When most people hear “cryptocurrency,” they immediately start thinking of high-risk trading, where you are constantly monitoring price charts, learning technical skills, and making complex predictions. But did you know you can make passive income in crypto without actively trading on the market?
Yes, passive income opportunities exist in crypto, allowing you to earn with minimal effort. In this article, we will highlight various ways to make extra crypto profits. We will also discuss the risks involved with them so you can make an informed decision and avoid potential pitfalls. Follow closely.
KEY TAKEAWAYS:
- Beyond trading, you can earn passive income in the crypto space.
- Common ways to earn passive income in crypto include staking, yield framing, and crypto lending.
- Other passive income methods are cloud mining, airdrops, and Play-to-Earn (P2E) games.
- The key to success in earning a passive income in crypto is to understand how the different strategies work and to choose the one that best suits your financial goals.
6 Common Ways to Earn Passive Income In Crypto
Over the years, new ways have been developed for beginners and seasoned holders to enjoy crypto gains. Check out some of the most common ones below.
- Staking
Here, you lock up your crypto in a proof-of-stake (PoS) blockchain to help validate transactions. In return, you receive rewards in the form of the network’s tokens. Unlike Bitcoin, which relies on proof-of-work (PoW), PoS networks are secured by validators. When you stake, you are literally lending your assets to support the blockchain’s operations. The more you stake, the higher your chances of earning rewards.
You can stake your crypto directly on PoS networks like Ethereum, Cardano, and Solana. You can also stake through crypto exchanges like Binance, Coinbase, and Kraken. The major downside of this method is that your reward may lose its value if the token’s price drops.
- Yield Farming
Yield farming is like lending your crypto to a DeFi platform so others can trade or borrow it. You then earn an interest or new tokens in return. The best part of yield farming is that you can earn very high returns of up to 100% annual percentage yield (APY).
To participate, you deposit your crypto in the liquidity pool of a decentralized exchange (DEX). Popular yield farming platforms include Uniswap (UNI), PancakeSwap (CAKE), and Aave (AAVE). Some risks associated with this means of earning passive income are smart contract vulnerability and impermanent loss if the crypto’s price fluctuates.
- Crypto Lending
When you lend crypto, borrowers use it for trading or yield faring, and you receive interest for providing liquidity. This lending process is secured by collateral, meaning the borrower has to deposit their crypto asset as security. There is a risk of borrower default in crypto lending if the platform is not well regulated. Feel free to consider established lending platforms like Aave (AAVE) and Compound (COMP) to minimize the possibility of such a situation.
- Cloud Mining
In cloud mining, you buy a mining contract from a cloud mining company that handles the technical work. The mining service provider uses remote mining rigs to mine cryptocurrency like Bitcoin, and you get a share of the coins as described in the contract. Genesis Mining and NiceHash are examples of reputable cloud mining companies.
Read Also – Who Are Miners? How Does Mining Work?
- Airdrops
Airdrops are free crypto giveaways by new blockchain projects that want to promote awareness and increase the token’s adoption. These projects distribute free coins to users who meet certain conditions, such as:
- Holding a specific currency
- Using the platform before a certain date
- Completing simple tasks like following the network’s social media
While they can be an easy way to earn free crypto, you should only participate in verified airdrops to avoid crypto scams like phishing attacks.
- Play-to-Earn (P2E) Games
P2E gaming is a fun way to earn, especially for gamers, because it involves playing video games to get crypto. You can earn rewards in the form of tokens and NFTs, and you can sell them for money. Popular P2E games include Axie Infinity (AXS), The Sandbox (SAND), and Gods Unchained. One of the disadvantages of P2E games is that some of them require upfront investment.
Conclusion
Earning passive income in crypto is not just possible, but it is a smart way to grow your crypto holdings over time. The key to success in this regard is to understand how the different strategies work and choose the one that best suits your financial goals. If you are new to crypto passive income, I will advise you to stay small. Over time, you can commit more funds when you have built confidence in your preferred option. Good luck!
References
- investopedia.com – How to Earn Passive Income Through Crypto
- forbes.com – How To Earn Passive Income With Cryptocurrency
- prestmit.io – 5 Lazy Crypto Investment Strategies To Earn Passive Income
Recommendations
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- Everything You Need To Know About Soulbound Tokens
- Proof-of-Stake (PoS) Vs. Delegated Proof-of-Stake (DPoS): Exploring Their Differences
