The cryptocurrency industry has created a new digital economy that offers individuals a number of brand new ways to generate passive income online.
In this guide, you’ll find ten ways to earn passive income with cryptocurrencies that you can get started with today.
Stable parts PvS
Proof-of-stake (PoS) cryptocurrencies protect their blockchains by forcing users to bring coins into play (by locking them or keeping them in a cryptocurrency wallet), as opposed to contributing computing power to the network (as in proof-of-work chains like bitcoin). In exchange for securing the network and processing transactions through aggregation, holders will be rewarded with a newly minted cryptocurrency.
Betting on PoS coins has therefore become a popular way to earn interest on crypto asset holdings. Long-term HODLers like to bet on their currencies mainly because of the potential return they can add to their investment portfolio.
For example, if you bet on coins like NEO (NEO), Reddcoin (RDD) or Komodo (KMD), you can earn around 5% per year on your holdings.
Betting on cryptocurrencies is a great way to earn passive income, but it requires a certain level of technical knowledge. Before you invest time and money in a passive income opportunity, you should familiarize yourself with the price discovery process for the specific cryptovalue project you wish to participate in.
Eastern transit nodes
Like proof-of-stake (PoS) cryptocurrencies, masternodes can also be mined.
The gateway is a kind of node in a blockchain network that performs certain functions. These nodes are usually made by dedicated community members and require an initial investment of stamped parts, among other requirements.
Privacy-focused digital currency DASH has launched its first master node to enable PrivateSend. To create a DASH master node, the user must deploy 1,000 DASHs (currently worth about $230,000). In return, the DASH master node manager receives a 6.45% return on investment and has a say in project management decisions.
If running a DASH masternode is too expensive for the average cryptocurrency investor, there are many other masternodes that can be set up. According to Masterminds. There are over 250 oriental pieces online. Major Allcoins such as PIVX, ZCoin and Horizen, for example, allow users to start making a decent return on their investment in Masternode without an initial six-figure investment.
The PIVX master node requires only 10,000 PIVXs (which currently cost about $15,000), and owners can expect returns of more than 10% per year.
Interest-bearing crypto accounts
A new form of passive income generation with crypto that has only emerged in recent years are interest-bearing cryptocurrency accounts.
BlockFi, for example, allows owners of digital assets to earn an annual return of 6.2% on their assets held in what it calls a BlockFi Interest Account (BIA). The accepted cryptocurrencies are bitcoin (BTC) and ether (ETH), with minimum deposits of 1 BTC and 25 ETH respectively. BlockFi uses funds held in trust to make loans to institutional and corporate borrowers on terms with higher collateral to guarantee loan performance.
Celsius Network, a decentralized finance (DeFi) platform, shares up to 80% of its revenue with the Celsius community in the form of weekly interest payments of up to 13.30% APY on coins deposited on its platform.
Interest-bearing cryptovaluta accounts allow you to earn passive income in the form of regular interest payments while you HODL your coins.
Peer to peer lending
If you prefer a more hands-on approach and the potential for higher interest rates, you can also pursue crypto-currency loans as a way to generate passive income.
Crypto-powered peer-to-peer lending platforms allow you to lend cryptocurrencies to cryptocurrency companies or professional cryptocurrency traders in need of funding.
For example, with BTCPop you can lend digital assets on a peer-to-peer basis to other market participants and earn interest on those assets. Unlike traditional lenders, BTCPop uses a reputation system rather than a credit score.
Of course, lending cryptocurrencies comes with risks, as it is possible that the borrower may not repay your loan. Therefore, the portfolio of cryptocurrency loans should be spread across several loans and each borrower should be considered in detail before handing over coins.
If you like the concept and risk profile of peer-to-peer lending, platforms like BTCPop offer excellent passive income opportunities for cryptocurrency holders.
Loans to margin traders
If peer-to-peer lending is too risky for you, you can also borrow cryptocurrencies from margin traders on major digital asset exchanges, such as Bitfinex and Poloniex.
On Bitfinex, for example, you’ll find margin traders taking credit to fund their leveraged trades in both fiat and cryptocurrencies. In exchange for the margin credit, traders receive daily interest. For example, the average daily funding rate for BTC at the time of writing was 0.003537%. Accumulated over several weeks, these links provide a significant annual return to lenders.
Borrowing from margin lenders on exchanges is therefore a great way to generate passive income with crypto-currencies. However, it is important to note that holding crypto assets on exchanges is risky, as they are a prime target for hackers, which we learned from the Bitfinex hack in 2016, for example. Therefore, lending to margin traders is not necessarily risk-free.
The best known and perhaps most controversial method of generating passive income with cryptocurrencies is what is known as cloud mining.
