As the NFT (non-fungible token) market evolves, the number of NFT use cases is continuously growing. As such, this has quickly made them one of the Web3 industry’s most significant features. Even though prominent application areas are e.g. digital art and gaming, new innovative ways to use NFT are constantly emerging. One of these is to use NFTs for NFT staking. The possibility to stake NFTs presents an opportunity for investors within the NFT space to earn passive income on their assets. As such, we’ll dive deeper into the details of NFT staking in this article. Along the way, we’ll additionally cover how you can stake NFTs and mint your own tokens with Moralis’ NFT API!
Due to the inherent non-fungible nature of NFTs, they are generally prone to a holding strategy where people keep assets for an extended period of time. As such, the opportunity to stake NFTs presents new ways for NFT investors to earn passive income. Moreover, this is a more exciting alternative to more conventional ways to earn interest on assets since banks nowadays offer relatively low interest. Furthermore, as a relatively new concept, it will be interesting to see how NFT staking evolves in the coming years.
What’s more, if you have further interest in the NFT space, you have arrived at the right place! Here at the NFTCoders blog, you’ll find more relevant NFT content. For example, check out the following articles on how to start generating NFTs in 15 minutes or NFT game development.
Before we look closer at NFT staking and explore how to stake NFTs, we’ll initiate this article by taking a closer look at more conventional staking within the DeFi sector!
What is Staking?
Like many areas within the crypto space, staking can be seen as a relatively complicated concept or quite simple, depending on how technical you want to get. For many, staking is a way to earn passive income for holding a particular cryptocurrency, which is often the main takeaway. However, if you aim to earn rewards for HODLING your crypto, it’s beneficial to understand the basic fundamentals of the process. As such, we’ll take this section to briefly cover the details of how staking works.
If the asset you own is eligible for staking, you have the ability to ”lock up” your assets and earn a percentage rate on your total holding over a time period. The most conventional way to stake is through a ”staking pool”, which is comparable to the more traditional concept of an interest-bearing savings account.
When staking your cryptocurrency, you receive a reward since the blockchain “puts your assets to work”. Currencies that allow for staking utilize a proof-of-stake (PoS) consensus mechanism. PoS is a way to ensure that transactions are verified on-chain without the need for an intermediary. The crypto that you stake becomes part of this process. In these systems, staking basically serves as a function similar to mining within a proof-of-work (PoW) network. As such, people who stake are provided with the opportunity to validate blocks.
However, validating blocks can be somewhat complex, especially if you’re new to crypto. This is precisely why the most common way to stake assets and participate in the process is through staking pools. These lower the entry barriers and allow all investors to start earning rewards without the need to operate their own hardware for validating blocks.
What is NFT Staking?
Put simply, NFT staking is a way for you to put your NFT assets to work. As such, when you stake, you attach your NFTs to a particular protocol and platform. In exchange for staking the NFTs, you’ll receive rewards. This means you can earn extra assets from your tokens, all while still remaining the owner of the NFTs.
This is comparable to the more traditional concept of staking cryptocurrencies or DeFi yield farming. In these systems, owners lend their cryptocurrency to staking pools and earn rewards in the form of interest or even a cut of transactions that occur on a network. NFT staking can, therefore, be a way of making interest similar to that of traditional savings accounts in a bank. However, NFT staking isn’t centralized but is rather part of the DeFi world.
If you decide to stake your NFTs, you’ll receive rewards in the form of cryptocurrencies. The rewards often come in the form of the project’s or protocol’s native currencies. However, this varies, and other alternatives, even privileges, can also be rewarded.
The interest you’ll receive if you choose to stake NFTs is dependent on a few variables:
- There is often an annual interest rate disclosed beforehand.
- The time you have staked your NFTs.
- The number of NFTs you stake.
Now, with a better understating of what NFT staking entails, we can move on and take a closer look at how NFT staking works!
How Does NFT Staking Work?
NFT staking is somewhat similar to that of more traditional staking within the DeFi sector. As such, we know some basics from one of the previous sections. However, let’s take a closer look at how NFT staking works more specifically.
When looking to stake your NFTs, you’ll need to find an appropriate protocol or project. Once an NFT is staked, the protocol locks up the asset in a staking pool and picks validators. When the protocol picks a validator, they become eligible to confirm block transactions. The process of choosing a validator is often random; however, it’s possible to increase the odds of getting picked based on how many NFTs you have pledged and the time horizon. As such, if you stake more NFTs for a longer period of time, you’re more likely to become eligible to validate transactions.
Once a new block is validated and added to the blockchain, new tokens are minted and handed out to the validators as rewards. The reward is additionally generally determined by several variables. These include how long an individual has been staking NFTs, how many tokens they stake, how many NFTs are staked on the network in total, etc.
This means that holders of NFTs have the possibility to stake their tokens and earn passive income, all while still being the owner of their assets. As such, when they feel like it, they can remove the NFT from the staking pool at any given time, depending on the terms of the protocol!
