Making Passive Money with NFTs
In this section, I will tell you about how to make passive money with NFTs!
Imagine yourself in an ice cream shop. You walk in, exchange pleasantries with the shop owner, and order some chocolate ice cream. Sitting at the nearby table, you check your portfolio of Bored Ape NFTs - you know that you’ve already made enough money to pay for the ice cream, during the time that it takes to make it.
Sounds cool? Well, this is actually very possible with passive income NFTs!
In this section, I’ll tell you all about how to make passive money with NFTs! We’ll start off with a quick introduction to NFTs, in general, and then discuss some of the potential ways how you could make a passive income, simply by holding them!
Let’s get to it!
Video Explainer: Making Passive Money with NFTs
Reading is not your thing? Watch the "Making Passive Money with NFTs" video explainer
How to Make Passive Money with NFT? (Explained!)
What are NFTs?
Let’s start at the beginning - what is an “NFT”, in the first place?
Now, here, we’ll go through the concept of NFTs in a semi-quick manner. If you’d like to understand the technology behind it in-depth, there is a separate, dedicated section on the topic of NFTs - make sure to check it out!
An “NFT” is a non-fungible token. This is a pretty fancy way of saying that it’s something completely unique - something that can’t be replaced with anything else.
Many people think that NFTs are the little jpeg images that we see online - images of animated monkeys, cyberpunks, and other characters. Well, let me tell you - that’s not the case.
Instead, an NFT is a piece of completely unique code on the blockchain - code that references and points to that image, which, by itself, is stored on some server. By now, you've probably learned more about them in the "Blockchain" chapter. This is really important information that you’ll require moving forward.
A good example of some well-known NFTs is one that I’ve mentioned at the beginning of this section - the Bored Apes. Better known as the Bored Ape Yacht Club, this is a collection of 10,000 different digital apes. When they were initially launched back in April 2021, each Ape NFT cost 0,08 ETH (in today’s money, that would be a bit over $200). Today, a single Bored Ape NFT will cost you anywhere from $170,000!
NFTs do face a lot of criticisms, the most popular of which is the idea that pixelated images and poorly-drawn art isn’t worth such amounts of money, and that it's simply a bubble that’s going to burst. Be that as it may, one of the main reasons why NFTs have become as popular as they are is because of exactly that - the ability to earn a passive income, and other perks, simply by holding them!
We all have that one friend who slides back into our DMs every year or so, offering yet another “business idea”, and telling you how you can “make tens of thousands of dollars without doing anything if you just listen to what he has to say”. I hate to say it, but, in most cases, these offers turn out to be pyramid schemes!
How are passive income NFTs different? Well, for starters, you won’t really find many NFTs that would offer their holders millions of dollars of returns per day - that’s simply not the case. Furthermore, as I’ve already told you, NFTs are built on blockchain technology. What this means is that anyone is able to check the code behind the NFT, and inspect its passive earning mechanics.
Lastly, once again - NFTs are still a new thing! People are just now becoming aware of this technology, and all of the potential that it has. Naturally, with it being a new concept, the potential earnings are very inconsistent, as well! With time, however, the actually-viable passive income NFTs will flush out, and new ideas will come to fruition, as well!
Examples of How to Make a Passive Income with NFTs
Imagine that you’re a game designer - you’re creating an online game, where players will be able to pick certain characters, and battle each other.
Now, you decide that there will be 100 different characters in the game. On top of that, before launching the game to the masses, you also decide to hold a public sale for the characters, in the form of NFTs - anyone can come in and purchase said characters as non-fungible tokens.
Now, your in-game character NFTs have a special utility. Each time some player picks the character that you’ve purchased within the game, you will get a small commission fee, in the form of, say, Ethereum coins, or game-related tokens.
This way, all that a player needs to do is make the initial “investment” - in other words, purchase the actual NFT of the character. Then, they can simply sit back, and relax - the earnings will be periodically transferred to their cryptocurrency wallet!
Naturally, those earnings are likely going to be small, but they will add up! This does actually motivate the owner of the NFT to promote the game to friends and other individuals, since the more people play, the more people will pick your character, and thus, the more passive income you will earn!
Another very popular example of passive income NFTs would have to do with your favorite video content creators - YouTubers!
Chances are that you have your favorite YouTuber - maybe it’s Pewdiepie? Or MKBHD?
Well, imagine if you could support your favorite creator, by investing in them! Let’s say, you believe that Pewdiepie’s channel will keep on growing exponentially throughout the upcoming years. On top of that, let’s say that Pewds decided to release a limited collection of NFTs related to his channel - 1,000 different images representing his years and achievements on YouTube.
Fans who purchase these NFTs will unlock a special feature - every month, you will receive a set portion of the YouTube revenue that Pewdiepie makes, as passive earnings of your own! This feature will be available forever, and for as long as you're the owner of the NFT.
Now, obviously, NFTs like this would cost A LOT of money, to begin with. But that’s exactly my point, too - this is why some NFTs are priced as high as they are! The market decides what each NFT is worth - whether it be because of its utility, rarity, or any other reason.
As a final example, let’s talk about music. Specifically, artists taking their songs, and creating NFTs out of them.
This actually isn’t a new phenomenon, in the first place. Artists like the Weekend and Grimes have been delving into the NFT space for some time now! However, it can be perfectly possible to make passive money with music NFTs, as well!
Imagine that you have a favorite artist. One day, you see that they’ve released an NFT collection. On top of some awesome artwork and songs, the collection also includes special licensing - if you’re one of the holders of said NFTs, the artist will pay out a portion of the revenue that their songs from that collection make per month, on a platform such as like Spotify.
Problems with Passive Income NFTs
With the few examples I’ve given throughout this section, you could clearly see that NFTs can act both as a method of supporting your favorite artists, musicians, and brands, as well as a way to make some passive money, on the side.
It’s worth mentioning, however, that there are a few things to be on the lookout for, if you’re thinking about going out and buying some passive income NFTs of your own.
The biggest point here is that such NFTs are usually very costly. The more potential an NFT has, and the more well-known the person or brand behind its creation is, the more it’s likely going to cost. If you want to find awesome and huge potential-possessing NFTs that wouldn’t break your bank, you will need to spend a lot of time in this industry, and on the market, and really put your research skills to the test!
Another thing to take note of are the Ethereum gas fees. Most non-fungible tokens are based on the Ethereum blockchain. This means that all of the transactions - NFT acquisition, royalty payments, and so on - happen on this same blockchain.
The issue here is that Ethereum transactions tend to be rather costly. Depending on a few different factors, you could lose out on a lot of potential profits! Now, there’s an update planned for Ethereum, called ETH 2.0 - this update should cut the gas fees of Ethereum-based transactions exponentially!
Wrapping things up, I hope that this section helped you to learn about how to make passive money with NFTs.