’s NFT staking platform.
WhenStaking allows users to stake NFTs from the Onessus blockchain (Image source)

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

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 like Bored Ape Yacht Club and Cool Cats 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 Bored Ape Yacht Club but don’t have the means to shell out the floor price of 73 Ethereum. You can bet on the future by purchasing $BAYC, the project’s token. Now you can invest in NFT projects just as you would buy shares of a company that you value highly.

A screenshot of staking on NFTX.
NFTX enables users to stake ERC-20 tokens that represent actual NFTs (Image source)

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. 

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 (both at 5%).

If you don’t have the funds to purchase a floor Cool Cat or Bored Ape Yacht Club, 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 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

LooksRare is an NFT marketplace that doubles as a staking service. In January 2022, LooksRare airdropped 120 million of its native $LOOKS token to entice NFT traders to 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 $LOOKS and wrapped Ethereum ($WETH).

A screenshot of LooksRare’s staking annual percentage yield APY.
LooksRare rewards users with its native token $LOOKS for trading NFTs (Image source)

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 has recently leveled off at just under 200%.

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:

An image of BAND Royalty’s music NFT staking structure.
BAND Royalty allows users to earn royalties from staking music NFTs (Image source)

The best NFT collections for staking

CyberKongz

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.

A screenshot of CyberKongz Genesis NFTs on OpenSea.
CyberKongz Genesis NFTs reward holders with $BANANA tokens ([sortAscending]=true&search[sortBy]=PRICE&search[stringTraits][0][name]=Type&search[stringTraits][0][values][0]=Genesis) (Image source)

For the CyberKongz VX collection, the project has implemented a Lock Registry that lets users keep their NFTs in their wallet instead of staking them. Holders can now enjoy the full rewards benefits of staking while taking advantage of additional perks for the Jungle Adventure game. Avatars in this 3D voxel-based collection can even be used in metaverses like The Sandbox.

CyberKongz are available on OpenSea for a current floor price of 6.9 Ethereum (~$19,000).

Mutant Cats

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 the DAO’s vault assets. The collection’s DAO distributes ownership of Cool Cats, CryptoPunks, Bored Ape Yacht Club and other blue chip NFTs.

An image of the Mutant Cats vault.
Mutant Cats NFTs allow users to hold fractionalized ownership of blue chip NFTs in the DAO vault (Image source)

Mutant Cats are available on OpenSea for a current floor price of 0.193 Ethereum (~$541). The current rate of 10 $FISH per day at $0.025 yields $0.25 per day or $91.25 per year.

Doge Capital

Doge Capital is an NFT collection on the Solana blockchain consisting of 5,000 pixelated avatars of the Dogecoin dog mascot.

The project allows holders to stake their NFTs to earn $DAWG tokens, which can also be acquired on Solana decentralized exchanges such as Raydium, Dexlab, and Aldrin.

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.

A screenshot of Doge Capital’s staking platform.
Doge Capital rewards users with $DAWG tokens for staking (Image source)

Doge Capital even built a Staking as a Service feature that allows any Solana NFT project to implement staking on their own website. Participating projects simply cede a small percentage of transaction fees in order to enable staking for their collection.

Doge Capital NFTs are available on Magic Eden for a current floor price of 2.35 Solana (~$223). 

The current rate of five $DAWG per day at $0.03 per token yields $.15 per day or $54 per year.

BabyApes

BabyApes is a collection of 5,000 pixelated baby ape avatars created on the Solana blockchain. The project allows holders to stake their NFTs and the subsequent token rewards ($OOGI).

BabyApes is a more affordable collection, with a current floor price of 0.57 Solana (~$52) on NFT marketplaces like Magic Eden. Staking a single BabyApe earns users 3,000 $OOGI coins per day, or about $0.24. 

At the current floor price, staking one BabyApe would yield an annual return of 168%! However, as always there is no guarantee that the project (or, for that matter, Solana) maintains its current price.

A screenshot of BabyApes’ staking site.
BabyApes allows holders to stake NFTs to earn $OOGI tokens (Image source)

An interesting fact about BabyApes is that the founders left the project in the hands of its holders after a disagreement about its future. While some projects can fall apart after the creators leave, the community has stepped up to run it ever since, taking control and making the recent decision to re-implement staking after a hiatus.

There are new NFT projects launching every day that offer staking functionality. Some of the most popular staking projects include:

In conclusion: 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

Passive income

If you plan to hold your NFT long term, why not earn some passive income? This same principle applies to users that stake cryptocurrencies. While the value of the token may fluctuate in the short term, you can counterbalance this by earning more of the coin.

Community participation

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

Rugging

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.

Price volatility

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 investment.

NFT Staking frequently asked questions (FAQ)

How much does it cost to stake NFT?

When staking your NFT you’ll need to account for any network or transaction fees, which will vary by blockchain. For example, Ethereum NFTs will carry higher gas fees than networks like Solana.

On Ethereum, the transaction costs depend on how busy the network is at any given point. This could range anywhere from a few dollars to several thousand. 

You can check current transaction fees at Etherscan’s Ethereum Gas Tracker.

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 high costs.

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 of your crypto, you can head to an exchange or fiat off-ramp and swap your cryptocurrency for fiat 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 for as long as 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. 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, hold, stake, or sell.

Can you claim rewards before your NFT is unstaked?

The rewards and lockup period will depend on the project. Some 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?

You can mint NFTs directly on the project’s official website, or buy on secondary NFT marketplaces like OpenSea. 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.

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Whether you want to stake, hold, or flip NFTs, MoonPay has you covered. Our NFT Checkout makes it easy to buy NFTs with a credit card removing excessive steps in the purchasing process.

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