Why NFT staking is dead.


NFTs with staking mechanisms of some sort are hugely popular in the marketplace. Holders stake their assets for a certain length of time and enjoy the rewards. More often than not, the rewards for staking are in the form of some made up token being airdropped to holders. Depending on the size of the liquidity pool and the number of coins in circulation, you can earn back the money you spent on buying them over a period of time. The percent yield per year is often expressed as APY. While the holder might be able to recoup the value of his NFT, these coins produced are virtually meaningless.

Why? Let me explain.

The concept of staking comes from DeFi, where a certain amount of a particular coin when staked, provides liquidity to the network operations. The rewards generated from the staking are direct by-products of adding liquidity to the pool. This is a sustainable way of staking. The airdrop received may be in the form of the original currency staked, or maybe a different currency. For example, if you stake BSC on the binance app, you are eligible to receive certain shares of every project dropping on the binance Launchpad. Extrapolating this to NFTs, when an NFT is staked, what is the purpose of it? It provides no liquidity, it has no way of generating a revenue upon stake, and it does nothing to improve the overall experience of the project. The only purpose I can see is to hold or drive the floor price up and benefit from the secondary market. Projects airdropping these new tokens have their job cut out for them- either create an ecosystem where your holders spend their tokens, or add liquidity to the tokens. Of course both are not mutually exclusive. To create value out of nothing, NFT projects often end up choosing raffles, merchandise drops and irl events (which are by far the most popular). Newer ecosystems include casinos with gambling, gaming utility and betting. Few NFT projects choose to link a DAO with the coin supply, meaning the direction of the project is decided by the ones holding the most coins. While these utilities are decent, real innovation is lacking in the space. With adoption of apecoin as a payment method for opensea NFTs, there is hope yet for these tokens. But most will go to zero. While some are sustainable short term, the jury is out on how these NFT staking projects fare in the long run.

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Learnings of the Kharmonkey
Learnings of the Kharmonkey

Hey everyone. My pseudonym is Kharmonkey and I am a digital creator who is always looking for new things to bring your way.

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