What is NFT Staking? Know Everything before Staking NFT

Updated on February 28, 2023 12:07 PM

Published on January 30, 2023 10:07 AM

NFT staking is the latest buzzword in the Web3 community, yet it may be difficult to grasp. The future possibilities for this approach are extensive as the digital asset ecosystem evolves - here's a more detailed discussion of how NFT staking could operate.

What is NFT Staking? Know Everything before Staking NFT

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NFT staking is a means of earning rewards and passive income by locking up one's NFT assets on a platform or protocol. Holders can utilize this approach to generate income from their digital assets without having to sell them.

In just a few years, NFT have evolved from a specialized technology within the blockchain sector to a cultural phenomenon. As the billion-dollar digital art market expands, producers and collectors are looking for new applications for this unique asset class. Staking NFT is one of the many potential use cases.

Continue reading to find out more about NFT staking and the elements to consider before staking your digital valuables.

What is NFT Staking?

NFT staking is the act of holding NFTs on a platform or protocol in order to gain rewards and other benefits. This allows NFT holders to put idle assets to work instead of selling them.

Staking an NFT is similar to staking cryptocurrencies in that all you need is a Web3 wallet. However, not all NFTs can be staked. Before purchasing digital collectibles with the intention of staking them, double-check that your selected staking provider supports the collection.

This method of staking is comparable to DeFi yield farming, in which bitcoins are leased or deployed to liquidity providers in order to receive rewards through interest or transaction expenses incurred by others. This method of generating interest is comparable to that of a bank, except there is no middleman in this situation. NFT staking is part of the decentralized finance realm, whereas banking is centralized.

How does NFT staking work?

While NFT staking is still in its early stages, it functions similarly to locking proof-of-stake (PoS) cryptocurrencies. PoS staking is based on the premise that individuals can lock their funds on a blockchain system to maintain the network.

Tokens are awarded to validators as staking rewards each time a new block is added to the chain. Token holders can assist fund the network's functioning by locking their currencies on a blockchain and letting their HODLed assets work for them in exchange for rewards.

You stake your NFTs on a platform for a set period of time in order to collect rewards. One advantage that collectors and the greater NFT marketplace get from NFTs being staked is that it can create deflationary supply pressure, causing the price of similar NFTs remaining in circulation to rise.

The benefits you'll receive are determined by criteria such as the annual interest rate given, the length of the staking period, and the quantity of NFTs staked. The sort of incentives received by NFT holders is determined by the platform used and the type of NFT staked.

Staking rewards are often distributed in the form of a platform's native token, which may be exchanged for other cryptocurrencies or cash. As in-game assets that fuel the action are frequently NFTs, play-to-earn blockchain gaming platforms are among the most prominent players in the NFT staking industry.

Some NFT projects have decentralized autonomous organizations (DAOs), and holders can place their assets in the DAO pool to participate in project governance.

Each staking platform will have its unique method of computing interest rates, which will motivate NFT holders to deposit their funds for as long as feasible. While some services may provide high-interest rates, please consider the dangers involved.

Interest rates that appear to be too good to be true may indicate that the platform is untrustworthy. Before depositing your NFT on a staking process, always do your own research (DYOR) and make sure you understand the dangers involved.

What Are the Benefits and Drawbacks of Staking NFTs?

Here are a few things to think about while deciding whether or not to stake your NFTs.

Benefits of NFT staking

Putting your unused digital assets to use

If you've had an NFT for a while and don't intend to sell it anytime soon, staking provides an excellent opportunity to put your idle digital assets to work. You can stake your NFT without giving up ownership by locking it on a staking site.

Participating in initiatives and communities

Although the specific incentives and perks of staking an NFT may vary between projects, one thing that all of them will have in common is that most projects will reward users who stake their NFTs with utility tokens. These tokens may have additional benefits, such as voting and governance rights to determine the project's future course.

Drawbacks of NFT staking

Scams have the potential to occur

While collecting returns on your NFTs seems really appealing, keep in mind that there are hazards associated. The NFT sector is still in its early stages, and it can be difficult to determine who is trustworthy and who is a bad actor in such a new space. It's not unthinkable for an unethical staking platform to misappropriate customer payments and flee with their tokens.

The easiest way to stay on top of such fraud is to conduct your own research. Always explore and investigate the staking platform and the team behind it: it's better to be safe than sorry.

Price volatility

While locked in, the value of your NFT could significantly climb or fall owing to market and digital art scene trends. You may not be able to withdraw an NFT with a long lock-up time depending on the restrictions of your staking platform.

However, if holding for the long term has always been your aim, momentary market peaks and falls should be less of a problem.

NFT Staking Rewards

NFT staking rewards refer to incentives offered to individuals who hold and lock their non-fungible tokens (NFTs) in a staking pool. NFT staking is a process that involves holding and locking NFTs for a certain period in exchange for rewards, which are usually in the form of tokens or other digital assets.

