Passive Income With NFTs – How Do You Do It?

Passive income – who does not want it? ‘Getting rich while you sleep’ is a dream or a goal for many people. A passive income is an income that you do not have to do anything for when the money comes in† How much you earn is therefore not related to how many hours you work.

Non-fungible tokens (NFTs) have gained popularity in recent times. They are very much in the news and have gained great popularity. Besides Dogecoin (DOGE) or Safemoon (SAFEMOON), there is really nothing in the crypto world that has become so popular in such a short time.

But can these two beautiful things be linked? Can you earn passive income with non-fungible tokens? Yes you can. But how does one do that? You can read about this in this article.

Read quickly

In the video below, NFTs are explained in a simple and clear way.

What is a non-fungal token (NFT)?

A non-fungible token, often abbreviated to NFT, is a token that represents something unique.

interchangeable means easily replaceable. A fungible token is therefore not unique, easily replaceable and identical† The easiest example of this is a 5 euro banknote. It shows some value but is otherwise identical to all other 5 euro banknotes. Other examples of things that are fungible include bottled beer or unlimited sneakers.

Non-fungible does not mean easily replaceable. A non-fungible token is therefore unique and cannot be replaced† There is only one of them. For example, you could think of a plane ticket. There are several airline tickets for the same flight, but only 1 ticket contains your code, your name and your seat number. This makes your ticket unique and no one else can come in with your ticket.

Now that we know the difference between a fungible and a non-fungible, it is also much easier to explain the difference between a fungible token and a non-fungible token.

A fungible token is a token that is not unique and can be easily replaced. An example of this is Bitcoin (BTC) and Ethereum (ETH). For example, if you sell 1 Bitcoin now and buy 1 Bitcoin back next week, you probably do not have the exact same Bitcoin. However, you do not notice the difference between the two different currencies because they are simply exactly the same.

This is different for a non-fungible token. Non-fungible tokens are unique and irreplaceable. Unlike fungible tokens, non-fungible tokens use the ERC-721 protocol or the ERC-1155 protocol. Fungible tokens, on the other hand, use the ERC-20 protocol.

The protocol used by non-fungible tokens ensures that these tokens become unique and irreplaceable† Very simplified, this protocol ensures that each non-fungible token is assigned a unique number, making it clear that it is unique. The most obvious comparison is probably when a limited edition sneaker comes out with a number on each shoe so you know exactly which one you have.

Because of this unique number, you know exactly which token you have, something you can not check with a fungible token. With a non-fungible token, for example, you can tell if you have the exact same token when you sell it and buy it back a week later.

Another thing that is unique about a non-fungible token, compared to a fungible token, is that a non-fungible token cannot be cut into pieces. For example, a Bitcoin can be chopped into thousands of pieces so you can buy 0.0001 Bitcoin. This is not possible with non-fungible tokens. You can only buy a whole non-fungible token, and therefore not a half or a tenth non-fungible token.

Want to know more about what NFTs are and how they work exactly? So read on here.

How do you create a non-fungal token?

The video below briefly explains how to make an NFT.

Most NFTs are built on the Ethereum network. However, this is not the only platform through which this is possible, it is also possible for example on Flow (FLOW) and Worldwide Asset Exchange (WAX). So far, let’s take a look at the Ethereum network, as this is generally the most common.

The first step in making (and therefore selling) NFT art is, of course to make your artwork† So it makes sense that you would, for example, create and process a work of art in the form of a GIF, JPG or maybe even an MP3 file. Of course, not all files are possible, in principle all files can be created for NFT.

The second step is that select a network, on which you will create and distribute your NFT. As mentioned before, we are looking at Ethereum so far, but it is also possible via, for example, Binance Smart Chain, TRON (TRX), Eos (EOS), Polkadot (DOT) and Cosmos (ATOM).

Then it is important that you a platform will choose from whereupon you will release your NFT. Examples of platforms where this is possible are, for example, OpenSea or Mintbase. Make a good choice for yourself, because it is a pretty important step.

After following the steps indicated, within your chosen platform, your NFT is ready for sale. You can add or adjust various things, such as linking royalties to your non-fungible token. This way, you can receive a percentage of the sales amount on each sale after the first sale. This can be an ideal option!

Want to know more about how to make and sell a non-fungible token and everything that comes with it? So read on here.

Benefits for artists by non-fungible tokenize their art

NFTs are thus part of the crypto world. In most cases, they are built on the Ethereum network. Ethereum is the second largest cryptocurrency out there after Bitcoin. On the Ethereum network, you can build completely unique assets that cannot be counterfeited. This is done via blockchain.

