If you are a true HODLer, you’ll always be on the hunt for ways to make more money with your crypto assets. Just like regular money, cryptocurrency can also be used to make passive income on the side without your involvement.
There are multiple ways one can make some extra bucks on the side without even looking into your portfolio and leveraging your crypto folio to the fullest potential.
Before we get started, let’s understand the basics –
What is Passive income?
Passive income is defined as the “Unearned income” that is automated or can be earned with minimal effort put. This type of income is usually considered as an extra source to generate cash flow or as a side hustle to get that extra income.
Now that you have a slight understanding of what Passive Income means, let’s go through the 13 different ways to earn passive income with cryptocurrency.
-
Exchange Based Savings
This is one of the simplest way to make passive income as all you have to do is to find the best Cryptocurrency interest account providers and start making interest with your assets.
Top exchanges like Crypto.com, Binance, Coinbase are well known for their popularity among the crypto space. They also provide a decent & a safe way of earning interest for your cryptocurrency from anywhere upto 14.5% interest on stablecoins.
-
Proof of Staking
Proof of Staking or PoS is one of the most common words you will hear as a cryptocurrency investor. This is a simple method used in blockchain technology where the users get a way to earn a specific APY to their cryptocurrency.
The technology used here is an alternative to that of Bitcoin’s PoW (Proof of work) technology where the PoS network uses Staking large amounts of tokens on a specific node and the users get rewarded.
Just like how Crypto miners are rewarded for new blocks, the Crypto Stakers receive new block rewards in the PoS (Proof of staking). But here in the PoS, there’s no need for expensive computer hardware like you can see in mining, but here a good amount of tokens is needed as an initial investment for staking.
These days, many exchanges offer staking rewards on their own platforms for different cryptocurrencies like Ethereum, Avalanche, Solana, Terra, Polkadot and more. Most of these require a minimum token for staking and have to be locked in for a specific period of time to earn the rewards.
But the whole point of PoS is once you stake your coins, everything happens automatically. There’s no need for manual intervention as everything happens automatically and few platforms even allow users to compound their initial staking tokens + rewards automatically to stack up the rewards percentage.
If you’re wondering how much you can earn via PoS (Proof of Staking), the yield or reward you get out of it usually depends on couple of things. The first is the amount of token you stake and the time period you stake for. But in the end, one can expect to get a decent 5 to 15% APY.
-
Liquidity Provider
A liquidity provider is someone who funds a liquidity pool with cryptocurrency assets in order to facilitate cryptocurrency trading through the platform and earn passive income.
Basically, anyone can become a liquidity provider by depositing a sum amount of tokens to a smart contact & receive pool tokens in return.
-
Yield farming
Yield Farming can be often confused with PoS (Proof of staking) as they are very similar. In this process, you lend your crypto assets and earn interest from DeFi platforms that lockup in a liquidity pool. The locked funds fro are further used for facilitating trading activities including lending & borrowing. The lending funds and facilitating other activities, the platform earns fees which are used to pay out to the users according to their amount put into Yeild Farming.
Staking here into a Yield pool allows users to earn to the proportionate they stake, for example, if you contribute 1% of the total pool, you’ll receive 1% of the overall awards received by the pool.
The payout period here ranges from weeks, months and even years. And the payout percentage can vary anywhere between 5% to 20% APY or even more if you liquidate your yields regularly.
Some of the well known Yield farm platforms include PancakeSwap, SushiSwap, TraderJoe and more.
-
Interest for CryptoCurrency
In the world of Decentralized Finance (DeFi) the platform has evolved so big that they now offer interest accounts for cryptocurrencies. These accounts enable users to stake cryptocurrency coins for a specific period to earn interest, something similar to the traditional saving accounts.
The only difference is that the Interest beared cryptocurrency accounts payout over 10% interest if staked for a year or more. The payout options here vary here from daily, weekly and even yearly. The payout is directly proportional to the period you lockin your funds.
-
Crypto Nodes for Passive income
Master Nodes are for a specific purpose. The main purpose is for large payouts. They are a part of an infrastructure sustains cryptocurrencies like Ethereum, Bitcoin, Dash, etc. The main purpose of the Master node is to verify the new blocks in the blockchain and govern them rather than submitting new blocks to the network for verification.
The master node is not for everybody, it requires a huge sum of money that can range anywhere around 1000 DASH or $130K. These nodes also receive a proportion of the block rewards every time a new block is mined.
By running a crypto node, the node operators are guaranteed crypto rewards that usually depend on the percentage they stake in the network. There are a lot of crypto nodes that pay but it’s better if you do personal research as there are many crypto nodes for each cryptocurrency.
