Interested in getting started with NFT staking? In this guide, we’ll break down everything you need to know about how to earn a passive income through NFT staking rewards — including how NFT staking works and the best platforms to earn rewards in 2023!
What is NFT staking?
When you stake an NFT, you lock it up for a set period of time to earn rewards. Typically, NFT staking rewards come in the form of cryptocurrency, but they can also include access to whitelists and future NFT mints!
What are NFTs?
NFTs (non-fungible tokens) are unique tokens secured by the blockchain. An NFT can be any type of file format that you might see browsing the Internet — such as an image, a song, or a video. However, what makes NFTs unique is that ownership can be proved via the blockchain — allowing NFT creators to provide benefits to holders!
In recent years, online creators have used NFTs for different applications. Today, NFT collections like Bored Ape Yacht Club provide benefits like access to a community and exclusive events, while
crypto games like Axie Infinity allow users to buy, sell, and trade in-game NFTs! What is staking?
In cryptocurrency, staking generally refers to locking up your cryptocurrency with a specific blockchain or protocol to earn rewards. Proof of Stake blockchains like Ethereum use staking to validate transactions and help ensure the security of the blockchain.
How does NFT staking work?
Typically, there are two ways to stake NFTs: through staking platforms or through the project itself.
How do staking platforms work?
Typically, NFTs are highly illiquid. This presents a problem for traders and investors who wish to speculate on NFT collections. While they may want to invest in the success of a project, there may be no NFTs available for them to buy.
Platforms like NFTX have helped to solve this problem by giving users access to NFT vault tokens — which give investors the ability to buy, sell, and trade tokens that are backed by NFTs from the collections they represent.
To incentivize NFT holders to store their assets in an NFTX vault, the platform offers staking rewards. NFT stakers are entitled to 100% of the transaction fees from each vault.
Why do NFT projects offer staking?
Certain NFT projects offer the ability for investors to stake their NFTs and earn rewards.
This can be a great way to offer additional rewards to investors and incentivize owners to hold their NFTs for the long-term. Because staked NFTs cannot be sold until they are un-staked, this can help the NFT collection maintain value.
What rewards do I get from staking my NFTs?
Typically, you’ll receive cryptocurrency rewards for staking your NFTs. Depending on the NFT platform you choose, you may receive your crypto on a daily or weekly basis.
Some NFT projects may offer additional rewards for NFT staking. For example, you may receive access to future NFT mints or the ability to buy an NFT at a discounted price!
How much will you earn for NFT staking?
The amount that you can earn for NFT staking can vary significantly based on the platform you are using, the NFT you own, and the method your platform uses to calculate staking rewards.
Typically, you’ll earn higher NFT staking rewards if you choose a longer lock-up period for staking.
Can my NFT be staked?
It’s important to remember that not every NFT can be staked. Many projects do not offer staking rewards to users.
What are the benefits of NFT staking? Earn passive income on your NFTs
Instead of simply passively holding your NFTs, staking allows you to earn rewards on your assets.
Earn governance tokens
Some NFT projects offer governance tokens in exchange for staking — which can give you a voice in the future of the NFT project!
For example, staking a Bored Ape Yacht Club NFT gives investors access to ApeCoin — a cryptocurrency that gives access to the decision making process over the future of the project through the ApeCoin DAO!
What are the risks of NFT staking? Potential losses
It’s important to remember that NFT staking — especially with a non-reputable platform — comes with significant risks. The NFT world is infamous for
theft, hacks, and scams.
It’s important to do research on your NFT and your NFT staking platform to minimize the risk of potential losses.
Some platforms require long lock-in periods if you wish to stake your NFTs. This can be an issue if you wish to sell your assets in the near future.
The NFT market is incredibly volatile — which means that NFTs can lose significant value in relatively short spans of time. This may present an issue if you are staking your NFTs and cannot sell your assets.
What platforms can I use to stake NFTs?
Wondering where you can stake your NFTs? Let’s walk through a few popular platforms.
NFTX: NFTX is one of the world’s biggest platforms for NFT staking. You can get started staking your NFTs today — or trading tokens that represent the world’s biggest NFT collections! However, it’s important to note that once you stake an NFT with NFTX, you lose ownership over that specific NFT. For example, if you stake BAYC #101 with NFTX, you’ll receive a different BAYC when you choose to un-stake. Binance NFT PowerStation: Binance NFT Powerstation is a partnership between Binance and sports teams from around the world. By buying and staking a team-related NFT, you can earn fan tokens which provide benefits — including priority ticket sales and the ability to influence key team decisions! Bored Ape Yacht Club: If you own a Bored Ape Yacht Club, Mutant Ape Yacht Club, or Bored Ape Kennel Club NFT, you can stake your NFT on https://apestake.io/ to earn Ape Coin! Axie Infinity: The crypto-based game Axie Infinity allows users to own digital plots of land in the form of NFTs. As of July 2022, users can stake land to earn AXS — Axie Infinity’s governance token. Is NFT staking a good investment?
Ultimately, what qualifies as a ‘good investment’ is dependent on the return you are seeking and the risk appetite you are willing to take on.
It’s important to remember that NFT staking is a relatively new concept — so it’s possible that staking your NFTs comes with risks. However, it may be a good option for investors who wish to hold their NFTs for the long-term and are willing to take on potential risks.
Do I incur taxes from NFTs?
Similar to other digital assets, buying, selling, or generating income from NFTs has tax implications.
If you use cryptocurrency (like ETH) to purchase an NFT, this is treated as a disposal of your ETH, and you will incur a capital gain or loss depending on how the value of your ETH has fluctuated since you originally acquired it. Similarly, when you eventually sell your NFT, you will incur a capital gain or loss which needs to be
reported on your taxes.
If you earn
staking rewards from your NFT, those rewards will be taxed as ordinary income at the fair market value of the cryptocurrency at the time it is received.
For a complete breakdown on the tax implications of NFTs, checkout our complete
NFT tax guide. Frequently Asked Questions Can you stake an NFT?
Yes. NFT staking platforms like NFTX and certain NFT projects offer the ability to stake NFTs.
What does it mean to stake an NFT?
Staking an NFT refers to locking up an NFT for a set period of time to earn rewards.
Does staking an NFT cost gas?
It’s likely that you’ll need to pay gas fees to get started staking your NFT.
How can I stake an NFT on OpenSea?
Currently, OpenSea does not offer the ability for users to stake NFTs.