When an artist releases his art as a non-fungible token, that artist can easily prove that it is his or her work of art† This does not always have to be the case with physical art, but it is very easy via NFTs, as we explained in the section above.

In addition, it is it is not possible for anyone to alter, manipulate or defraud the non-fungible token† Blockchain makes this simply impossible. This is due, for example, to the security of the system, but also to the transparency and the easy traceability.

Artists can also use their art as a non-fungible symbol to sell† It is especially this part of non-fungible tokens that has gained immense popularity in recent times. Famous people like Gary Vee and Elon Musk have already released their own NFTs and sold them for a lot of money. The most expensive NFT, Beeple, was sold for $ 69 million, converted to euros it is about 57 million euros.

In addition to the money that this directly provides, the sale of art as non-fungible tokens has a few other benefits. You can do that, for example, as an artist add royalties to NFT† This ensures that you as an artist receive a certain percentage of the proceeds at each subsequent sale. We’ll get a little deeper into this later.

Papamoon / Shutterstock.com

How do you earn passive income with NFTs?

When you own a non-fungible token of, for example, a piece of music or a beautiful work of art so you actually own the property rights to this online work of art† For example, if it’s a picture, it does not matter that everyone has this picture on their phone, because none of those people have real property rights like you.

When you publish an NFT, you can add royalties to it, as we mentioned earlier. In short, in this way you always retain the right to receive a certain percentage of the next sales amount† In other words, when the non-fungible token is resold for, for example, € 10,000 and you have 5% royalties, you will receive € 500 on this sale amount while you were no longer the owner of NFT.

This is therefore a relatively easy way to get passive income because you literally never have to do anything for it after the sale. This is an advantage, because with many forms of passive income, it is never completely passive. With many forms you still have to work a bit with it, but with royalties this is not the case.

The good thing about NFTs is that you always have a good idea of ​​how much the NFT is worth. This way you know how much income you are likely to expect from the next sale. That you have such a good image is a great advantage. That is why there are many experts there expects assets such as real estate, cars or, for example, gold to also become NFTs

Should this happen, you can now correctly display the value of these assets and they can also be sold quickly and at any time.

mundissima / Shutterstock.com

How much passive income can you realistically expect from royalties from NFTs?

Before you spend a lot of time building a certain passive income, it is important that you have a good idea of ​​what it can provide you.

Of course, in the case of passive income, the expected income is always less predictable than in the case of active income† With active income you know for example: my 40 hours a week is equal to € 2000. You are then 100% sure that when you make your hours, you will receive this money. It is different with passive income. Your income is not directly related to anything you can influence yourself, such as hours.

So it’s still a little more unpredictable with passive income, but with NFT it’s even more unpredictable and perhaps more irregular than with other forms of passive income. This is mainly due to the fact that the market is very new.

The crypto market as a whole is very new, let alone the NFT market† They have only become very popular in a relatively short time, making it difficult to say how the market will react to certain things.

In addition, your income naturally depends on how often your NFT is resold. If this only happens once, you will only receive royalty income once. So you hope it happens as often as possible, because it means as much revenue as possible for you.

You can do a number of things that can increase the chance of a great income. In the next section, we will go into some of these things.

The amount of the royalty percentage

The level of the royalty percentage affects your income in 2 ways.

The first way, of course, is that you get more receive money per. sales, as you specify a higher royalty percentage. In that regard, it may be wise to set this percentage as high as possible.

However, the lower you set the percentage, the more attractive it is for people to buy NFT† With a low royalty percentage, the turnover rate could therefore be higher, so you end up earning more.

It is important that you make a good decision about this yourself.

The appearance of NFT

Of course, the appearance of NFT has some influence on the number of sales. The more beautiful NFT is, the faster people will consider investing in it and the more often it will be sold.

This means that you will receive more money when your NFT is good.

Conclusion

NFTs are one of the new developments in the crypto world. They are unique tokens that are irreplaceable and they certainly look like an interesting option. You may decide to invest in it, but it is extremely important that you Do your research first and invest only then!

You can also generate passive income using NFTs. You can do this by adding royalties to it. You can adjust and add various things that can affect your eventual return.

Want to know more about NFTs and how to make money with them? Sign up with our AllAboutCrypto Facebook group† We like to talk about everything that has to do with crypto and blockchain and share valuable information with you. Hope to see you there!

Leave a Comment