-
Lending
Cryptocurrency lending is a process where an investor can lend out crypto for a fee or interest. The amount earned out of lending your cryptocurrency depends on three things –
The amount of Crypto Lent
The duration of the lending period
The interest rateThe simple rule here in lending cryptocurrency is that the higher the rate, the longer the loan period, and the higher you can earn from interest. Lending can be broken down into different kinds –
– Margin Lending: Margin lending in cryptocurrency is a type of loan that allows users to borrow money to invest or trade. Here, you can lend your crypto assets to the traders who amplify their positions with the borrowed funds and repay the borrowed loan with interest. Most of the crypto exchanges these days have this feature.
– Centralized Lending: Centralized lending is an infrastructure based lending system and follows the terms laid by third parties. Here, the interest rates and lock up periods will be predetermined. In this type of lending, a user should deposit crypto to the lending platform before they can earn interest.
– Decentralized Lending: Decentralized lending is also known as DeFi Lending and involves blockchain directly. There are no intermediaries or third parties. Lenders and borrowers communicate through a smart contract which automates the interest rates.
– Peer-to-Peer Lending: Peer to Peer lending involves users directly borrowing from other users on that platform without any intervention. The lender has to deposit crypto directly into the lending platform to the custodial’s wallet. Once it is in the custodial’s wallet, the lenders have complete control and can set the interest rate, the time period and the amount they want to lend.
-
Cloud Mining
Cloud Mining cryptocurrencies are based on a proof of work mechanism that involves a huge sum of investment in computing hardware technology along with some technical knowledge.
Alternatively, users can also rent hash power from an established platform rather than doing all the hard work of investing in the hardware parts, etc. In this type of cloud mining, a user can pay a fixed sum of money for a predefined mining hash rate and accordingly, the mining rewards will be directly deposited.
-
Dividend Earning Tokens
Few tokens offer their holders a fraction of the revenue issued by the company. The only thing that needs to be done here is to hold them for a certain period and you will be automatically eligible to receive a certain percentage (predefined by the issuer) from the company’s revenue.
The earning here depends upon the tokens you hold, so the more you hold the more share you are allotted by the company. These payments are usually done in a quarterly basis.
-
Affiliate Programs
Just like any other affiliate programs out there, there are tons of cryptocurrency affiliate programs for crypto-related products and services. Here a user can simply signup for an affiliate program and start promoting their affiliate link to earn a commission off each singup or conversion made through that link.
It’s always better to know the commission rates, marketing tools & other offers related to the affiliate program. Binance is well known for their affiliate program in the cryptocurrency industry as they are one of the high commission payers and also have the world’s largest userbase. Not just that, they also have plenty of cryptocurrency options to promote with super quick & easy payouts.
-
Forks and Airdrops
A fork happens whenever a new change is made to the blockchain protocol. When this happens, the chain splits into two where they share a common history with the original blockchain but is headed in a different direction.
When this happens, Airdrops are created and dropped to users as a reward. There’s no specific set date or time on when these will happen but if you are an active holder of specific cryptocurrency tokens, there’s a good chance the odds of winning airdrop increases.
-
Running a Lightning Node
A lightning node is software that bridges the gap between the main lightning network and the blockchain network. The main purpose of these lightning nodes is to verify the transactions but in a smarter way compared to the traditional method of verifying the transactions.
Anyone can run a lightning node and earn a small percentage off every transaction. The only downside is the low income generated through this as the transaction feels is so less.
Pros & Cons of Passive income with Cryptocurrency
Be it any investment, there will be an advantage and disadvantages. So when it comes to cryptocurrency, here are the pros and cons –
Pros –
Super simple and straightforward process
Easy to write off capital gains
Cons –
Risky as the crypto market has lots of scams
Few options wouldn’t be newbie-friendly
Cryptocurrency for Passive income, is it worth it?
Be it any type of asset, keeping it idle is the worst investment as it doesn’t yield anything. So exploring different ways to make use of holding those funds can help you generate some passive income.
It can be as simple as depositing your assets into an interest account or opening your own master node. There are tons of different options that you can explore as the cryptocurrency world never stops growing.
FAQs
- Is Staking considered passive income?
Yes, as it doesn’t involve any manual intervention it is considered passive income. All you have to do is deposit your token in a specific network and you will be rewarded for the amount you put in & the time period you lock in. - Can we make passive income out of cryptocurrency?
Absolutely, there are different ways you can make passive income in cryptocurrency. It can be as simple as staking or lending your assets for interest and can go to cloud mining or running your own node that requires some technical knowledge & experience. - Are there any risks involved while trying to make passive income with cryptocurrency?As long as you rely on trustable sources & reviews, there’s not much that can go wrong. But be prepared for anything and everything as there are lots of crypto scams going on. But in general, the common risks that are involved are usually the loss incurred due to fall in token prices which directly affects the rate of return.