NFTs are digital assets in the form of photos, videos, audio, etc. These can be purchased and sold over any NFT exchange with the help of cryptocurrencies. Some of the key ways through which you can make money from NFTs are, by flipping which means buying low and selling it high. Creators of NFTs can receive royalties on the sale of their NFT. Apart from this, you can stake your NFT to obtain additional income while still owing it.
What are NFTs?
Firstly, for those who are unfamiliar with cryptocurrencies and blockchain, an NFT or Non-Fungible Token is a digital asset that is rare and has some value. These NFTs are in the form of data, stored on the blockchain network. As the blockchain is a public network, you can see it and verify it at any given point in time. NFTs are predominantly in the form of Photos, Videos, or Audio, but there are some other NFTs that are in the form of virtual objects in a metaverse. These include Land, building, and other utility objects located in the metaverse.
Any NFT uses an underlying cryptocurrency, mostly Ethereum to get registered on the blockchain. Therefore in order to buy and sell NFTs, you will need some cryptocurrency to complete the transaction. The recent cryptocurrency boom has pushed the popularity of NFTs, and even famous celebrities like Amitabh Bachchan, Yuvraj Singh, Rajinikanth, Salman Khan, and many more have come up with their own NFT collections.
How to make money using NFTs
Buying and selling is the primary method exercising which you can make money but there are some other ways, using which you can earn additional returns on your NFTs. Here are the 3 alternative methods using which you can earn money from your NFTs.
1. Buying Low and Selling High
Trading NFTs is the first way to make money. Trading an NFT is not the same as trading stocks or other securities. Here you will have to conduct intensive research to find out good projects that are available at a reasonable price. Once you have done that, you need to procure those NFTs and wait for the right opportunity to sell them at a profit. This technique of trading NFTs is known as ‘flipping’ and is a common strategy used by NFT traders. Most of the major NFT marketplaces include hundreds of new NFTs almost every day, therefore it is important to find out some of the good NFTs, buy them at a discounted price, and then sell them when the market realizes it’s true value. This process could require weeks or months, and also there are no certainties that you will produce a positive return on your investment. Therefore conducting thorough research on the NFT is of great importance before you purchase anything. Usually, the primary sale of any NFT is the best time to purchase it. Here, you tend to get a chance to purchase it at the lowest possible price, at which it is issued by the company/individual.
2. Earning Royalties
This method is only applicable to the creators of NFTs. Most of the exchanges provide a facility to give a specified percentage on the sale of your NFTs in the form of royalty to the creators of the NFT. The royalty percentage can start from 5% and go all up to 20%. This percentage is calculated on the seeing value of the NFT and is paid directly to the owner. For example, you listed an NFT at Rs 1000 on platform X with a 10% royalty. Assume an individual purchased the NFT and resold the same at 1500. In this case, you will receive 150 which comprises 10% of 1500 as your royalty. This percentage will be paid to you every time your NFT is sold and repurchased by someone.
3. Staking your NFTs
If you are not planning to sell your NFT anytime soon and still want to get some returns out of it. On that occasion, staking remain a suitable option to get additional returns from your owned NFTs. Staking is a method where you lock your NFT with a third-party DeFi platform for a specific amount of time, through a smart contract. In return, you are offered a fixed yield, depending on the time period and also the value of your NFT. You get the returns in the native cryptocurrency of the platform.
Bottom Line
These were three of the most popular and simple ways in which you can make money using NFTs. Although there are several other complex ways like renting, yield farming, etc in which you can generate supplemental passive income from your NFT. These were some of the simpler ones.
Now before you hurry to implement any of the strategies, it is significant to know that NFTs are fairly new digital assets and it is very common to loose a lot of money trying to bet on a wrong NFT. Hence, it is critical that you do your due diligence and research before you employ your hard-earned money into any digital asset.