After the explosive growth in NFT
trading volume in 2021, the NFT market is growing beyond the launch of profile picture collections. There are now many different ways to earn yield with NFTs:
- You can lock NFTs in vaults and earn a yield on them.
- You can play NFT play-to-earn games that allow you to earn yield on in-game assets.
- You can collateralize your NFTs and borrow against them.
CoinMarketCap Alexandria puts together the 10 best yield-generating NFT projects that will earn a yield on your NFTs.
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One way to generate yield on NFTs is by playing games and using vaults. This is a selection of the best yield-generating NFT games and vaults.
is a clever NFT minting platform
allowing you to transform scarce NFTs into a basket of NFTs that generates yields. With Charged Particles, users can deposit any ERC-20 token or NFT into a new NFT that earns yield
on platforms like Aave
. An analogy would be that Charged Articles dispenses bags (the new NFT), where you can keep your other assets (other NFTs and tokens), and this bag earns yield.
The newly-generated NFTs can be time-locked (unable to withdraw the assets before a certain time) and charged (assets supported by Aave's aTokens can be swapped and their liquidity accessed). Assets and the interest they earn can also be programmed.
Charged Particles lists several different use cases
for its technology:
- As vesting vouchers, where the NFTs replace token time-locks.
- As membership tokens for accessing other protocols.
- As escrow capsules for OTC trades.
- As gift baskets containing different NFTs.
- As containers for fractional NFTs.
For yield farmers, Charged Particle NFTs can act as a virtual wallet containing different assets, all of which earn yield if they are supported by Aave.
CyberKongz is a collection of 1,000 pixelated ape NFTs
created in March 2021. The project quickly generated a lot of buzz and is ranked 20th by the price floor
, making it one of the most valuable NFT collections in the world. Later, the BANANA
token was added, which enabled Kongz NFT holders to generate yield passively.
Each Genesis CyberKong produces 10 BANANA per day for the next ten years, making them a form of passive NFT income without added complexity. Only the first 1,000 Genesis Kongz produce yield, although they can breed Baby Kongz and Kong holders can mint CoberKongz for free.
is a DeFi RPG game that uses NFTs for vesting purposes on its yield farming rewards.
To distribute its BUNI
token, Bunicorn follows the standard liquidity mining process, where users can provide liquidity to the token pools and/or stake their BUNI tokens. To prevent token dumping, Bunicorn decided to wrap the farming rewards into NFT collectibles. These are only available after a vesting period
, although users can choose to trade their NFTs, which are backed by the underlying assets.
Thus, although the NFTs themselves do technically not generate any yield, they constantly accrue value through the underlying farming rewards.
is a community-driven GameFi platform that uses NFTs to create financial incentives
to drive players towards its platform. Its MOMO NFTs can be obtained from mystery boxes in the game or purchased on the marketplace and subsequently staked to earn MBOX tokens.
Each MOMO has a randomly generated hash power that can be upgraded by consuming other MOMO NFTs. The NFTs can be combined to add up hash power and increase their return. The amount of MBOX tokens mined is dependent on your weighted average of the total hash power across the platform. The amount of MBOX tokens released per day is also dependent on the total hash power across the platform. MOMO NFTs can also be borrowed or lent to other users.
is another NFT game with yield farming elements.
Players can access different liquidity pools
with their own zoo animals that double as mascots for the pools. They can earn ZOO and WASP tokens and increase their rewards by providing liquidity to one of the farming pairs.
NFTs are used to increase a player's farming rewards. They can also be staked or taken on an "expedition" to win NFT boosters. Different expeditions have different ZOO prices, and the higher an expedition cost, the more likely the player is to win an NFT booster.
Another form of yield-generating NFT protocol is NFT lending platforms. NFT owners can borrow against their NFT as collateral and lenders have an opportunity to earn a yield on someone else's NFT and potentially buy it below market value.
NFTX creates liquid markets for NFTs
, which are considered illiquid assets. Users deposit NFTs into an NFTX vault and receive an ERC-20
token (called a vToken). This vToken is a claim on a random or specific NFT from the vault.
