The crypto scene has seen some major changes and huge increases in popularity over the years, and perhaps one of the biggest influxes we have seen is with NFTs.
Non-Fungible Tokens have become so popular that celebrities are even getting involved.
While NFTs are primarily associated with digital artwork, its unique technology is allowing for people outside of the art world to get a piece of the action. Indeed, musicians, creators and many more people are getting involved.
But what if you do not have such talents? Well, there are still ways you can earn a passive income through selling NFTs - which could be through farming, renting, staking or royalties.
We're going to examine these and much more with our handy guide below. So, if you're hungry to know a lot more about NFTs, then read on for all the answers!
We'll kick off by looking at what an NFT actually is.
NFT stands for Non-Fungible Token and it came from the world of cryptocurrency and blockchain technology. To put it simply, they are unique digital assets which represent someone's ownership of something.
This may be a piece of media, content, art, video, music or a mixture of these. These tokens are stored with blockchain technology - which means they can easily be verified and makes them immutable.
When NFTs first emerged, many people were apprehensive about them and saw them as nothing more than a quick fad. However, as time has progressed, they have become a very real and serious form of investment.
As with other forms of cryptocurrency and digital investments, there are a number of advantages to them. These include the following points which we will discuss in the next section.
The advantages of NFTs include, but are not limited to the following reasons
As we briefly alluded to, NFTs are unique and they can be easily verified using blockchain technology. This makes it very easy to prove ownership and removes any potential duplicates or fraudulent ownership problems.
Indeed, the same technology has been employed for luxury fashion houses to try to fight against counterfeit products being sold on the market.
NFTs are very scarce, so there are very few of them around. This makes them much more sought after by investors and collectors.
Blockchain technology makes NFTs highly transparent in terms of their history and transactions. This makes them a secure investment.
Potential For Value Appreciation
This type of investment has a huge potential for appreciation to its value, especially if famous artists create a limited series.
Access To The Global Market
Marketplaces all over the world can get involved with the sale and purchase of NFTs - which effectively makes for a global investment market.
NFTs can be programmed to have their own functions like new content or exclusive events etc. This makes them somewhat customizable.
NFTs can represent a huge number of different assets, from artwork to real estate.
NFTs can automatically pay the original creator a royalty every time it is traded - allowing for passive income.
The Best Ways To Make Passive Income With NFTs
You can get paid a passive income through NFTs in a number of ways, but we've written the most common ways to do so below.
As we briefly touched upon in our last section, NFTs can be programmed in such a way that a royalty is paid directly and automatically to the original creator, every single time a trade is made on the secondary market.
What this means is that creators can make a passive income by collecting royalties in this way - because there's no need to be directly involved.
Of course, you will need to find an NFT marketplace, and many of them offer this type of feature.
You will first need to get your work minted though and then set your own royalty amount that you wish to receive every time a trade is made.
This is one of the most popular ways to receive a passive income through NFTs now. It works in a very similar way to how holding money in a savers account with compound interest does.
In other words, you hold an NFT in a smart contract which rewards its users with extra tokens for using their service over a specific period of time.
Users stake NFTs while others trade until the time period has expired. Some even allow you to add your NFTs into a liquidity pool which can earn you even more.
This can be profitable but it involves a little more work, so it's debatable for how passive this income is. Nonetheless, it involves you depositing NFTs into liquidity pools and receiving new NFTs as a reward.
It's a great way to increase the value of NFTs and can help contribute towards the growth of the industry too.
Tokens can actually be rented out to other users in exchange for a rental fee. Of course, this is a very simple way to generate passive income, in the same way that you may rent a room to someone in your home.
Platforms like RENFT can help you to do this, but it's worth noting that, to maximize your return, you should consider the demand for your NFTs and work out how much the rental value should be.
This strategy is probably the least known one around, but it can yield some great results. Some platforms allow for NFT index funds where investors will passively invest in a diversified portfolio of NFTs.
This, of course, allows you to break into the NFT market without having to actually manage your investments - which is very similar to traditional forms of index funds.
However, NFT index funds look specifically at the performance of rare or collectible NFTs.
To get involved with this, you will need to invest in an NFT index fund through a broker or similar investment platform - but one that actually specializes in NFTs.
And that's everything you need to know about earning a passive income through NFTs. Remember to research the market and how it works before you get involved though, as this type of investment can be unstable.
Frequently Asked Questions
We're now going to cover some of your most frequently asked questions.
It can be. Much like other forms of investment, you are putting yourself at financial risk - especially when you consider the NFT index funds option.
However, it is worth considering as a viable option, particularly if you know people in the industry who can guide you through some of the process when you start out.
It can be, but as with other passive income streams, you need to put the time and effort into the start, which later can yield a passive return.
It depends on the market and your strategy. The average royalty fee is set at between 2 and 10 percent for example.
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