NFT Farming — Where DeFi, Yield Farming, and NFTs Converge
Learn about the latest crypto trend that combines elements of decentralized finance (DeFi) with the world of NFTs.
NFT farming is one of the latest DeFi trends that combine yield farming with the world of non-fungible tokens (NFTs). In this guide, you will learn what NFT farming is, how it works, and you can take part in this new opportunity to earn crypto.
Yield Farming & NFTs Explained
Before we can talk about NFT farming, we first need to define yield farming and talk a little bit about NFTs.
What’s Yield Farming?
Yield farming, also known as liquidity mining, is the process of earning yield on digital assets by locking them up as a stake in a DeFi trading or lending pool to act as a liquidity provider.
On PancakeSwap, the market-leading AMM on Binance Smart Chain, users need to deposit two BEP-20 assets in a trading pool to receive a liquidity pool (LP) token that then needs to be staked in a farm to earn yield farming returns in CAKE tokens.
Yield farming has grown incredibly popular since the mid-2020, when the concept first emerged on the leading DeFi platform, Compound. Since then, hundreds of yield farming DApps have launched on blockchains like Ethereum and Binance Smart Chain to enable investors to earn double-digit yields on their digital assets.
What’s an NFT?
Non-fungible tokens (NFTs) are blockchain-based digital tokens that represent a unique physical or digital asset with verifiable ownership.
NFTs (non-fungible tokens) enable artists, brands, and creators to tokenize their work and sell it in digitized form to fans, followers, and collectors.
For example, leading digital artist Beeple sold NFTs at an auction for over $69 million in Christie’s, setting the standard for anyone wanting to earn an income as a crypto artist.
While NFTs — as a technology — have a broad range of use cases, including verifying copyrights, providing provenance for physical products, and representing real-world assets like real estate of physical collectibles, today’s NFT market is dominated by crypto art, virtual collectibles, and in-game items.
NFT Farming: Creating Utility and Liquidity for NFTs
In light of how fast the crypto markets evolve, it probably doesn’t come as a huge surprise that a handful of creative developers have managed to combine the concepts of yield farming and NFTs to create “NFT farming” as a new way to earn income in the DeFi markets.
NFT farming refers to staking an NFT to receive rewards in tokens or staking tokens to receive an NFT as a reward.
Unlike in “traditional” yield farming, where you deposit digital assets into a liquidity pool to receive token rewards, NFT farming involves the use of NFTs instead.
The idea behind NFT farming is to create utility and liquidity for NFTs.
Until the advent of NFT farming, NFTs were almost exclusively digital collectibles that were bought, traded, and held by crypto-savvy collectors. Now, NFTs can be deployed to earn tokens, giving this new type of digital asset utility as well as enhancing its liquidity.
Currently, NFT farming is predominantly found in blockchain games, where users can stake in-game items to receive tokens or vice versa.
Axie Infinity is a prime example of a blockchain game with NFT farming capabilities. In the Ethereum-powered game, players earn SLP tokens that they can then use to mint NFTs in the form of new Axies.
Aside from Axie Infinity, other DApps that provide NFT farming opportunities include Aavegotchi, Mobox, and SuperFarm.
The Risks of NFT Farming
NFT farming is as fresh out of the box as it gets in the cryptoverse. That means it’s also one of the riskiest ventures in crypto.
Many NFT farming opportunities are still in experimental stages and the jury is still out on whether this new type of crypto-earning opportunity will stand the test of time or not.
Moreover, similarly to conventional yield farming, NFT farmers face the potential risk of vulnerabilities in the DApp’s smart contract’s code, which could lead to a complete loss of funds, as well as the volatility risk in the platform’s token, which could lead to substantial losses when converting the tokens earned back into stablecoins or fiat currency.
NFT Farming on SuperFarm using Trust Wallet
Arguably the easiest way to dip your toes into NFT farming is with the recently launched NFT farming DApp SuperFarm, which you can easily access using the Trust Wallet DApp Browser.
The cross-chain protocol allows you to stake its platform token, SUPER, to earn GEM tokens that can then be used to purchase NFTs that are periodically released during NFT Drops.
You can get ahold of SUPER tokens in Trust Wallet by swapping an ERC20 token (assuming you are using the Ethereum version) for SUPER. Subsequently, you can securely store and deploy your SUPER tokens in SuperFarm, all in the Trust Wallet app.
Once you have accumulated enough GEM by depositing your SUPER tokens into the SUPER pool, you can “harvest” NFTs during the next Drop.
Alternatively, you can also use SUPER as a medium of exchange on SuperFarm and vote on governance matters as the platform moves towards a more decentralized model over time.
Trust Wallet: Your Gateway to DeFi and NFTs
With Trust Wallet, you have the world of Web 3.0 at your fingertips. Using the Trust Wallet DApp Browser, you can access a wide range of DApps, DeFi protocols, and NFT platforms to explore the exciting crypto-powered earnings opportunities in this brave new world.
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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.