Cloud mining refers to the leasing of digital currency mining equipment on specialized mining farms, allowing individuals to earn a steady income by mining cryptocurrencies without having to own and maintain the mining equipment. In exchange for this service, cloud mining operators like Genesis Mining or HashNest charge a daily fee to maintain their cloud mining contracts.
While cloud mining may seem like the ultimate passive solution for cryptocurrency users, it is important to note that investors have historically been better off buying and holding digital assets than investing in cloud mining contracts. The payback period for cloud mining can be more than a year, and there is a risk that the value of the currency will fall below the point where mining will no longer be profitable during that time. At this point, the cloud mining contract is usually terminated by the operator.
While cloud mining provides a convenient passive income opportunity for cryptocurrency investors, it comes with significant risk due to the fluctuating prices of cryptocurrencies and the difficulties associated with mining.
Moreover, the cloud mining market is plagued by a large number of scams. Therefore, investors should thoroughly research the cloud mining service provider before investing.
Starting up Flash network node
Another exciting way to earn passive income with cryptocurrencies is to run a Lightning Network node.
Lightning Network (LN) is a Tier 2 technology that enables larger transaction volumes while keeping costs down. Being an off-chain payment network means that transactions can be processed independently without the blockchain having to process them. Only the opening and closing balances are included in the chain.
In recent years, the use of cryptocurrencies has increased. And one of the most frequently asked questions is whether cryptocurrencies like bitcoin will be able to handle the millions of transactions made every day. The simple answer is yes, with Tier 2 solutions like Lightning Network.
In addition, LN users can earn crypto-passive income by mining the Lightning node. The Lightning node allows users to create Lightning payment channels that can be used by other users to process payments on the Lightning network. Users can therefore charge transaction fees for payments they process through their channels.
Launching the Lightning node can be difficult for non-technical bitcoin holders. Also, don’t expect to get rich managing a Lightning network node, as the reward depends on acceptance.
Another relatively new form of generating passive income with crypto is credit via DeFi.
DeFi is an ecosystem of financial applications based on blockchain technology that operates without centralized management or third-party intervention. Unlike centralized peer-to-peer lending platforms like BTCPop, lending at DeFi is done via a standalone protocol that runs on smart contracts.
According to Defi Pulse, the total value of blockchain (TVL) inFi newspapers today is $45.01 billion.
Because DeFi is unapproved, transparent and open, the DeFi loan has become very popular. DeFi Lending is where platforms for borrowing cryptocurrencies like Compound or Aave offer loans in cryptocurrencies with zero intermediaries, where users can list their cryptocurrencies for loans on the platform. So borrowers can borrow directly on the decentralized platform and the lender can earn interest on its coins.
For example, on the Compound platform, token holders have a say in matters such as technical updates, protocol updates and decisions to bring new assets onto the platform via the COMP management token. What could be more attractive to cryptocurrency investors, however, is the fact that placing funds in a loan pool usually means getting a higher average annual return than with a traditional bank account or money market fund.
Although the DeFi loan has become very popular because of its above-average annual return, it is far from risk-free. Protocol hacks on less established DeFi lending platforms occurred almost weekly during the DeFi boom in 2020.
In addition to providing loans, remodeling is another way for users to earn passive income in the DeFi markets.
Farming involves placing digital assets in an exchange or loan pool, then placing a protocol token to generate additional revenue.
For example, if you are a farmer on the popular Binance smart blockchain crop farm (PancakeSwap), you need to put two tokens into the trading pool to earn income from trading fees, and a pool token called LP that you can put on the card to earn income from farming, which is paid in a protocol token called CAKE.
High yield agriculture is a very risky business, not suitable for investors with low risk tolerance. Therefore, further research should be conducted before starting harvesting as a passive income-generating activity.
Holding of dividend certificates
After all, one of the most effective and easiest ways to earn passive income in the crypto markets is to buy and hold dividend tokens. Currently, the main types of dividend paying digital tokens are exchange traded tokens.
A number of digital asset exchanges have issued their own tokens, which offer users discounts on trading costs and in some cases entitle them to a share of the platform’s profits.
Here are some examples of profit-sharing tokens:
- KuCoin token (KCS), which pays owners 50% of KuCoin transaction fees in the form of dividends.
- Bibox tokens (BIX), which pay holders 45% of Bibox’s net profit for trading.
To receive dividends on these tokens, holders must typically hold them on an issuing exchange or bid through an external portfolio. The more chips you have in your hand, the more passive income you can earn with them.
There are no free meals at Crypto.
Before proceeding with any of the above passive crypto currency income options, it is worth noting that none of them are without risk.
Mining, rates and loans all have different levels of risk that need to be considered. Even for those who are new to the world of cryptocurrencies, it is important to know how to manage your crypto assets, including your private keys, before trying any of the aforementioned methods for passive income.
That said, once you are comfortable with the concepts of mining, wagering and/or lending coins, you can start earning passive income today.
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