The rewards for staking NFTs can vary depending on the platform or project offering the staking program. Some platforms offer fixed rewards, while others offer variable rewards based on the demand for the NFTs being staked.

One of the main benefits of NFT staking is that it provides an opportunity for NFT holders to earn passive income. Staking NFTs also encourages users to hold onto their tokens instead of selling them, which can help to increase their value over time.

Best Platforms for NFT staking

Because there are numerous different NFT staking platforms, one example of a platform is insufficient. We highlight a few NFT staking platforms to offer you a better picture of the variances in this field.

There are many examples in this sector due to the massive increase of play-to-earn NFTs, but did you realize that exchanges are also actively engaged in NFT staking?

NFTX is a platform aimed at providing liquidity to the illiquid NFT market. The NFTs can be staked in NFTX vaults in exchange for a tradeable fungible token (vToken). vTokens can also be used to purchase an NFT from a vault.

Band Royalty is a music NFT platform that allows you to stake NFTs from its small selection. The staked NFT holders are paid based on the royalty money earned. The lock-up duration ranges from 90 to 5 years, and royalties are paid after the lock-up period.

Kira is a layer 1 network that provides derivative products based on staked assets. Kira is still in testing mode. NFTs can be staked, and a fungible token will be issued in exchange, according to their blog. The fungible token will be tradeable and divisible, allowing for the creation of fractional shares.

Onessus is a play-to-earn game that offers NFT staking using the in-game cryptocurrency. The yield is paid in advance when the NFT is staked.

What are the top NFTs to invest in?

When you decide to stake your NFTs, it is critical that you have a clear goal in mind. To locate the greatest NFTs for staking, you must first understand where the opportunities are. As a result, thorough market research is critical. You can invest in various NFTs, each with its own set of characteristics. As a result, ensure that your plan is crystal obvious to you.

Do you enjoy gaming and wish to invest in it? Then an NFT staking platform like Splinterlands would be an intriguing choice for you. This Ethereum blockchain-based play-to-earn game allows users to earn extra money by staking NFTs.

What is Staking in NFT Games?

NFT staking in games is a mechanism that allows players to stake their non-fungible tokens (NFTs) in a game in exchange for rewards. In this context, staking means locking up a player's NFTs for a specific period, during which time they are unable to use or trade them.

Game developers use NFT staking as a way to incentivize players to hold onto their NFTs for longer periods, rather than simply buying and selling them on a marketplace. By staking their NFTs, players contribute to the overall stability and health of the in-game economy, which benefits the developer as well as the players.

In some games, players can earn rewards for staking their NFTs, such as in-game tokens, additional NFTs, or other valuable game items. The amount of rewards earned is usually based on the length of the staking period and the rarity or value of the NFT being staked.

Is NFT Staking a Good Investment?

Whether or not NFT staking is a good investment largely depends on individual circumstances and personal goals. NFT staking can be a good investment for those who want to earn passive income on their NFT holdings, as staking rewards can offer a regular source of income.

Additionally, staking can encourage individuals to hold onto their NFTs, which can potentially increase in value over time.

However, NFT staking also comes with risks. The value of NFTs can be volatile and difficult to predict, and staking on a platform that isn't secure or reliable can result in the loss of funds. It's important to carefully research any platform or project offering NFT staking before investing and to only invest what you can afford to lose.

Ultimately, whether NFT staking is a good investment will depend on individual factors, such as risk tolerance, investment goals, and personal circumstances. As with any investment, it's important to carefully weigh the potential risks and rewards before making a decision.

NFT Staking FAQs

What is NFT staking?

NFT staking is a process that involves holding and locking non-fungible tokens (NFTs) for a certain period in exchange for rewards.

How does NFT staking work?

To stake an NFT, a user locks the token into a staking pool for a specified period. During this time, the NFT is unavailable for use or trading. In exchange for staking, the user may receive rewards, such as tokens or other digital assets.

What are the benefits of NFT staking?

NFT staking provides an opportunity for NFT holders to earn passive income while encouraging them to hold onto their tokens. Additionally, staking can help to stabilize the value of NFTs and create a more sustainable market.

What are the risks of NFT staking?

The value of NFTs can be volatile, and staking on an insecure or unreliable platform can result in the loss of funds. Additionally, staking involves locking up NFTs for a specific period, which means they cannot be used or traded during that time.

Where can I stake NFTs?

There are many platforms and projects that offer NFT staking, including some decentralized finance (DeFi) platforms and NFT marketplaces. It's important to do research and choose a reputable platform before staking NFTs.

What are some examples of NFT staking platforms?

Following are the top NFT stacking platforms -

Binance PowerStation NFT.
NFTX.
Doge Capital.
Splinterlands.
Polychain Monsters.
BAND NFTs.
Mobox (MBOX).
KIRA.

Do I lose my NFT if I stake it?

Even though you are staking your NFTs, you retain possession of them. The payouts will be determined by the annual interest rate, the number of NFTs staked, and the staking period.