Non—Fungible Token, or NFT for short, should already be a familiar term to you as we have discussed it in previous lessons. You also know that some investors have made quite a return on their investment in this asset.
NFTs have been around for a while, however, the 2020 pandemic saw them grow in popularity. It was at that time that celebrities began selling their photos, and even their bodies, in the form of tokens. Collectors were tempted to invest millions in NFT-based artwork. In today’s lesson, we will help you understand the phenomenon of non-convertible NFTs and present a short guide on how to make money from them.
As a reminder – NFT is not a cryptocurrency. It is a unique, non-convertible token which is a digital confirmation of the quality of a given asset. What characterizes them? They cannot be replaced, there is no possibility of falsifying or modifying them. These features make them attractive to investors.
Utility of NFTs
Utility is a loose term, used to give meaning to an NFT or by identifying specific rights or offers to the owner of the NFT. In various forms, this usefulness can be announced in advance in the project roadmap, as a surprise or simply as an addition to the life of the collection. Your NFT is then no longer represented only by a work of art and becomes a kind of key, giving you access to specific benefits.
The non-exchangeable tokens represent almost everything. Paintings, fashion, media or unique artworks. They can also be found in the music or film industry. As you gain new users, they become more and more valuable, and you can earn more from them. Of course, to trade them, we need the right background. NFT are traded on specific exchanges such as OpenSea or Rarible. However, exchanges of non-exchangeable tokens are a topic for a separate lesson. This is where creators, collectors, or even investors place their works and assets. Until they are purchased by someone else, it is the creators who have full power over the tokens.
NFTs carry a certain danger; there is quite a risk that they will be used for money laundering or even terrorist financing. Fraudsters are not idle in this matter, either. The simplicity of their creation and trading as an asset gives wide scope for dishonest creators and investors.
How to make money from NFTs?
There is no single best practice for investing in these assets. The market is still young and the full potential of tokens has yet to be recognized. However, this does not mean that it cannot be exploited. It is worth hunting for free airdrops, and if you own your NFTs, you can stake, rent or earn NFT licence fee. Flipping tokens or gaming, which is growing in popularity, can also be an additional form of income. Remember also that as the author of a given token, you have full ownership rights to it. We will now look at each of the methods mentioned above.
- Airdrop and passive income
In some cases, NFT owners can benefit from airdrops (tokens received for free) of new NFTs or a valuable token. This allows collectors to make money just by owning NFTs. When the received token itself has utility, creating demand, this revenue can become substantial and drive up the price of the original NFT while owners are unwilling to part with it. An example is CyberKongz Genesis, owners receive $10 BANANA per day.
- Staking.
Without a doubt, this is the main advantage of non-convertible tokens. All thanks to the combination of these assets with DeFi (decentralized finance). You will probably think to yourself now that since tokens are not cryptocurrencies, how can they be staked? Well, you can ☺ Fortunately, they have this feature, and you earn interest. For those who don’t know what staking is, we briefly explain – in exchange for reward, you lock up your digital assets for a certain period of time. Something like a bank deposit. Some platforms where NFT staking is possible: Only1, Kira Network, or NFTX.
Before you proceed, read the terms and conditions of the platform carefully. Some allow you to use different NFTs. However, some only allow you to use native tokens. Then you are rewarded for your investment with so-called staking tokens. Is staking tokens a good form of earning? Definitely. In addition to interest, you can benefit from a second option – reinvesting the cryptocurrencies you have earned through staking non-convertible tokens. As you can see, this form of capital investment allows you to earn a satisfactory rate of return. Of course, if you do everything with your head.
- Renting.
We recommend this method if you want to earn a passive income. The operation is relatively simple. As a potential NFT lender, you send them to a smart contract. You set a daily rental price and its maximum duration. The user, who would like to rent the asset from you, pays for the rental period. An additional cost for him is a security fee equivalent to the price of the NFT in question. At the end of the rental period, borrowers receive it back. ReNFT is one of the platforms that allows you to borrow tokens. It is safe to say that, it is an effective alternative to the speculative trading of these assets. As Regan Bozman says, “It’s a valuable new primitive in web3, and especially in the fast-growing GameFi space.”
- Flipping.
