NFT Staking: A Quick Guide On What To Know Before Staking
Main Takeaways
Similar to how it works with proof-of-stake cryptocurrencies, NFT staking is the process of locking up your digital assets to receive rewards.
NFT staking opens up a new opportunity for NFT holders to earn rewards on their assets while still maintaining ownership of them.
Users who own NFTs within the Bored Ape Yacht Club (BAYC) ecosystem can participate in Binance NFT’s Ape NFT Staking Program to earn daily rewards.
Not sure what you can do with non-fungible tokens (NFTs) sitting in your digital wallet? NFT holders can lock their assets on staking platforms to earn rewards – all without the need to sell their collectibles.
A non-fungible token, or NFT, is a digital asset stored on a blockchain that holds metadata and unique identifiers that distinguish them from other tokens, making each NFT unique. NFTs have transformed from a niche technology within the blockchain space into a cultural phenomenon in just a few short years. As the billion-dollar digital art market continues to grow, creators and collectors are exploring new use cases for this unique asset class. One of the many new use cases is staking. Keep reading to learn about NFT staking and the factors you should consider before staking your digital collectibles.
What is NFT Staking?
NFT staking refers to locking up NFTs on a platform or protocol to earn rewards and other privileges. This allows NFT holders to put their idle assets to work without having to sell them.
Staking an NFT works like staking cryptocurrency; all you need is a Web3 wallet. That said, not all NFTs can be staked. If you’re considering buying digital collectibles with a view to stake them, double-check that your preferred staking service supports the collection before making a purchase.
How Does NFT Staking Work?
While NFT staking is relatively new, it works similarly to locking proof-of-stake (PoS) cryptocurrencies. The main idea behind PoS staking is that participants can lock their funds on a blockchain protocol to support the network. Each time a new block is added to the chain, tokens are distributed to validators as staking rewards. By locking their coins on a blockchain, token holders are able to help support the operation of the network while making their HODLed assets work for them in exchange for rewards.
With NFT staking, you lock your NFTs on a platform for a specified amount of time to receive rewards. One benefit that collectors and the larger NFT marketplace gain from NFTs being staked is that it can produce a deflationary supply pressure, resulting in an increase of the price of similar NFTs still in circulation.
The rewards you’ll get depend on factors such as the annual interest rate offered, staking duration, and number of NFTs staked. The type of rewards NFT holders get depends on the platform used and the kind of NFT staked.
Staking rewards are typically issued in a platform’s native token, which can be traded for other cryptocurrencies or cash. Play-to-earn blockchain gaming platforms are among some of the most prominent players in the NFT staking space as in-game assets that power the gameplay often come in the form of NFTs. Some NFT projects maintain decentralized autonomous organizations (DAOs), and holders can lock up their assets in the DAO pool to participate in the project's governance.
For more information on DAOs, learn more from our article about What is a DAO and How Does it Benefit NFTs.
Each platform that offers staking will also have its own way of calculating interest rates that incentivize NFT holders to deposit their assets for as long as possible. While some services may offer high interest rates, please consider associated risks. Interest rates that sound too good to be true could be a sign that the platform is unreliable. Always do your own research (DYOR) and make sure you’re aware of the risks involved before depositing your NFT on a staking protocol.
What Are the Pros and Cons of Staking My NFTs?
Here are a few factors for you to consider as you decide whether staking your NFTs is the right choice.
Pros of NFT staking
Putting your idle digital assets to work
If you've been holding on to an NFT for a while and don't plan on selling it anytime soon, staking opens up a great opportunity to put your idle digital assets to work. You can lock your NFT on a staking platform and reap the benefits without giving up your ownership.
Engaging with projects and communities
Although the exact rewards and perks of staking an NFT will differ between projects, a common factor is that most projects will reward users who stake their NFTs with utility tokens. These tokens may have additional benefits, such as voting and governance rights to decide on the project's future direction.
Cons of NFT staking
Potential for scams
While earning rewards on your NFTs sounds incredibly attractive, remember there are risks involved. The NFT industry is still growing, and it can be hard to discern who is trustworthy and who is a bad actor in such a new space. It’s not a far-fetched scenario for an unscrupulous staking platform to misappropriate user funds and run away with their tokens.
The best way to keep abreast of potential scams is to do your own due diligence. Always research and investigate the staking platform and the team behind it: it’s always better to err on the side of caution.
To learn more about how you can keep yourself safe from common NFT scams, check out our article on Common NFT Scams & Safety Tips.
Price volatility
While locked in, your NFT could see a significant rise or drop in value due to developments in the market and digital art scene. Depending on the terms of your staking platform, you may not be able to withdraw an NFT that has a long lock-up period. However, if holding long-term has always been your intention, temporary peaks and dips in the market should be less of a concern.
Can You Claim Rewards Before the Lock-up Period Ends?
The rewards distribution schedule and lock-up period will depend on the platform you’re staking on. Some services offer flexible lock-up periods, while others will have you to commit to a pre-agreed period strictly. Some platforms may reward users daily during the entire staking period, while others may only release rewards once the staking period is over. Before you decide to stake your NFT, it's best to do your due diligence and choose a program that aligns with your needs and goals.
Go Ape and Stake Your NFTs On Binance NFT
Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) NFT owners can stake their NFTs on our platform to earn daily ApeCoin (APE) rewards via the Ape NFT Staking Program. Featuring a one-click to stake experience, top-notch security, and zero gas fees, the Ape NFT Staking Program is one of the most convenient ways to stake your BAYC or MAYC NFTs. Users can lock up their BAYC or MAYC NFTs for a flexible term. Plus, stakers don’t need to hold ApeCoins to join the program.
Please note that daily APE rewards and the annual percentage rate (APR) displayed on the Ape NFT Staking Program page are subject to change on a daily basis.
For more information, refer to the Frequently Asked Questions on the Ape NFT Staking Program page.
Conclusion
NFT staking allows participants to earn extra rewards from their idle digital collectibles. And if the NFT project has a DAO, NFT holders can stake their digital assets in its pool to play a part in the project's governance. The introduction of NFT staking has unlocked new use cases for this asset class that go beyond just collecting. While it might be too early to tell, we’ll most likely see more new staking opportunities being created in the NFT space in the near future.
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Read the following helpful articles for more information:
(Blog) A Guide to NFT Rarity
(Academy) Top 7 NFT Use Cases
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