How to make money with NFTs: NFT Renting vs NFT Lending
You may have heard about the 24-year-old artist who earned over $300,000 from selling NFTs of her works. Or, Rob Gronkowski, who made a decent sum from selling NFTs of his best Super Bowl performances. It’s no surprise that more people joined the bandwagon after this kind of asset started trending on social media. However, in addition to selling NFTs, there are other ways to make money using NFTs, like renting NFTs out and lending cryptocurrencies against NFTs.
Understanding NFTs is the first step in using them to make money. We’ll give you a brief introduction to NFTs and show you how to use them in order to get profit. Let’s begin by defining NFTs in detail.
What are NFTs?
Non-fungible tokens are transferable crypto assets that allow holders to prove their ownership. As we’ve already mentioned, the assets could be anything from an image to a GIF or audio clip.
What’s interesting about NFTs is that each copy of the item will be noticeably distinguishable from the other 999 pieces based on the unique type of data (referred to as metadata) that each NFT token contains, even if you create 1,000 copies of the same image or file and mint the same number of NFTs to represent ownership of them. As a result, each investor can claim to be the owner of a unique copy even though 1,000 investors may all possess the same image in their wallets.
Imagine it as a 1,000-piece limited edition of card trading, each of which has a special serial number that may be used to identify. Additionally, compared to other cases of the issue, the card with serial number #1 would definitely sell for more money and be more in demand. To increase the value and scarcity of NFTs, designers always include a variety of attributes with varied degrees of rarity
Now let’s talk about the fungibility that gives non-fungible tokens their name. By definition, fungible tokens are those that may be exchanged for one another like-for-like. For example, exchanging each other’s bitcoins one for one wouldn’t benefit anyone more or less. Using NFTs makes this more complicated.
NFTs are tradeable in the sense that you can buy and sell them to other individuals, but each NFT has a unique value. For instance, it would be impossible to exchange a shiny Charizard Pokemon card for a “Shoeless” Joe Jackson, 1909 American Caramel baseball card. The term “non-fungible” refers to what is mentioned above regarding NFTs.
The value of NFTs comes from their utility. The person or entity who owns the assets acquires exclusive rights. So, NFTs can use the power of blockchain technology rather than the hype that is driven by people. Here are the most 2 popular ways to improve NFT utility.
NFT renting is the process by which people who don’t own or possess a certain NFT but want to use it or experience it temporarily borrow the NFT from an appropriate NFT renting protocol. The NFT is returned to its owner at the end of the rental time thanks to the use of Defi blockchain technologies by NFT rental marketplaces.
Why would someone want to rent an NFT, you may ask? It’s simple: to generate income. On one hand, asset owners can make money by allowing borrowers to passively earn from the use of their NFTs. Renting NFTs can help you make passive income if you have digital assets that are in great demand or are well-liked. This idea is very popular if you join in NFT “play-to-earn” gaming because many NFT games demand a considerable initial investment before you can begin earning money.
Purchasing the NFTs required for these games and lending them to players who can’t afford to purchase them but still want to play is one option. These NFTs in this scenario would be in-game items, like virtual lands or characters, that would provide players an edge over one another. In return for renting NFTs, players provide you with the agreed-upon amount of cryptocurrency.
On the other hand, the borrower is offered the opportunity to join the NFT community. A small number of users might prefer to utilize an NFT only within a specific timeframe. In this case, renting offers them immediate access to the NFT. Also, they can use their rent NFTs to increase income. Renting NFTs is an economical method to enjoy some of the premium NFT services without having to make a significant initial investment.
An NFT renting transaction usually requires collateral. To protect the rights of the asset owner, the borrower must deposit collateral with a higher price point than the NFT. Additionally, the borrower is required to pay a fixed amount as a rental fee. After the contract’s term has expired the NFT is given back to its original owner, and the borrower gets their collateral back.
NFT lending, also known as NFT-based lending, is the process of using NFTs as collateral to receive immediate cryptocurrencies. The concept was motivated by the lack of use of NFTs that cannot produce additional returns once staked.
Consumers can use NFT lending to lock in NFTs as collateral for cryptocurrency or fiat loans, and lenders can use the platforms to lend their money and make revenue. The loan is dependent on the APR rate and the loan term. The borrower shall return the locked NFTs and pay the capital plus interest at the end date. The locked NFTs will become an asset of the lender in the event of late payment.
Most NFT loans operate in the type of peer-to-peer. Similar to a traditional loan, peer-to-peer NFT lending operates when transactions are made directly between the lenders and the borrowers. The NFT, for instance, will be moved to the digital vault within the allotted time frame when a borrower lists an NFT as collateral with a loan request on a platform. If the borrower repays the loan on time, the asset will be returned while the lender receives the loan plus interest.
A loan rollover might also be suggested by the borrower. When a loan matures, the borrower may select to roll it over into a new loan with the lender’s approval rather than paying it off. The previous loan’s conditions and other components will be carried over, with or without the interest.
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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.