Adding your NFT to a pool in order to gain yield or advantages from the blockchain or project you support is known as NFT staking.
NFT staking is a new DeFi concept made famous by blockchain games, where players can often stake characters, cards, or land toward a pool to receive in-game rewards or altcoins for their commitment.
Just like cryptocurrency staking, NFT staking requires the NFT holder to stake the token for a set period of time, and they are typically not allowed to unstake it at will.
By staking the NFT for longer, its utility to the NFT Staking Pool increases; hence the rewards increase, too.
Is NFT Staking Different from Crypto Staking?
By staking a cryptocurrency, you typically help a node validator verify transactions on the blockchain that the cryptocurrency relies on. For example, by staking ETH towards a staking pool, you are supporting a node validator that checks and verifies transactions on the ETH Blockchain. The validator gets rewarded for their efforts with a small percentage of the transactions.
Crypto staking may be compared to "voting" for a certain candidate on Proof of Stake blockchains.
A Proof of Stake blockchain is a blockchain where the validation happens by staking coins and not by performing complex mathematical operations on the backend. Most blockchains nowadays follow the Proof of Stake protocol.
You have greater voting power the more cryptocurrency you hold. If the community loses faith in a node validator—the candidate—they may lose their authority. Every blockchain needs node validators, without whom the network could not validate transactions in a trustless and automated manner.
The most common use for NFT staking is in blockchain games, where NFT holders stake their game characters to yield a gain when someone uses their NFTs. NFTs staked in the pool will be rented out to anyone that might need them for the benefit of the community.
It's important to note that, technically speaking, NFTs are quite similar to cryptocurrencies. This indicates that a DAO may theoretically leverage NFT staking for governance reasons.
A DAO investing in NFT gaming, like Polemos DAO, is compelled to employ NFT staking for governance reasons since the assets themselves determine whether or not the DAO will succeed as a viable business.
Is NFT Staking Risky?
The value of the staked item determines the risk involved rather than the act of staking itself. Staking your coins or NFT assets to a pool is completely safe as long as the pool is trustworthy and is being monitored by skilled technical staff.
However, you do run into the risk of the asset devaluing and potentially losing all value completely. Although you are not going to lose your coins or NFTs in the pool, the assets can lose value quickly, and you won’t be able to take them out during the staking period.
Staking is one of the simplest ways to receive a passive return on your investment, but it does have inherent risks for all parties involved. We advise investing your NFTs in companies you believe have long-term potential and in which you have faith. NFT staking can be quite advantageous for genuine projects!
By securing NFTs in a pool, their market value rises as a result of their scarcity. Thus, the business may grow quicker due to the influx of money.
##Do I need a crypto wallet to stake NFTs?
Yes, you do. You need a crypto wallet to do pretty much everything in the Web3 space. We suggest you get to creating one as soon as possible. In order to stake NFTs, you need a wallet compatible with the blockchain your NFTs are using. Over half of the market is using Ethereum, but a significant portion of NFTs are now on the Solana blockchain.
##Wrapping up NFT Staking
NFT staking is a new frontier of staking on the blockchain, with significantly less risks and a lower budget required to start investing.
We believe that more DAOs will start offering this kind of staking to allow their members to profit from their asset investment in the company.
NOTE: Article originally posted in the NFT Staking topic on the Polemos website.