Almost everyone in the blockchain world would have heard about NFTs, the foremost unique digital assets. However, when most people hear about NFTs, they generally think of the exorbitant prices that come with them. For instance, a $69 million NFT collage was produced by the world-renowned graphic designer Beeple. No doubt, there are low-level and accessible NFTs, but when talking about these latest digital assets, no one doubts their ability to be earned.
Similar is the case with NFT farming. It is the idea behind token staking and liquidity farming. Moreover, people can make money using authentic staking tokens via an NFT-based compensation.
Non-fungible token farming is one of the latest DeFi crazes that blends yield farming with NFT. This guide will walk you through NFT farming and how it operates. Moreover, it will also help you understand how you can participate in these latest exciting opportunities to earn crypto.
But before we move ahead to NFT farming, let’s first understand other essential terms related to NFT farming. This won’t let you get confused seeing them ahead in the article.
What is DeFi?
Decentralized finance, commonly known as DeFi, refers to peer-to-peer financial products on public blockchains, most notably on Ethereum. It allows you to do maximum things banks do like gain interest, purchase insurance, sell assets, etc. But, the best part is it’s simpler and doesn’t involve documentation or a third party.
What are NFTs?
Non-Fungible tokens are blockchain-based tokens that highlight cryptocurrency assets with testable proprietorship. It enables creators and brands to tokenize their artwork and trade it in digitized form to followers and collectors.
For instance, prominent digital creator Beeple sold NFTs at Christie’s for more than $69 million. This established the bar for anybody looking to make a living as a crypto artist.
What is Yield Farming?
Popularly known as liquidity mining, yield farming is the practice of generating a yield on a digital file. This is done by securing them as a stake in a DeFi trading to operate as a liquidity provider.
Yield farming had gained popularity since 2020, when the notion first appeared on the largest DeFi platform, Compound. Numerous yield farming DApps are introduced on blockchains such as Ethereum and Binance Smart Chain. This is done with the aim to help investors gain good yields on their crypto assets.
How Does Yield Farming Work?
With the popularity of online gaming, we have seen numerous users trading in-game currencies for substantive money on these marketplaces. The growth of blockchain and decentralized money makes virtual farming gold a viable economic possibility, which developers have previously disapproved of.
Just like that, non-fungible token farming is analogous to yield farming. Nothing surpasses current players in virtual world things or in-game currency that can be exchanged for currency and revenue.
Now that we have covered the fundamental principles that would give you a basic understanding of NFT farming, let’s begin with NFT farming and how it operates.
What Do You Understand by NFT Farming?
NFT farming is the trending concept that entails utilizing Non-fungible tokens as a token to stake NFTs. The NFT combining DeFi allows you to generate revenue by selling your NFT on the web. Overall, NFT farming provides hassle-free stakes and is consistent with yield farming.
As a result, NFTs now have more liquidity and, in certain situations, more utility than before. Moreover, such farming generates revenue by wagering tokens on the application’s performance. Buying exceptional and one-of-a-kind NFTs is the foremost step in utilizing the NFT. However, it’s not necessary that such NFTs may come pricey. You can buy reasonable NFT for farming purposes, but the production will be less than that of unique or uncommon NFT.
After purchasing the NFT, you do get the option to alter the prizes for your owned NFTs. These digital assets become earnable based on multiple factors, including the tokens staked. Moreover, the cause and actual return of the project also plays a crucial role in it.
What Is the Process of NFT Farming?
Non-fungible tokens exist on various blockchains like Ethereum, Flow, Tezos, Binance Smart Chain, and many others. These products follow specified standards and can therefore be utilized in multiple applications.
You require to set up a cryptocurrency wallet in order, to begin with, NFT farming. We recommend using MetaMask when connecting with any blockchain such as Ethereum, Tezos, Flow, etc. After the successful setup of the wallet, you will require tokens based on the platform. Stake tokens and gain rewards according to the share of the pool.
Staking a portal is the fundamental approach in this situation. It is a perfect location where appropriate NFTs may be converted into vaults and rewarded. For instance, the $MEME genesis Farm enables the users to stake MEME tokens for free to farm tokens. This can later be sold on NFT marketplaces like UPYO.
Can You Make Profit Via NFT farming?
Unlike traditional staking, which rewards the user with the automatically staked token, NFT farming enables the user to acquire significant yield-generating assets. These profitable NFTs can vary widely based on the token being staked and what the development team deems as the perfect reward to be made profitable.
With NFT farming, projects gain an advantage by getting add-on tokens locked up and off the marketplace, strengthening their space. On the other side, users benefit from the availability of particular NFT assets by receiving real incentives.
Gamification of NFT Farming
The current buzz in NFT farming is all about the gamification of the procedure. This type of farming basically involves a video game layer to yield farming methodologies. Items like Alien Worlds come with a gaming feature and a sense of competition to the basic concept of yield farming.
Yet another eye-catching game is Axie Infinity, which enables the players to make SLP tokens in-game. They can either trade such tokens or use them in creating other NFTs that will be popularly called Axis.
There are numerous non-fungible token-based yield farming platforms available on the UPYO. You are simply required to get an NFT with specific functionality before you begin to farm and develop tokens. After that, NFT can showcase a yield growth, which can then be merged to DEF.
Why Do Marketplaces Open Up Opportunities for NFT Farming?
NFT farming enables companies to provide concise added value and hence offers value to the consumers. When talking about NFT farming, there are different outputs. But the accolades are often utility-based digital assets and collectibles. Nonetheless, NFT farming may offer consumers similar benefits as projects that don’t offer yield or staking production.
NFT farming helps people make revenue from NFT assets that are only present in the marketplace. As a result, this strengthens the developers’ ecosystems. This in turn help users gain actual value by holding the add-on tokens which are not available on the market.
Risks Involved in NFT Farming
NFT farming is an ideal way to grow your cryptocurrency portfolio, but it comes with risks. It is among the riskiest ventures in crypto. Several NFT farming options are still in the testing phase. The jury is yet out on if this new crypto-earning option will pass the test of time or get stuck.
Moreover, just like conventional yield farming, NFT farmers may be exposed to the flaws in the DApp’s smart contract’s code. This might result in a total loss of money and frequent risk in the platform’s token. This in turn will result in significant losses when changing earned tokens back into stable coins or fiat cash.
Composability is considered one of the biggest benefits, but on the other hand, it can also turn out to be a boon. As non-fungible token platforms are built-up blocks, there is a possibility that if one collapses, all of the other blocks will crumble as well. The majority of this innovation is still in its early phases of development. A system flaw might have severe effects on bitcoin dealers.
Overall, NFT farming offers a creative solution to an issue that consumers and project developers may not have recognized. This allows all parties involved to gain in various ways. By including add-on utility to token in NFT farming abilities format, various marketplaces are bringing innovative ways for the blockchain community to raise its features. Hence, it won’t be wrong to say that earning from NFT farming has started and will not slow down anytime soon.
Whether you wish to learn about NFT, Blockchain, Web3.0, Metaverse, or other emerging technologies, we have the vital resources that will enlighten and help you make an informed decision.
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