Sounds out of this world? It doesn’t. You buy tokens when they are completely new to the market (e.g., when a fresh project comes out). The next step is to sell the bought NFT, of course, at a higher price on the market that trades these assets. According to the law, the sale of tokens is not reserved only for their creators. So go ahead and take action. Just like with cryptocurrencies – buy and sell at a profit. The important thing is that you know when to sell them. The right moment will bring you more profit. The right valuation depends on the type of token you have, its usefulness, and the interest of other users. At this stage, also keep in mind transaction fees, or those less obvious, such as gas fees.
- Licensing fees.
As a creator, you can earn passive income after selling your token, with every transaction that happens on it. How do you do this? You can set what’s called a royalty, or license fee. You will then receive a percentage of the sale price in your account each time your token falls “victim” to a transaction. This earning model gives you the opportunity to receive a return for an indefinite period of time. In the NFT marketplace, you can set your royalty. This can be 10%, 100% or even 1000% of the value of a given token. The process is as trivial as creating your own NFT. The smart contracts in the DeFi ecosystem are responsible for it. There is absolutely nothing you need to do manually – the whole cycle is fully automated.
- Games.
This is an ideal way to make money, especially for users just entering the world of digital assets. NFTs have almost unlimited potential in this world. Publishers and manufacturers want in-game tokens to work fully legally and be regulated. The entire idea is to be based on skins, trophies, items or unique artefacts. A user possessing such a totem could easily cash it in (e.g., for cryptocurrencies) or use it in other games. Surely, you have heard of Axie Infinity. Players care for, develop and battle their adorable creatures, called Axies. They don’t receive points for this, but game tokens (Smooth Love Potion – SLP). They exchange the tokens they receive for cryptocurrencies or cash out. The cute creatures themselves are also NFT tokens.
All these actions are supposed to bring us closer to the model of games in which we earn. The so-called Play to Earn. All the goods that we obtain in a given game, we monetize, and this is our way of earning income. Popular NFT games where you can earn are: Axie Infinity, Cryptokitties, Gods Unchained, or Guardians Guild.
Alternative NFTs
We have discussed the main ways to make money from NFT. It is worth looking at the niche ones that also allow us to monetize:
- Celebrity NFTs.
When a celebrity doesn’t shine in their former glory, NFT comes to the rescue. Admittedly, to tap into this earning potential, you unfortunately have to be a well-known person. Non-exchangeable tokens have become a very profitable business model for celebrities. For example:
- Paris Hilton offered a portrait of her cat at NFT.
- Lindsay Lohan sold her music video as a non-exchangeable token.
- Using NFT you could buy a day with Snoop Dogg.
- Marta Rentel sold her love for 1 million Polish zlotys.
- Doda, gradually trading in her avatar, which she divided into 400 pieces.
- Fashion.
Well, the biggest designers and fashion houses want a percentage of the tokens without losing their exclusivity. Furthermore, we will share with you examples where NFT has been used in the fashion industry:
- Naked Shoes – crypto sneakers created by RTFKT Studios and FEWOCiOUS. They made $3.1 million in 7 minutes.
- Louis Vuitton has included Beeple’s work in its 2019 collection.
- Gucci has released virtual sneakers.
- Dolce & Gabbana’s collection was presented in an NFT version.
The NFT is still in its fledgling stage in the fashion industry, but is on track to make spectacular profits.
Interesting fact – what does the Metaverse have in common with NFT?
As the metaverse grows in popularity and takes control of our daily activities – NFT will grow even more powerful. Metaverse will enable non-exchangeable tokens to have far more features and options. It is important to remember that the Metaverse blurs the lines between the digital and the real. It brings people closer together. Not only that, but it gives us unlimited possibilities in commerce, entertainment, socializing, work, sports, or even education.
Summary
As you can see, all of us can make money from NFT. The ways are plenty. You can create your own unique project that will provide you with enough profit. With the licence fee, you can double it even more. Investing in the right token should also be a form of earning for you. But before you decide to buy or sell, do thorough research. Conduct your own thorough research, as not all NFTs are good investments.
Combining pleasure with usability – games. This is also an excellent opportunity for passive income. In addition to the suggestions we’ve mentioned, there are many more P2E games on the market from which you can have a great income. If you’re just getting into the virtual investment world, this is a good option for you to get started.
NFT is a revolution that is just getting started. As the Metaverse grows, the boom in non-convertible tokens will be even bigger.
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