Crypto glossary
NFT staking
NFT staking means locking NFTs in a contract, or proving you hold them, to earn token rewards or perks, a popular but often inflationary incentive.
Projects let holders deposit their NFTs into a staking contract, or simply keep them in their wallet under soft staking, and accrue the project's token over time. Rewards may increase with rarity, staking duration or the number of items held. Some games use staking to represent characters working, mining or training, and some collections use it to grant access to events, airdrops or voting power.
Staking became widespread in 2022 as NFT projects launched their own tokens and needed ways to distribute them and discourage holders from selling. Locking NFTs reduces the supply listed for sale, which can support the floor price, and gives the project a loyal base of participants.
The rewards are frequently paid in a token with little demand beyond the staking programme itself, so continuous emissions push its price down, a pattern that sank many 2022 projects. Locking an NFT in a contract adds smart contract risk and prevents selling quickly in a downturn. Rewards may be taxable income in many countries when received.
Example
A holder stakes three NFTs from a collection and earns 10 project tokens a day each; six months later the token has lost 95% of its value and the rewards are worth little.