NFT Staking and How It Works

Today, NFT staking is a new means to make passive income in the crypto space. It allows holders to lock their assets in decentralized finance (DeFi) platforms to receive rewards. This is achieved without holders needing to sell their NFT collections.

What Is NFT Staking?

NFT is the act of locking up NFTs on a protocol or platform in exchange for rewards and many other benefits. Holders who stake NFTs earn an income for their collection and still maintain ownership of it. NFTs are in vogue in the crypto world.

Typically, NFTs are indivisible smart contracts based on the Ethereum network. It makes use of the ERC721 token standard. The ERC721 is more complex than ERC20 and every token on it is unique. These cryptographic tokens are recorded on the blockchain and are used to represent ownership, authenticity, and provenance of assets, avatars, artworks, and many more.

How NFT Staking Works

When NFTs are staked, funds are locked up in a staking pool by the blockchain protocol. The protocol then randomly selects validators who are tasked with confirming or “mining” blocks of transactions. A participant is more likely to be chosen if they pledge more.

Additionally, new tokens are minted and shared with the validators as staking rewards every time a new block is added to the chain. Some factors that may determine how much a validator receive may include the token's inflation rate, the number of coins staked on the network, how long the validator has been actively staking, and the number of coins the validator is staking, and more.

Coin holders through staking their coins can become validators. As a result, they can make their assets work for them in the exchange while they generate passive income and receive rewards. Additionally, the cryptocurrency protocol for NFT staking is secure, and transactions by users are confirmed.

Users who stake their coins still maintain the ownership of their assets and can remove them from the staking pool at will and at any time. However, this depends on the terms and conditions of the crypto protocol.

Similar to cryptocurrency, not all NFTs can be staked for rewards. The requirements for different projects are different. Therefore, ensure that you check the conditions of the project you choose before investing in any NFTs.

Best Platforms for NFT Staking

There are numerous platforms offering opportunities to stake NFTs. To get started, all that you need to do is stake NFTs in a compatible wallet. Here are some of the best platforms for NFT staking:

·     NFTX: NFTX is a staking platform used for creating ERC20 tokens. The tokens are backed by NFT collectibles. Users put their NFTs into the NFTX vault and then mint the ERC20 token. The minted token is composable and fungible at a ratio of 1:1. These tokens are known as vTokens and can be used to purchase specific NFTs or staked for yield rewards.

·     Splinterlands: Splinterlands is similar to Hearthstone. Splinterlands is a blockchain-based collectible card game in which players can build up a collection of cards listing various stats and abilities, and use them in matches.

·     BAND NFTs: Music NFTs are a new era for the music industry. With them, creators have complete control over distribution. At the forefront of the revolution is BAND Royalty. It is an NFT exchange platform for users to buy music NFTs and stake them in royalty pools for earning a portion of the proceeds their albums or songs acquire.

·     Polychain Monsters: Polychain Monsters is a platform for animated collectible NFTs called Polymon. Polymon is acquired from digital booster packs and it has varying levels of rarity and different traits. Polymon users can earn a weekly reward in PMON, the native cryptocurrency of Polychain Monsters when they stake their Polymon NFTs.

 Conclusion

Staking NFTs has produced results with an already promising foundation. One of the biggest advantages of NFT staking is that there is no need for you to sell your NFT collection or transfer ownership. All that is required for you to do is lock up your assets in a staking pool and earn staking rewards.