How to Earn Passive Income with NFTs

It’s 2022 and digital apes have taken over the internet. Who knew that 2D monkeys smoking cigars would carry the kind of thumb-stopping power that content creators and brands dream of? Or that pixelated punks in cool kid’s hats would break Twitter because their creator turned down a multi-million-dollar sale offer?

Unique art pieces and their equally unique creators are getting their moment and we couldn’t be more excited. You’ve probably guessed what we’re talking about: Non-Fungible Tokens, otherwise known as NFTs. These blockchain-based tokens are attached to tangible or intangible works and are non-fungible, meaning unique. They cannot be copied, replaced, or reproduced and are therefore used to price digital assets.

NFTs do sound interesting, but most of us have no clue how to use NFTs to start earning a passive income. Don’t let the thoughts deter you. NFTs sound a lot more complicated than they really are, and once you sink your hooks into the ecosystem, you can set up a passive cash flow pretty quickly. Before we get into the various methods of how to earn your passive income, let’s take a deeper look at NFTs and the current state of the market.

NFTs – A Brief Overview

We’ve already defined NFTs as unique tokens that are used to buy and sell digital assets, but what exactly are these assets? Essentially, anything can be made into an NFT. We’re talking digital art, 2D and 3D animations, sports highlights, Tweets, Instagram Reels, and a lot more. One of the rarest and best-selling NFTs last year was Pantone colors. Imagine paying over $100,000 to purchase a solid color block. And yet, people do.

Can NFTs Be Copied?

One of the major questions people have when talking about NFTs is about duplication. If you think about it, a digital art piece that’s online can easily be copied and downloaded for free. For example, when Nyan Cat was sold as an NFT for about $590,000, a lot of eyebrows were raised because the asset had already been saved and passed around for years. How did a viral video go from being available everywhere for free to become one of the highest valued NFTs in history?

The answer isn’t simple but it is intuitive. Consider this: if you went to the Louvre and took a picture of the Mona Lisa, would the picture be as valuable as the real thing? You already know the answer to that question. Owning the Mona Lisa and owning a picture of it are vastly different because, in the former, you’d be recognized as the legal owner versus the latter, where you’d be known for having a cheap imitation.

It’s pretty similar with NFTs. Owning a copy of Nyan Cat isn’t the same as owning the real thing simply because the owner has the NFT. And since the token is encrypted into the blockchain for the NFT, there can only be one owner. NFTs don’t currently have concrete laws that back them up, but this is also in the works.

How Can You Earn Passive Income with NFTs?

Here are a few passive income ideas through NFTs:

Royalty Fees

This is one of the best ways to keep earning through NFTs. Since NFTs are unique codes, they allow creators to set their own terms depending on their earning requirements. This means that once a creator sells his NFT, he can continue to receive royalties from it. For example, if a creator sets his royalty percentage to 15, he will receive 15% of the sale price whenever the NFT is sold onwards.

The best part about this process is that it’s regulated by machines. This means creators don’t need to worry about getting their royalty payments because the whole system is governed by smart contracts. So, all you have to do is get to work on creating and minting your first NFT!

Staking

Think of NFTs as ownable entities and the people who own them as stakeholders. Staking is the process that allows you to lock or seal your NFT into a DeFi (Decentralized Finance) smart contract to ensure it keeps generating money.

Staking allows buyers to keep interests in their NFTs and generate a substantial yield every so often. Owning a staking token means you also get to reinvest in different protocols, much like in a corporation. You can earn staking tokens through different platforms, although some of them may require you to purchase NFTs from them first.

Put Your NFTs on Rent

Another great way to earn passive income from your NFTs is to rent them out. This is another process that’s regulated through smart contracts and is therefore safe to participate in. All you have to do is lease your NFT on terms that suit you. You have full freedom to set the duration and rate of the agreement.

This is particularly lucrative for assets like digital trading cards or NFTs that allow you to attend high-profile and exclusive events. As a renter, you can get access to privileges you wouldn’t normally have without shelling out millions of dollars.

Are NFTs Worth It?

Collins Dictionary called ‘NFT’ the word of the year for 2021. All in all, it’s a good time to invest in or create NFTs for passive and active income. The market is open for early adopters because, despite their virality, NFTs hold endless untapped potential. They are currently minted using Ethereum and gas fees are relatively low. These may go up once more people start investing. In a nutshell, considering the popularity of NFTs, it seems a wise choice to mint or invest in NFTs as soon as possible so you can set up a reliable stream of passive income right away!