Yield generating NFTs like CyberKongz or Mutant Cats could be key to widespread acceptance NFTs.
The NFT space is going through an innovative phase that will likely help mainstream adoption. Up until a couple of months ago, NFTs had managed to be expensive and illiquid without ever providing real utility value. But that has changed. With the incorporation of Defi technology in the NFT market, we see so many projects adopt new strategies to incentivize NFT holders and strive to build a sustainable collection.
In the NFT space, you can make profits by selling your NFTs for a higher price, but it is not possible to get recurring income from the same. That’s where NFT-based yield farming comes into the picture. Similar to staking, collectors can stake their NFTs and earn governance tokens in return. Now, these tokens may not have enough liquidity support for instant trading, but it is a step forward in making NFTs more appealing to the larger crowd.
We have seen play-to-earn models like Axie Infinity blow up in a way no one expected. And it is because— players were able to create a side income from playing an NFT-based blockchain game. With yield farming, NFTs have own-to-earn models that do not require additional work from the holders other than holding NFTs.
Now, will the token system work for every project? No, it is not possible. The mechanics of each project is different. If they use the tokens for things with no utility value, then it will not have a deflationary effect. But on the other hand, if the tokens are used to give an advantage to the holders, then it would make sense to integrate a yield farming technique.
These tokens issued by NFT projects can also drive community engagement, and the team can decide to reward most active members. There are so many ways to leverage NFT staking, and we are just getting started. The most prominent projects in the NFT space providing such a staking mechanism are— CyberKongz, SupDucks, Mutant Cats, and Bear Deluxe. Let’s get into each project one by one.
One of the most significant profile picture projects after CryptoPunk and BAYC is CyberKongz. 1000 randomly generated NFTs were priced only at 0.01 ETH. And this was in early March 2021. At the time of writing, the floor price of genesis CyberKongs is at 9.8 ETH with more than 27k ETH in trading volume. This shows how popular the project became on social media, and it also had no major marketing campaign to promote the project.
The unique owners of CyberKongz decided to expand their universe by launching Baby Kongz and CyberKongs VX. Both these projects took off in a similar way, giving more than 10x returns to the early supporters. The distinction among all three collections lies in the ability of earning $BANANA every day.
The last two collections do not provide any tokens. Genesis CyberKongz, however, generates 10 $BANANA tokens every day for the next ten years. Holders who own these tokens can gain utility value, as they can alter their Kong’s name and bio. The CyberKongz VX enables holders to socialize and interact in the online Sandbox environment to explore metaverses. The $BANANA tokens also can be used to breed two genesis kongs to receive an incubator.
Currently, the number of tokens in circulation is 110,000, which is still early for this PFP-based NFT project. The price of each token is around 70-75 dollars, giving more than $750 in daily yield. In one year, holders of CyberKongz can earn as much as $270k. Many other projects followed this model and are now implementing it with their NFTs.
My love for SupDucks never ends. I really love the artwork, and the community is super supportive and open-minded. The launch price for this collection was less than 0.1 ETH when bought in multiple packs each. Now, the floor price is comfortably sitting at 2.25 ETH. That is more than 25x returns in less than two months, considering the price of ETH was significantly lower back then.
In mid-September, the team released a token called $VOLT. All holders of SupDuck immediately got 100 tokens. Similar to CyberKongz, SupDucks also provides ten tokens each day that is worth little over 80 cents. So, if you just hold on to a SupDuck NFT, you can make more than $3.5k per year. It could be higher as the project matures and the majority of owners stake their NFTs. Unlike other projects that launch a DAO and token system for merely attracting new buyers, SupDucks is creating an ecosystem of its own using $VOLT.
Discord members can use these tokens to give to others as a sign of appreciation. And get exclusive access to content unlocks and drops. The monetary upside is still not there yet, but holders should feel more confident in this project moving forward. And I hope other PFP projects learn how they implemented the $VOLT token so smoothly.
Bears Deluxe ($HONEY)
The second phase in the Bears Deluxe roadmap introduces the $HONEY token to all its holders. This happened after migration from OpenSea shared contract to their own ERC-721 smart contracts. The Bears have done incredibly well in terms of floor price in such a short period, all thanks to its great community and loyal fans. The price went from 0.02 ETH to almost reaching 7 ETH floor price. With a $HONEY token yield, the project is expected to bring more utility to its holders.
They can unlock holders-only content and even participate in games to win $HONEY tokens. Just like CyberKongz VX, the team is planning to launch VX bears by using the same tokens. The details are still not out yet, but the project looks promising with so many use cases of $HONEY.
Mutant Cats ($FISH)
Another great example of NFT-based yield generating projects is Mutant Cats. Inspired from the Cool Cats collection, Mutant Cats created the first project that fractionalizes NFTs and rewards its holders with tokens representing fractional ownership. The NFTs used for distributing tokens are Cool Cats. They are stored in a vault and enable the team to give 10 $FISH tokens every day.
The strategy combines staking as well as fractionalization of NFTs. In both cases, the utility value is present. As a result, the price of Mutant Cats skyrocketed in a short period and reached a floor price of 2.2 ETH. The future of this project looks bright because the number of mutants staked is constantly rising, which decreases the selling pressure and keeps the community thriving. Not to forget- the holders of Mutant Cats also get DAO membership and exclusive access to NFT drops.
For NFTs to go mainstream, we need more projects leveraging Defi and using different ways to provide more value to the holders. Yield farming could just be the starting point of something greater. So we will see more projects adopting this staking model, as it will attract more buyers, selling out their collections in a matter of hours. However, if those tokens are not attached to something real and actionable to NFT holders, it will not last long. I expect to see a project following what Mutant Cats did. The blue chip or top NFT collections can fractionalize and distribute tokens, creating significant market demand.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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