8 ways on how to earn passive income with crypto

Experienced traders can earn thousands of dollars daily. Still, to do so, they need to know the current situation in the market, use tech analysis, and spend much time due to the need to monitor their portfolios constantly. Not everyone can afford that, so for traders who plan long-term investments, there are many other methods to make money from digital assets. Let’s talk some more about that today. 

Earn passive income in crypto: is it possible?

Yes, it is possible to have a passive income with the help of cryptocurrencies. And the number of options makes it easy to choose something unique and most suitable for everyone. However, it is worth understanding that the money will not just drop, and to start getting something, you will have to study the market and working strategies. But even in this case, you must understand that investing is always a risk, so you must have a competent and straightforward approach.

You’re mistaken if you think you can figure it out in a few hours and choose a 100% successful option. The advantage is that it can be done with minimal investment. The leading resource you have to spend is time. Specifically, the time to study: 

• the market;
• the different strategies;
• how DeFi works;
• and reading forums on the subject;
• reliable and promising projects.

The internet is full of stories about how someone made a fortune without much effort, so everyone wants to do the same. Let’s look at the most popular ways to make a passive source of income using cryptocurrencies.

Staking

Surely you have heard of this method, as it is pretty popular. The level of earnings will depend on which digital asset you choose. For example, some stablecoins bring about 0.15% a year, while other cryptocurrencies can give 5-6% or even more.

The principle is simple. The user gives his funds to exchange for storage for a while or places them on a wallet, for which he receives a percentage. This way of earning passive income is suitable for investors and traders with an average or a large amount of cryptocurrency in their accounts.

Also, some digital assets pay to stake rewards in another related token. You keep the money, and the platform gives you various rewards. It’s safer that way because then you can control your funds.

Otherwise, you should find a reliable platform. We reported about the best exchanges here and here.

Some offer bonus programs, i.e., the service takes control of your savings for a certain period and uses them for its own needs (margin trading, loans, etc.).

Technically, staking is made possible by the Proof-of-Stake consensus mechanism or its variants (Nominated Proof-of-Stake, Delegated Proof-of-Stake, and so on). The system asks you to create a validator node and block a fixed minimum number of coins to secure, power the network, or transfer your savings to a specific nominator or validator. At the end of the day, stackers receive a percentage mostly made up of the inflation of the digital asset deposited and/or the transaction fees generated by the network.

Among the cryptocurrencies that give remuneration for staking, you can consider:

• Ethereum;
• Solana;
• Cardano;
• Avalanche;
• Polkadot.

It’s worth keeping in mind that the percentage of staking is paid in the same cryptocurrency investing. That is, the income from SOL gives more SOL. Thus, if the value of a coin fell at the time of staking, it is not excluded that it is possible to go down when converting to fiat unless the funds received during the staking will cover the difference.

Yield farming

This approach is similar to the previous one but a bit more complicated. The principle is that along with storing funds on an exchange or wallet, the user gives part of the savings to a liquidity pool, which often includes combining multiple coin variants.

For example, storing two tokens in a liquidity pool can result in a combined token that will generate huge profits. Especially new, very volatile coins offer such an opportunity. They can go into farms with hundreds of percent annual interest and 10-20 thousand yearly percentage yields.

The advantage is that the percentages accrue 24/7 and are usually in the form of crypto tokens. The resulting coins can be re-pooled and added to the farm, allowing you to earn larger rewards in the long run or withdraw into fiat if you wish.

However, given that the method allows you to get more, it is also riskier. This is because coins that provide such high interest and commission income have a greater chance of dropping in value if the underlying digital asset collapses in value dramatically.

To avoid losing everything all at once, it’s not recommended for newcomers to the industry to participate in pools with low liquidity.

Also, like any other digital network, DeFi can fall victim to hacks or simple mistakes. In addition, this method may require more attention, time, and effort from the user than average passive earning.

You can read more about field farming here. 

Cloud mining

One of the easiest ways to get passive income, so suitable even for beginners. It does not require any in-depth knowledge or the purchase of expensive hardware/applications. Instead, the user borrows the power of particular companies that mine crypto somewhere far away in remote data centers.

Cloud mining can be divided into:

• Host mining. In this case, a mining facility is rented.
• Hash leasing. Refers to renting/leasing the total capacity that a remote farm produces.

This passive income method allows for passive profits in bitcoins and other altcoins.

Compared to traditional mining, cloud mining has several advantages:

• there is no need to buy and set up any equipment;
• no technical or IT knowledge is needed;
• no electricity costs;
• generally higher profitability;
• you can mine different coins on the same platform.

To start, choose a legal platform and buy a suitable contract. Look only at proven sources that are related to the industry. Otherwise, there is a chance of running into scammers.

Crypto savings account

A working but relatively old way to make passive income from digital assets. It means opening a crypto-deposit or a crypto-savings account similar to financial products in traditional financial institutions.

