5 Ways to Use NFTs to Generate Passive Income

November 25, 2022

By Murtuza Merchant

1. Lease NFTs

NFTs are frequently available for short-term rental.

Renting out your NFTs, particularly ones that are in high demand, is one method you might generate passive revenue.

To increase their odds of winning, players can borrow NFT cards in several card trading games, for instance.

As anticipated, smart contracts govern the terms of the agreement between the two parties. As a result, NFT users typically have the discretion to choose the length of the leasing agreement and the NFT’s lease fee.

This is a wonderful choice, especially if there is a lot of demand.

2. Generate Revenue from Your NFTs

Whether you like it or not, NFTs do allow you to earn royalties.

NFT developers can apply terms that charge royalties whenever their NFTs are sold on the secondary market thanks to the technology that underpins NFTs.

In other words, even after selling their works to collectors, the creators can still get passive revenue.

With this, they can continuously receive a portion of the NFTs in question’s sales price. The original author will receive 10% of the final sale price each time their digital artwork is sold to a new owner, for instance, if the royalty rate is set at 10%.

Keep in mind that while minting the NFTs, developers frequently specify these fixed percentages. Furthermore, the entire process of allocating royalties is controlled by smart contracts, which are self-executing computer programmes that uphold contractual commitments.

Because the procedure is totally automated, you as the creator do not need to manually enforce your royalty terms or keep track of payments.

3. Invest NFTs

To produce a yield, you can “lock away” your NFTs in a DeFi protocol smart contract.

The ability to stake NFTs is one advantage of the union of NFTs and decentralised finance (DeFi) protocols.

Staking is the process of adding digital assets to a DeFi protocol smart contract and “locking them away” to produce a yield.

While some platforms accept a variety of NFTs, others require that you buy native NFTs in order to receive staking token incentives, which are frequently paid out in the platform’s native utility token.

4. Offer Liquidity for NFTs to Be Earned

It is now possible to contribute liquidity and receive NFTs in return to establish your position in a specific liquidity pool because of the ongoing integration of NFTs and DeFi infrastructures.

For instance, the automated market maker (AMM) will issue an ERC-721 token, also known as LP-NFT, that contains information about your portion of the total amount locked in the pool when you offer liquidity on Uniswap V3. The token pair you placed, the tokens’ symbols, and the address of the pool are also carved into the NFT.

You can immediately liquidate your position in the liquidity pools by selling this NFT.

5. Adopt Yield Farming Powered by NFT

Users can now farm for yields utilising NFT-powered items because NFTs are quickly becoming a key component of AMMs. A technique known as “yield farming” is using a variety of DeFi protocols to get the best return from your digital assets.

About the author

Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptos.

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