As a sub-trend of the broader NFT space, staking non-fungible tokens is gaining a lot of attention from crypto enthusiasts these days. Let’s have a look at what NFT staking is.
What is NFT Staking?
NFT staking is the process of locking up NFTs on a platform or a protocol, earning rewards in exchange for this action. With this process, instead of simply holding NFTs and waiting for prices to go up, NFT holders can earn passive income while still retaining ownership of their tokens.
Similar to how we cannot stake every cryptocurrency, it is not possible to stake all kinds of NFTs. Different NFT staking platforms have different requirements which are important to keep an eye on before deciding to stake NFTs. This is a new opportunity for NFT holders to monetize their digital assets, which in turn increases the demand for acquiring stakable NFTs.
How does NFT Staking work?
The concept of staking assets and earning rewards has been introduced with the Proof-of-Stake (PoS) consensus mechanism, used in most blockchain networks. These blockchains rely on a global network of validators who verify the transactions on the chain and keep the network secure. To prove their participation in the network, validators pledge pre-purchased coins and keep them locked for a certain period. They will then receive rewards in the form of the network’s native cryptocurrency in exchange for staking cryptocurrencies and verifying transactions.
This same concept has been expanded also to the NFT space, where NFT holders can earn rewards in the exact same way by dedicating their NFTs to a blockchain network.
NFT Staking rewards
The reward structure offered for staking NFTs differs from platform to platform, where the amount of reward will be calculated based on factors such as:
- Staking period. There are collections that allow users to lock-up their assets for an indefinite period, while others have strict rules on how long tokens can be staked.
- Annual percentage yield (APY). Some platforms might also display the expected token rewards (e.g. 10 tokens per day) that can be earned during the staking period instead of a specific APY.
- Rarity and number of NFT staked. Some projects will offer higher APY rewards for staking multiple NFTs or those with higher rarity scores.
Most of the time, rewards will be paid in periodic intervals in the form of utility tokens. Stakers can exchange or sell these reward tokens for other cryptocurrencies and fiat money. Some staking platforms also have decentralized autonomous organizations (DAOs), where voting privileges are given as a form of reward, allowing NFT stakers to participate in governance tasks of the platform.
Best platforms for NFT Staking
As the NFT staking trend is gaining traction, the number of platforms that provide this service is increasing. Let’s look at some of the best NFT staking platforms.
MOBOX is a Play-to-Earn (P2E) gaming metaverse built on Binance Smart Chain. It combines DeFi (Decentralized Finance) yield farming strategies with NFTs and allows users to stake NFTs. Yield farming is an investment strategy that rewards users for lending out or staking cryptocurrencies. Apart from including this strategy and rewarding users for their engagement and gaming activity, MOBOX rewards users for staking NFTs.
MOBOX metaverse is called MOMOverse and the NFTs of this space are called MOMOs. When users stake NFTs on MOBOX, they can mine native governance token MBOX as a reward. The mining power will increase when the rarity of the staked NFT is higher, which in turn provides more MBOX tokens.
Splinterlands is a collectible card game built on the Hive blockchain network. Players can buy and sell digital cards with unique NFT identifiers which can also be used in battles inside the game. Splinterlands is also set up as a DAO on Binance Smart Chain. As a result, users can stake the native token Splinter Shards (SPS) to earn rewards, participate in governance, and get special offers and bonuses.
In addition to staking SPS tokens, users can also stake NFT cards in liquidity pools and earn staking rewards. Liquidity pools contain locked funds for providing liquidity to the traders. When users stake NFT cards in liquidity pools, they will earn rewards for helping ease the transactions between buyers and sellers.
NFTX platform allows its users to create ERC20 tokens that are backed by NFT collectibles. Users will first deposit their NFTs into the NFTX vault and mint ERC20 tokens, which are also called vTokens. Users can stake these tokens to get staking rewards and purchase NFTs from the NFTX vault. Additionally, holders can also deposit their vTokens in automated market makers to provide liquidity for other users and earn rewards.
Doge Capital is a collection of 5000 pixel-art NFTs minted on the Solana blockchain network. The holders of these NFTs will get a membership of the Woof club along with exclusive perks. Doge Capital offers a staking program that allows users to stake these NFTs and earn daily rewards in the form of DAWG tokens. When a user stakes one NFT, he can get a daily reward of 5 DAWG tokens. DAWG is the platform’s native utility token and is listed on multiple exchanges so that stakers can exchange their rewards with other crypto or fiat money.
Polychain Monsters is a digital collectible and gaming ecosystem. The platform contains animated digital collectibles called Polymons which have different traits and varying levels of scarcity. Users can acquire the Polymon NFTs through digital booster packs. Holders can stake them on the platform and earn weekly rewards in the form of the native cryptocurrency called PMON.
NFT staking is the most beneficial concept for Play-to-Earn and other gaming ecosystems, as the players can borrow the staked NFTs to participate in a game when they cannot afford to buy them. However, this concept has been expanded also to pure trading activities behind the NFT space, where it will be interesting to see where this innovation will take investors’ strategies.