Author: James Page
Estimated read time: 4 minutes
Publication date: 19th Apr 2022 10:47 GMT+1
NFTs have done something extraordinary — they have transformed people’s need to own scarce items and sheltered devalued creative artists on the blockchain by protecting their moral and property rights. As such, the NFT market has become a point where intellectual property and digital assets intersect, carving out an industry that made $17.6 billion in sales in 2021 only.
For that reason, NFT pessimists shouldn’t be baffled to hear that Justin Sun, the founder of Tron (CCC: TRX-USD), bought an NFT art piece for $6,000,000. After all, art is known to reflect the present reality, and the one that we're in right now is the digital reality.
What Is NFT?
NFT is an acronym for a non-fungible token that works like a certificate of ownership over a digital item. By its very nature, an NFT is a blockchain product in the form of a smart contract that once concluded, gets encrypted into a token. Like cryptocurrencies, NFTs reside on the blockchain as immutable data units that you can transfer or sell. However, NFTs aren’t minted in bulk like other crypto assets. Instead, they are circulating as a unique piece or a limited edition of rare collectibles, which gives NFTs a value of scarcity for the associated work.
The first NFT was a pixelated octagon filled with pulsing shapes, built on top of the Bitcoin blockchain in 2014. In the years to come, a series of tokenized artwork would occasionally pop up on the digital scene but without making any major financial impact. Ultimately, NFTs found their real home on the Ethereum blockchain, whose set of standards simplified the creation of such tokens.
However, the real NFT frenzy spilled when the world started feeling comfortable with blockchain technology at the end of 2020. From that point on, NFTs became a lucrative source of income for anyone who could create a .gif document, .jpg image, game skins, video reels, and, surprisingly, posts on Twitter (NYSE: TWTR).
How to Make Money With NFT?
You can’t trade NFTs in the same way you can trade Bitcoin (BTC) against Ethereum (ETH) because no two identical NFT items exist at the same time. However, you can sell an NFT token that you own at a very handsome price. Apart from selling, you can buy or even create a piece of an NFT and earn passive income in the following ways:
Rent/Lease an NFT
NFT rentals have created a secondary economy within this industry because NFTs give a sense of security to lenders — the asset stays safely locked in a smart contract, not on the borrower’s computer.
The DeFi gaming industry, for example, often requires an NFT character for a player to enter the game or give the player a certain advantage in the game. So, the players can borrow an NFT from you and pay you interest with the reward they would receive for racing or fighting online.
However, NFT rentals go beyond the gaming industry. You can also rent a parcel of NFT real estate on metaverse-focused platforms and earn some extra income without a mouse click.
With a little business sense, you can also negotiate a smart contract with an NFT dealer on the secondary market and charge them royalty fees every time the NFT changes its owner. For example, if the royalty for a piece of digital artwork is set at 7%, you will receive that same percentage each time the artwork is resold to a new owner. Consider that the NFT price can skyrocket in no time or get resold for more than you can imagine.
Finally, you can try your hands at the increasingly popular AMM protocols and other DeFi infrastructures that make a great match with NFT tokens. You can either provide liquidity to these automated marketplaces and earn new NFTs in return, or stake NFTs to get incentives in the form of utility and governance tokens of that protocol.
The NFT mania isn’t accidental, nor is it naive. Now that the general public spends most of the day online, they can recognize a product that protects their ownership interests in a trustless way.
And, if you’re wondering why people are willing to pay a little treasure for your “unusable virtual gadget,” the answer is pretty simple — for the same reason a passionate NBA fan wants to have a pair of Nike (NYSE: NKE) sneakers signed by Michael Jordan, regardless of their price.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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