A Non-Fungible Token, NFT for short, has become an enormous digital commodity since it was first sold in 2021. Since then, the market has experienced 138% of growth. Even the recent sluggishness in the cryptocurrency market hasn’t slowed down NFTs. So, how can you get in on this trend? Here’s a guide to earning passive income via NFTs.
What Are NFTs?
An NFT is a unique digital asset. Art, music, literature, and even tweets have been made into NFTs. These items are distinctive enough that they can’t be replaced by something else.
NFTs are different than other digital properties. For instance, swapping one bitcoin for another gets you the same crypto. On the other hand, you’ll receive a different NFT if you trade it with someone else.
NFTs are assets whose value grows and shrinks over time. The cost is based on parameters such as what another person is willing to pay for the token. Some NFTs were sold for millions of dollars in cash or cryptocurrency.
How to Create an NFT
To know how to make an NFT and sell it, you’ll need to be well-versed with the several steps involved. Start with the item you want to turn into a digital asset. Items include music videos (your own, not someone else’s), original paintings and photos, and unique memes and GIFs. You must be the sole owner of the NFTs, as this makes them rarities.
Next, start the minting process by choosing a blockchain method. Used to protect cryptocurrency, this form of security emphasizes zero trust. In other words, the release of information only happens when a customer’s credentials match the on-hand data.
Once you establish the NFT’s protection, the next step is to set up a digital wallet and a marketplace to sell the digital work. For the latter, select an online portal that fits your material. For instance, a sports-related NFT would work best in a marketplace related to the MLB, NHL, NFL, etc.
Upload the NFT to the appropriate and set up the sales process. If you set a fixed price, the customer willing to pay it gets the material. In timed or unlimited auctions, the NFT goes to the highest bidder.
How to Earn Passive Income
There are several methods to earn passive income with NFTs.
Staking – This is simply depositing your NFT into a marketplace. What’s generated is distributed in the form of cash or tokens. Sometimes, the creator receives voting rights in the company.
Renting – Many NFTs feature unique gaming bonuses, weapons, and scenes. Owners can rent their digital assets to gamers within various platforms. Creators set a lending rate and duration placed in a smart contract. Needless to say, renting NFTs is a good source of ongoing passive income.
Royalties – Similar to a novel or other creative work, your NFT continues to earn royalties even after their work sells. The fees are generated each time the digital asset gets traded in the secondary market. Their value is determined ahead of time by the creator and handled by automated transactions governed by blockchain.
Liquidity Pool – This is a collection of digital assets locked in a smart contract verified by multiple investors. In turn, its value is distributed as loans by the signers. The NFT’s owner can sell their creation to leave the liquidity pool.
Yield Farming – Here, investors look to earn layers of returns. It’s done by leveraging yields gained from one platform and investing them in another through staking or other methods.
While these passive income opportunities sound promising, there are factors to consider before creating an NFT. First, the concept is new, so there’s an inherent risk to uploading a digital asset. To put it another way, there’s no guarantee of success.
The same goes for a smart contract, which is a blockchain program. These are activated once pre-determined conditions are set. However, not all NFT platforms offer this option. Thus, the creator takes a risk that they’re working with a valid investor.
Of course, the risk is embedded in most investments. Thus, you shouldn’t avoid the NFT market. In the end, you need to understand what’s involved, the right marketplaces, and the best ways to earn passive income. Don’t give up if one method fails.