Despite its ever-increasing popularity, crypto remains a mystery to many people. How does it work? Where does the money come from? Can one get rich by investing in such assets?
These are some of the questions you and many other people may have asked concerning this asset. And while it can be a bit baffling, one of the many known facts about crypto is it can potentially produce passive income. In fact, there are several ways to earn passive income using crypto. If you’re interested, read on as this article covers six of these ways.
Stake Your Crypto Assets
Anyone in the crypto industry should’ve heard of the term ‘staking’ at least once in the past. Basically, it’s when an investor locks up a certain amount of crypto.
Other parties then use this crypto to participate in a network’s consensus-taking process, and as a reward, the investor earns passive income from the successful transactions.
Yes, it’s pretty similar to how mining works, but they’re not by any means the same.
Mining makes use of Proof of Work (PoW), while staking utilizes Proof of Stake (PoS). You can look into this topic in more detail with this guide to crypto staking. Staking is also similar to how you deposit money into a savings account and wait for it to grow before taking it out. Here are three ways you can stake your crypto asset for passive income:
- Use An Exchange: Like mining, some crypto exchanges allow you to stake your crypto in exchange for a specified amount of commission.
- Join A Pool: If you don’t trust exchanges all that much, you can instead partner up with a couple of fellow investors and join a staking pool.
- Become A Validator: The last option would be to set up the staking infrastructure yourself. This would require computing equipment, software, and a copy of the blockchain’s transaction history. In short, it requires a massive number of resources, but since you have complete control over the pool, it also offers the highest rewards.
Many experts estimate that crypto can yield up to 4.5% to 6% every year. For your reference, savings accounts usually have an annual yield of 0.5%. So, crypto is definitely more profitable as a passive income than a savings account, but it comes with a risk.
Consider Crypto Cloud Mining
If you find staking a bit confusing, you can always consider traditional crypto mining.
Mining is the process of solving problems to ensure the blockchain generates new crypto smoothly. Unlike staking, this requires sophisticated hardware. Because of this, investors typically spend a hefty sum of money, around USD$40,000, to start mining.
Fortunately, you can always invest your cryptocurrency assets into mining pools, so you don’t necessarily have to set up all sorts of equipment in your office or home.
Since your mining rate relies heavily on your equipment, it can be challenging to quantify how much passive income you can earn every month or year with this method.
Lend Your Crypto
Lending is a relatively straightforward way of earning passive income with your crypto. It works the same way as with physical money. You lend someone your crypto, and you earn interest regularly.
Now you might be thinking: will this require you to establish lender-borrower relationships?
Fortunately, there are platforms out there that would take your crypto and lend the assets themselves. You earn the interest this way without the hassle, though you need to pay a fee.
But if you insist on lending the crypto by yourself, make sure you lend it only to trustworthy individuals, or at the very least, create contracts and make the borrower sign it with you.
Take Part In Affiliate Programs
Affiliate marketing is one of the best ways to advertise a particular product or service. That’s precisely why many cryptocurrency exchanges out there seek affiliate marketers to promote their platform. In exchange, they would pay the marketer a considerable sum of money for every investor that you successfully drive into investing money into the crypto platform.
This is perhaps the best way to earn passive income for those who already own a blog, website, or social media page with a decent following. But of course, it’s not entirely passive.
You must first set up your platform where you’ll be promoting crypto exchanges as an affiliate and gain enough following to guarantee a good number of ‘clickers’ of your affiliate link.
Purchase Dividend-Generating Tokens
Like stocks, there are specific crypto-tokens you can buy that could generate dividends for you at regular intervals, essentially providing you with passive income without much effort.
These tokens are usually owned by cryptocurrency platforms. In exchange for investing and holding their tokens, you receive up to 80% of the transaction fees from their platform as a dividend. It’s very similar to staking, except you’re investing in a token rather than buying into a block.
Watch Out For Forks And Airdrops
If you want a way to earn passive income using crypto without any risk at all, forks and airdrops would be the perfect option.
Airdrops are when an institution distributes massive amounts of new cryptos to encourage people to invest in that crypto in the future. You could earn passive income with this method by signing up on crypto platforms.
You’ll find that some crypto platforms occasionally provide cryptocurrencies into your account. If that crypto rises in price, you can essentially earn free money without much effort.
Meanwhile, a fork is when a blockchain splits into two, creating new crypto. If you’re holding a cryptocurrency asset on that blockchain before the fork, you’d most likely receive free tokens corresponding to the new cryptocurrency asset. Of course, this method is all about timing, so it’s not a guaranteed passive income.
Final Words
More often than not, investors tend to rely solely on their passive income for all their needs. But keep in mind that methods that require zero time and effort tend to be unreliable, especially considering the inherent volatility of these assets.
Furthermore, earning passive income using crypto typically requires extensive expertise and knowledge, so it’s often not an advisable option for beginners. Nevertheless, one cannot deny the potential profitability of these methods, especially if you know crypto.
