Does Holding Onto NFTs Stifle Returns?

Summary:
• What do fine wine, art and NFTs have in common? They don't correlate well with traditional markets, and they don't pay a dividend until now.

What do fine wine, fine art and NFTs all have in common? They can be excellent alternative investments, particularly in turbulent markets and a hedge against inflation. Neither of these investment types correlates with the traditional financial markets, and the general rule of thumb is that the longer you hold on to either of these three asset types, the more (hopefully) they will be worth down the line. 

But what if you seek regular returns on your investments? As we know, alternative investments do not pay dividends. A piece of art sitting on your wall might bring you joy, but it will not get you a monthly return, although it will bring you a payday once you sell it. In contrast, holding on to property can, of course, bring you monthly rental income while the property price is appreciating, But holding digital art will not give you monthly returns. Or will it?

Unparalleled investment opportunities through blockchain

This is the new age of investing, where the blockchain is at the heart of everything we do, bringing investing opportunities that just aren’t available through the conventional money markets. Heard of staking, loaning and lending? Well, the blockchain opens up the investing arena to give users the chance to stake their idle tokens in return for a  passive income. You simply lock it in a smart vault and get APY in return, in the same way, you get returns on your savings in a bank. 

The difference is that in the age of zero per cent interest, your savings are practically meaningless, in fact holding on to cash these days sees compound interest taking a chunk out of your savings, where your savings drop over time due to banking charges. On the blockchain, however, your idle assets can also be saved in the same way, and yet bring returns of around 6-8% or even more, depending on the actual token. 

Returns for idle NFTs

But the same is now also true of NFTs, whereby you can now lend your NFTs out and realize returns on them. In this way, you can hold on to your NFT items for as long as you want and hope for their price appreciation over time, while getting a kind of dividend on them for as long as you want. 

NFTs are unique digital tokens that represent ownership of anything from art, to media, to music and even tweets. As we have seen in the last year, NFTs can be wildly valuable. Jack Dorsey sold his first tweet for $2.9 million, Lionel Messi unveiled his NFT art collection on the Ethernity Chain and generated millions of dollars in the first 24 hours alone, Beeple’s NFT collage raised $60 million. And NFTs have crossed the barrier from the digital world into the real world where auction houses, financial institutions and rare art collectors have started sitting and paying attention by displaying and investing in these digital masterpieces.

Dividends on NFTs?

So we understand that holding onto NFTs can be a great investment,  but what about short term payouts? One example of a platform that offers just this kind of service is Drops.  Drops give people loans in exchange for their NFT and other DeFi assets. The asset is used to start a lending pool, where the user in exchange obtains loans or passive yield. Any kind of NFT of assets can be used to set up a lending pool, from NFT collectables to in-game NFT assets for the metaverse, as well as financial NFTs, which represent anything from bonds, loans and mortgages, and also DeFi tokens. The goal of this protocol is to give asset creators and holders the opportunity to gain more value on their digital assets, above and beyond the selling price. 

Final Word

The blockchain is effectively rewriting the way we engage and transact online, and potentially changing the way we conduct banking, savings, investments and gaming, and now with NFT staking, we also have the chance to get passive returns on our NFT holdings.