For example, a user deposits a CryptoPunk and receives an ERC20 vToken in return. They can redeem this vToken for a specific Punk (not necessarily for the one they deposited) or a random one for a 1% discount. vTokens can also be staked
to earn rewards.
NFTX aims for a better distribution and price discovery process for NFTs
. Currently, NFTs are illiquid and even valuable NFTs can only be liquidated quickly if they are underpriced. By depositing an NFT into an NFTX vault, users can instantly access the NFT's liquidity by selling the vToken on a DEX
or stake their tokens to earn a yield on their NFT.
There is also an option to earn yield by owning a fraction of an NFT. Investors can buy a fraction of a CryptoPunk and stake their claim in the Punk/ETH liquidity pool
to earn an attractive yield.
is a P2P NFT lending platform
where NFT owners can collateralize their tokens and borrow wETH
against them. Although NFTfi has no token yet, it has been live and has a cumulated loan volume of $150 million in over 8,000 loans, making it the biggest player in this emerging market.
As a peer-to-peer platform, NFTfi employs individual loan amounts, durations, and interest rates
. Borrowers list their NFTs and specify their conditions, with typical loan durations ranging from 7 to 90 days. Lenders either accept the offered terms or counter with an alternative proposal. Once the loan is agreed upon, the NFT is sent to an escrow smart contract
and the loan is executed.
A loan only defaults if the borrower fails to repay the loan and interest and the expiration date has passed. Thus, there are no automatic liquidations if the loan falls below the collateral value (e.g., because of falling floor prices). The average APR a borrower has to pay is 49% and varies based on the loan duration.
is a peer-to-pool NFT lending platform
. Borrowers provide their NFTs as collateral to a liquidity pool and can borrow ETH in return. An NFT holder bundles their NFT into a separate token (called boundNFT) and can receive a 30-40% loan.
NFT holders are protected against sudden liquidation by a 48-hour liquidation protection period, while lenders have the security of having the NFT collateral locked in a smart contract. The collateral amount is determined by the collection's floor price. Thus, in contrast to P2P lending market places, even rarer NFTs can only fetch 30-40% of the floor price.
Currently, BendDAO lists only six active pools: Bored Ape YC, CryptoPunks, Mutant Ape YC, Azuki, Clone X, and Doodles. However, taking BEND liquidity mining rewards into account, borrowers currently can make a profit by collateralizing their NFTs. The total TVL
at the time of writing is just short of 95,000 ETH.
is another peer-to-peer lending platform that works similarly to NFTfi
. NFT owners wrap their NFT and create a loan request with individual terms and loan duration. Lenders can counteroffer or accept and the platform sets no maximum loan-to-value or APR
In comparison to NFTfi, Arcade provides more loan assets like USDC, USDT, and others and lower APRs on average. However, the cumulative loan value is much smaller at around $20 million, and Arcade offers less whitelisted collections.
is another peer-to-pool lending platform
enabling users to create non-fungible debt positions. NFT owners of whitelisted collections like Bored Apes and CryptoPunks can lock their NFTs as collateral and borrow up to 32% of the collection's floor price. The protocol mints a synthetic stablecoin, which can be deployed as liquidity. Liquidations are taken care of by the DAO, which can choose to hold the NFT, liquidate it on the secondary market or buy it over the counter in case it exceeds its loan-to-value ratio.
treasury bills are not a direct way to generate yield on NFTs, but it is an attractive proposition nonetheless. Investors can buy treasury bills from ApeSwap, which are non-fungible tokens representing the output tokens (either BANANA or partner project tokens) and vest over time. There are two types of treasury bills to choose from:
- BANANA Bills offer BANANA tokens at a discount compared to the market price. Each BANANA bill is an NFT that can later be redeemed for BANANA. This allows users to earn a yield on their NFTs and the protocol to earn its own liquidity.
- Jungle Bills work in the same way as BANANA Bills. The only difference is that you are buying partner tokens at a discount instead of ApeSwap's native token. This provides an excellent fundraising opportunity for ApeSwap partner protocols.
You can read more about ApeSwap in our deep dive into ApeSwap
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