The income from such accounts is much higher than in regular banks. It is possible to choose a flexible or fixed term of storage. Several experts advise storing coins for the long term. Thus, several companies promise 10-20% profitability, which cannot boast of usual banks.

However, it is essential to remember that such savings accounts estimate their yield in digital assets, the value constantly fluctuating, which can affect the annual income. In that case, experts recommend choosing offers on stablecoins that are more reliable, such as Dai (DAI) and USDC.

If you choose this way of getting passive income, it is worth paying attention to the conditions for withdrawal from the account. Fixed terms allow you to freeze your savings for a certain period and get a higher yield.

This strategy is suitable for those who plan to invest in the long term. Also, the method is considered relatively safe. 

Crypto lending

The principle of operation is similar to opening a deposit in a regular bank; only the calculation is carried out in cryptocurrency — the investor credits exchanges, which increase liquidity, or ordinary users. The transferred money is frozen in a smart contract.

For example, let’s take the Binance exchange. It has two types of lending:

• Perpetual contract. Low-interest rate, but money can be withdrawn or deposited at any time.
• Fixed contract. Created for a specific time of ten days and characterized by a high-interest rate. For USDT, it is 10%, and for Axie Infinity, 50%, but the invested money will be frozen for 15 days.

If you like it, go for it. 

Affiliate programs

The bottom line is simple: the platform rewards partners who attract new customers to use the service — exceptional loyalty to those with many subscribers on social networks. You only need to be famous on the internet and declare your desire to cooperate with the platform as a partner.

Airdrops and forks

Cryptocurrencies number in the thousands, and there are more and more of them. Newcomers in the market now and then want to make themselves known, and one of the most common ways is to distribute their coins to profitable market participants and those who like their approach and technology. However, finding out which project has just recently opened will not be easy; you will have to do your research to be aware of who has just appeared.

Look for affiliate programs, some of which offer exchanges that reward users for bringing in new clients.

Forks are an offshoot of the leading coin. In this case, the creators of the token reward the user with forks for having used the main product. Airdrops usually happen after someone launches a new digital asset, and forks are needed to get market participants to appreciate the new product.

Such a strategy can bring in revenue, but not immediately or not at all. The upside is that the user gets the coins for free, but they have no value until there is interest in them. The company’s task is to introduce its product to the market and make it known. The more people know about the coin, the more likely it will be bought, the market capitalization will grow, and the value of the currency, and therefore, your income.

In 2017, BTC holders received the so-called bitcoin bash, a fork of the leading coin. In 2021, KeepKey wallet customers were rewarded with ShapeShift. All users who logged in at a particular time received tokens. You must follow the requirements and get the reward to get something as part of the airdrop.

It’s like getting a discount coupon or a sample of some product for free. Customers don’t spend money but tell the masses about the new product. But, if everyone likes the coin and becomes famous, it will be considered that the participant of the airdrop got the money for free.

To promote projects, token creators turn to affiliate programs such as Crypto, which helps companies increase sales, trade, and customer base. Look for a program with good commissions and a good reputation. Chances are higher that you will be partnered with if you have a large audience that will potentially want to try the new product as well.

Dividend-earning tokens

A way of generating passive income, in which the user is paid for supporting the development of the business. Payment is made in tokens with different functions. It may seem that this strategy is similar to staking, but it is not; in the case of staking, a market participant invests in a coin and waits for its value to increase; in this case, the user receives dividends in cryptocurrency.

Look for companies that pay well. Some pay more, so do your research. For example, some companies give loyal individuals up to 30% per year in dividends, depending on the investment size.

It’s also worth noting that many digital assets promise passive income. In exchange, users offer their financial support. Profits can come in the form of increased coin value or investment privileges.

Such a strategy is more like owning shares in a company. The dividends received depend on the company’s profits and participants’ contributions. 

Passive income generation with crypto: pros & cons

Pros:

• Some strategies are very simple. Users just need to deposit stablecoins and start making profits.
• Investors can set aside an increase in funds. That is, not to sell coins that have increased in value but to keep it and use it to make a profit. And while such income would be taxable, it would be more convenient than selling many coins outright.

Cons:

• Most strategies imply that the user is willing to take risks. Sometimes even 100% of their money. The reason could be a hack, a smart contract error, a platform bankruptcy, or anything else.
• Difficult navigation (sometimes). The world of DeFi can be technically complex. For example, when it will require setting up a wallet or learning decentralized finance protocols. Newbies will have to spend some time on this.

Conclusion

As we learned, digital assets offer many ways to make passive income. The choice depends on your preferences, how much time you are willing to spend on it, and your technical analysis level. Whether or not you’re ready to take a risk can also play a decisive role. However, it makes no difference whether you’re a beginner or an expert investor; you can learn everything, as all methods work. Just find the one that works best for you.