How to Stake NFTs
As NFT staking is somewhat similar to more conventional staking practices, the differences between the processes don’t differ significantly. Moreover, it’s important to know that – just like some cryptocurrencies – it’s not possible to stake all types of NFTs.
However, since NFTs essentially are tokenized assets, it’s possible to deploy them on specific NFT staking platforms. The technology allowing for this is smart contracts which allow you to stake NFTs on particular protocols where they will be kept safe while generating income.
Just like when staking crypto, you additionally need a wallet like MetaMask to be able to stake NFTs. You should also ensure that your choice of wallet is appropriate for the chain on which the project or platform is built. Next up, you also need to check if the NFTs are eligible to be staked. Unfortunately, you don’t have the opportunity to stake all NFTs as this varies depending on the project. As such, it would be preferable to check this before purchasing an NFT if this is the end goal.
Once you have found the proper wallet, NFTs, and staking platform, all that remains is to connect your Web3 wallet to the platform. This will allow you to send the NFTs to the platform, where they will be kept while you make a return on your assets!
During the time you stake NFTs, the particular protocol/project lock up the asset. However, it’s generally possible to withdraw your tokens whenever you please, but this might also vary depending on the platform you opt for.
How to Mint NFTs
With a better understanding of what it means to stake NFTs, we can move on to the last sections of the article, where we’ll show you how to mint your own NFT. However, we aren’t simply going to be creating a simple NFT. Instead, we’ll create a dapp where you can continuously mint NFTs with the click of a button. This is what the UI of the platform will look like:
But, with no further ado, let’s kick things off by creating a Moralis dapp! The first thing you’ll need is a Moralis account. Once you have signed up with the platform, you can create a new dapp by clicking the ”Create New Dapp” button and following the instructions.
Once you have a Moralis dapp at your disposal, you can progress by cloning down the following GitHub repository to your local directory:
Minting Dapp Documentation — https://github.com/DanielMoralisSamples/19_MINTNFT
This is the complete code for the NFT minting dapp. Once you have downloaded the code locally, we can progress by initializing Moralis. In doing so, you’ll connect the code to the dapp you just created.
So, to initialize Moralis, you’ll need your dapp URL and application ID, which you can find in the Moralis admin panel. Once you navigate to Moralis, you can click the ”Settings” button for your dapp, which will display a new window with the heading ”Dapp Credentials”. Under this heading, you’ll be able to find both the URL and the ID.
With these elements at hand, you can navigate to the ”logic.js” file and add the data in the following place:
Moralis.initialize(""); // Application id from moralis.io
Moralis.serverURL = ""; //Dapp url from moralis.io
With Moralis initialized, there are a few additional elements we need to look closer at, one being the smart contract of the dapp!
How to Mint NFTs: HTML and Smart Contracts
If you’d like, you now have the opportunity to customize the dapp according to your own preferences. As such, if you’d like to play around with the design and the structure of the minting dapp, you can take a closer look at the HTML file, ”index.html”.
The last thing we’ll take a closer look at is the smart contract for the dapp. Luckily, we don’t need to create a smart contract from scratch, as one is available in the Github repository. As such, all you need to do is navigate to this file and input the right chain into the following line of code:
const nft_contract_address = "" /* Available deployed contracts Ethereum Rinkeby 0x0Fb6EF3505b9c52Ed39595433a21aF9B5FCc4431 Polygon Mumbai 0x351bbee7C6E9268A1BF741B098448477E08A0a53 BSC Testnet 0x88624DD1c725C6A95E223170fa99ddB22E1C6DDD */
Now that’s it for this brief tutorial on how you can mint NFTs. If you have any questions regarding the process or want a more detailed breakdown of the process, you can check out the following article on how to create an NFT minting website in 5 steps. This provides a more comprehensive description of the entire process and will hopefully aid your development endeavors!
NFT Staking – How to Stake NFTs? – Summary
As NFTs have become increasingly popular as of late, innovative new use cases emerge for these tokens. One of the most exciting areas that have recently emerged is NFT staking. If you have NFTs available, it’s now, in some instances, possible to stake NFTs and earn interest in return. This basically means that you attach your tokens to a particular platform allowing your NFTs to make money for you.
This provides another degree of flexibility to the NFT space as it allows holders to earn interest on assets that are otherwise generally held in isolation in Web3 wallets. What’s more, it’s a perfect fit for NFTs – as they aren’t interchangeable assets, holders are often reluctant to sell.
However, before getting into NFT staking, it’s essential to know the basics of how you stake NFTs. For example, it’s not possible to stake all sorts of NFTs. For this reason, you need to check that the protocol, your NFTs, and the blockchain on which the protocol is built are compatible with your wallet and assets!
If you have further interest in the NFT space, be sure to check out additional articles here at NFTCoders. For example, read up on the concept of lazy minting, allowing you to create NFTs without paying any gas fees!