How to earn with NFTs without having to put them on sale
Blockchain, which can be understood as a ledger that records transactions in code, will soon become the future of the Internet. The rise of blockchain has allowed cryptocurrencies to be widely used in today’s world, which can be taken for example by some familiar names like Bitcoin and Ethereum. Meanwhile, the Non-fungible token (NFT) which is another asset of the blockchain has also made a big impact on the market with its exceptional characteristic.
Unlike cryptocurrencies where one Bitcoin is equal to another Bitcoin, each NFT token contains a unique code that distinguishes it from others, thus, it cannot be exchanged in an equivalent value with anything like cryptocurrencies can. In reality, the NFT file is linked to real rare objects like artworks and sport cards, which makes it one-of-a-kind. If a person purchases an NFT, it means that this person has become the owner of the NFT file but not the owner of the objects themselves. The NFT is just proof that this object is authentic.
Most people buy NFTs to earn money from selling them. They only need to upload the NFTs to the marketplace and sell them at a price they deem appropriate for the value of the product. However, the process will take some time to wait for a customer interested in their product to show up, and it can be much longer if both sides cannot agree on the price. Furthermore, there is a chance that there will be no customer and the owner of the NFT file might not gain liquidity from it.
The good news for NFT owners is that there are different ways to make money from NFTs without having to sell them. This post will focus on three methods which are (1) Borrowing crypto against NFT collaterals, (2) NFT rentals, and (3) Depositing NFT into a vault and explain how each of them works and their benefits.
Borrowing crypto against NFT collaterals
The process is quite similar to taking a car or a house as collateral, except this time it happens on a digital platform. The rule is that people lock up their NFTs in a digital vault and gain a certain amount of cryptocurrency as an exchange. To get the NFTs back, borrowers are required to pay the interest rate demanded by the lender at the due date, and if they are unable to repay, the NFTs will immediately belong to the loaner. The benefits of this protocol are that the lenders can earn an interest rate added to the principal loan amount, and the borrowers can receive an instant monetary amount without having to give up on the NFT.
As NFTs are not tangible assets and do not support owners in tracking the true identity of renters, the secured lending regulations (UCC) applied for the NFT backed loan are slightly different from tangible lending. They protect the lenders by giving them more control over the deal. The lenders can ask the borrowers to send the NFT straight to their digital pocket, or let a third party be the one who keeps the NFT but obeys only to the lender’s orders. The second option satisfies both parties since the borrowers are more comfortable when their NFTs are not completely taken by the lenders and the lenders feel more secure knowing that the borrowers cannot run away with the NFTs after the due date.
Although the protocol seems to be promising for earning liquidity, both lenders and borrowers need to be careful when making decisions since the crypto market is very volatile. The worthy NFTs today might not be that valuable tomorrow, which can be caused by the decreased number of investors and the fall in the price of cryptocurrencies.
It is not easy even for people with an average salary to purchase and collect NFTs. For example, one s&m hat of the ape from the famous Bored Ape project cost 69.69 ETH on January 1, 2022. That is why NFT rental has quickly been noticed by people who cannot afford to buy their favorite NFTs.
After choosing a digital platform supporting the renting process, users can rent the original NFTs by paying the rental fee and collateralizing something that has a higher price than the NFT. Then, a smart contract will be instituted with the expired date and the fee which are agreed upon by both parties. When the contract ends, the NFT will be repaid to its owner. For instance, in play-to-earn games, many users have invested in property and houses so that they can lend these digital land plots NFTs out to other players.
Renting NFT is expected to grow even stronger in the future alongside blockchain games’ development. These games require players to have some of the items that can only be purchased before, but now NFT rental business has entered the market, it can create mutually beneficial and secured arrangements between the players and the renters.
Deposit NFT into a vault
This protocol is also about exchanging NFTs to gain an amount of cryptocurrency. Unlike using NFT as collateral, this method will provide borrowers the crypto right after they deposit their NFT without having to pay interest rate payment. The digital platform will let them deposit their NFT on it and then mint a fungible token which can also be sold into another cryptocurrency in return. In addition, it is possible to exchange their NFT for another NFT in the vault. All people need to do is place their NFT into an NFT collection vault, mint an ERC-20 token, and request to trade theirs with one random NFT in the collection.
There are several methods to earn money while not having to sell NFTs. It is based on the value of NFTs and how much money they want to earn to choose a protocol to follow.
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Disclaimer: The information herein is for educational purposes only and should not be considered financial, investment, or trading advice. Please conduct your own research and due diligence before making investment decisions. You understand that you are using the Information provided at your own risk.