Passive income is considered one of the best ways to boost your earnings because, unlike traditional savings, crypto income strategies provide higher returns by utilizing the blockchain’s decentralized infrastructure. One should consider investing in crypto because of its quick and lower fee nature. Earning passive income with cryptocurrency is a simple way to grow your money and get involved in the crypto economy without needing a big investment upfront.
There are multiple ways to generate returns without actively trading crypto and it getting increasingly popular these days. However, earning with crypto lies in diversifying income streams and taking advantage of the booming crypto ecosystem. With proper knowledge about crypto and the crypto market cycles, one will be able to generate income easily and enhance financial stability. This article will explain ways to earn passive income with cryptocurrency. So, keep reading to learn more.
Ways to earn passive income through cryptocurrency
There are several ways to earn passive income with cryptocurrency, including:
1. Lending
Crypto Lending is a good way to earn passive income as it is a decentralized finance service that allows cryptocurrency holders to lend their crypto to borrowers. This helps the holders earn interest on their cryptocurrencies when the market values fluctuate. The returns often range between 5-15%, which makes lending an attractive option to earn passive income. Even though crypto lending can be very profitable, it has associated risks of loss and theft.
2. Staking
Staking can help earn passive income by putting the crypto work on a blockchain network. By helping the network run smoothly and securely, one will be able to generate more of the cryptocurrency they are staking. The best part is the returns come from the network itself without your crypto being lent out, and all you have to do is hold your cryptocurrency in a wallet and support the blockchain. There are mainly three types of staking: delegated staking, exchange staking, and Proof of Stake (PoS) staking.
3. Yield Farming
Yield Farming can be a way to earn passive income through cryptocurrency and it involves providing crypto liquidity to protocols, receiving a token, and reinventing that token to earn more rewards. You can earn returns by creating a digital wallet, buying cryptocurrency, selecting a yield farming platform, and depositing tokens into a pool or strategy. Then, monitor your yield farming performance and reinvest or withdraw rewards. Some of the yield farming platforms are Compound and Aave.
The compound is an Ethereum-based protocol that allows users to lend and borrow assets, and Aave is a multi-chain yield farming platform allowing users to lend and borrow assets with dynamic interest rates. However, there are certain risks involved with yield farming, such as impermanent loss and smart contract flaws.
4. Crypto Mining
Crypto mining can earn you passive income but its profitability depends on several factors like the cost of electricity, hardware, and the cryptocurrency you are mining. Also, the current market conditions play a major role in determining the profit. For most miners, the returns may not be significant enough to consider it passive because of the high operational costs involved.
You can contribute computing power to the network to validate transactions, and the miners receive a reward in the form of cryptocurrency. Certain challenges associated with crypto mining include high hardware costs, market volatility, and electricity consumption.
5. Dividend earning tokens
You can earn passive income with dividend-earning tokens using crypto interest accounts or staking your crypto. The crypto interest accounts work like savings accounts for your crypto and offer higher interest rates than traditional savings accounts. The dividend-earning tokens can be a good source of passive income as they work similarly to company dividends, where you can earn a share of the profits by holding a cryptocurrency.
For this, you will have to buy a dividend-earning token and the token’s project sets aside a portion of its profits to pay out to token holders. Then, you will receive dividends automatically, which will be in the form of additional tokens. The main benefits of this source are that it has low effort and compound interest. However, the risks associated with it are project failure, unpredictability, and token devaluation.
6. Crypto Games
Players can earn passive income through crypto games by playing play-to-earn (P2E) games and selling the in-game assets they earn. These games reward players with cryptocurrencies or NFTs, which can be sold for real money. To earn money with P2E, play the game, complete challenges or achieve high scores, and earn in-game assets like rare weapons, character skins, and in-game currency.
Then, you can sell the assets on marketplaces for cryptocurrency or fiat money. You can also earn money through games by winning crypto or NFTs, lending money to other players, or trading virtual assets. Some of the games that help you earn cryptocurrencies include Axie Infinity, REVV Racing, and My Neighbor Alice.
7. Using multiple wallets
One can earn passive income with multiple wallets by using DeFi protocols to participate in staking or yield farming. You can primarily leverage strategies like arbitrage trading across different exchanges and take advantage of the price between platforms. Try participating in airdrops by creating multiple wallets on different networks and managing separate ‘hot’ and ‘cold’ wallets for active trading versus long-term holding. Ensure you do this while carefully managing risk by diversifying your investment across different cryptocurrencies and digital wallets.
8. Liquidity Provision
To earn passive income through liquidity provision, you can deposit your cryptocurrency assets into the liquidity pool on a decentralized exchange (DEX). You will receive a share of trading fees that are generated within that pool whenever someone trades against it. This essentially earns you a passive income based on the trading volume in the pool you contribute to. However, there are risks associated with it, such as impermanent loss due to price fluctuations in the pooled assets.
Conclusion
Passive income can help earn passive income easily because, unlike other traditional ways, it offers higher returns. Cryptocurrency is an ideal space to invest because it is fast and has lower fees. There are multiple ways to earn returns without actively trading crypto but one should have proper knowledge regarding the crypto market. Some of the ways to earn passive income through crypto include Lending, Staking, Yield Farming, crypto mining, dividend-earning tokens, crypto games, using multiple wallets, and liquidity provision.
Even though cryptocurrencies are a great way to earn passive income, be aware of Smart contract vulnerabilities, volatile token values, and impermanent loss. These factors can negatively impact gains. Also, watch out for scams and make smart decisions according to the crypto market cycles.
