Passive income is an option to get some extra money without doing anything actively. Simply put, putting up your resources so they would work for you.
Alongside many of the already available options for passive income, there are also ones that can help you earn in crypto as opposed to fiat assets.
With all that in mind and all the options available, these are a few ways how you can earn crypto passive income by employing your resources to work for you instead of using the resources for your own work.
An obvious example of crypto passive income is, without a doubt, mining. For a long time now, it has been the one and only way to acquire crypto without making a purchase or doing any other deals. The first cryptocurrency, Bitcoin, could only be acquired this way, and the story is the same today.
Assembling and using miners requires a reasonable amount of technical knowledge as well as investments in powerful hardware that would be capable of achieving this task. To explain briefly, mining works under the principle of Proof-of-Work (PoW).
This means that various powerful computers are in constant competition with each other to solve mathematical equations (ridiculously complex ones). For doing all this work and being the first to solve this, the “winner” of this race gets a right to verify the next block of transactions in the blockchain.
What does that mean? The reward is not based on bragging rights or getting a medal on your neck. The reward, in this case, is a certain amount of Bitcoin (BTC) (or other PoW-based coins). It should be noted that after each successful calculation, the difficulty of the equation that needs to be solved gets higher. This results in more computing power needed in order to mine Bitcoin.
For comparison, back in the very early days of Bitcoin, 250 BTC could be mined in a single day. Today, however, since a lot of Bitcoin is already mined and the equations are way more difficult to earn, they require a lot more computing power. The mining difficulty, back in 2010, was 1.18 to 14 484. Since 2010, the difficulty has increased by more than 145 billion percent.
Having these facts in mind, to put it bluntly, making passive income in crypto by using miners is not a very viable option. It is possible; however, it would mean investing a lot of money into specialized rigs that would be catered for this purpose specifically. The other downside is the operational costs.
A lot of computing power means a lot of electricity costs, hence, even with the correctly made rig, the revenue will probably not outweigh the losses, making the profit margin ridiculously low at best.
Related to the previously mentioned way to earn passive crypto income, cloud mining takes away the technical and the very expensive part of mining from you.
Basically, cloud mining is renting out mining equipment from a certain enterprise for a fixed sum. As you are renting out this equipment, the mining operations are happening in highly-sophisticated and fully-equipped facilities. For each operation and successful solution, you get a part of the earnings depending on your investment.
By utilizing cloud mining, you do not have to buy and build expensive mining rigs and worry about the electricity costs and other burdens that this process would incur. There are numerous cloud mining services available, each with its own strengths, weaknesses, and potential profits.
Depending on the fluctuating prices of Bitcoin and the cloud mining service that you choose, it is possible to double your investment. That is, on a $2000 contract, you could get out with over $4000 at the end.
This is a great way to earn some passive crypto income without getting too much into technicalities or other worries that may come your way if your method of choice happens to be good old mining.
On a somewhat opposite side of things from the PoW approach, there is a Proof of Stake (PoS) algorithm. It gained traction in recent times due to environmental and other concerns that are tied to PoW. A big boost to this approach was Ethereum’s switch from PoW to PoS to verify its transactions.
To put it bluntly, if you are engaged in staking, it means that you lock your crypto assets for a certain set period of time, and during this time, you earn interest for doing so. It could be compared to traditional bank interest, where you get money for letting the bank use your monetary assets.
Earning interest via staking is a much easier way to earn passive income compared to going for PoW coins. Currently, the staking systems are made easy to understand pretty much everywhere just to encourage participation in it.
In a lot of cases, staking is provided as an option right on the coin’s website. JumpTask, for example, offers staking as one of the earning options, and it takes just a few clicks to stake your JumpTokens.
Essentially, in the PoS case, you are employing your crypto assets to make money for you. Usually, both centralized and decentralized exchanges offer such services.
According to Staking Rewards, there are currently 165 coins that can be staked, meaning that the options are vast. Of course, each coin has its own way (and different protocols) of approaching staking, and the interest rates differ from one to the other.
Also, some may be more difficult to stake than others. However, overall, this is one of the easy ways to earn passive income in crypto in the long term.
Yield farming is a bit more difficult to understand on paper since it contains many different terms. What yield farming means, in very basic terms, is putting your crypto assets (tokens) into a liquidity pool with other investors and letting the resources there be used by others.
Basically, you would act as an investor, and the others will be borrowers. It is somewhat similar to a savings account to an extent.
With each movement from the borrowers and the successful further investments that they made, the revenue and profits from their disposal of the funds from the pool will be shared with you, giving you the opportunity of earning passive income. All of this is done via smart contracts.
Decentralized finance platforms (DeFi) have liquidity pools with different returns and different cryptocurrencies available for pooling, so you should check out which ones work out the best for you.
What should be noted is the fact that this crypto investment carries a risk of losing your investment. In a way, it is not that different from similar investment opportunities provided in non-crypto markets.
Lending, on the surface level, is as basic as it can be. You lend some crypto to borrowers, and they pay you back with interest, as the assets your lend are interest-bearing. That is it. There is no other bigger or more complex explanation required to get the gist of it.
However, since the crypto world is anonymous and more complex, there are some other things worthy of pointing out. There are a few ways how lending works using cryptocurrencies:
This is where you lend your crypto assets to a borrower that would later use it to make further investments or other monetary operations that would grow what they had borrowed.
This means that you will regain the full sum that you had given to the borrower. There are considerable interest rates there on the payback.
This is where you lend your cryptocurrencies to the other party rather directly, without the involvement of a third party. This way, you can set up the terms, conditions, interest rates, and everything else yourself, together with the person who borrows from you.
This is where a lending platform will decide the interest rates and lock periods before any lending happens. You can lend this way only after you deposit your assets to the platform of your choice.
In a way, it is similar to peer-to-peer lending, except the interest rates and other financial instructions are governed by smart contracts. The changes to interest rates happen automatically by the rules defined in the smart contract.
There are different lending platforms available; some centralized and decentralized exchanges offer the possibility to earn passive income this way right there on their websites and apps.
Besides all the aforementioned ways to make some passive crypto income, you can also take advantage of dividend-earning cryptocurrencies.
Once again, this can be tied to the “real life” example of dividends. If you are a shareholder of some company, you receive a part of their revenue.
In this case, if you hold a certain token, the company that issued that cryptocurrency will give you a part of their revenue straight to your wallet just for having their cryptocurrency.
It really is as simple as it sounds. Users that wish to take part in this way to earn passive income have to simply buy the cryptocurrency that offers dividends and hold it. The longer you hold the coin, and as long as the company at hand is profitable, you will get some money from them.
There are a couple of different approaches to this, though. Certain centralized exchanges offer a portion of transaction fees collected on their network via trading to holders of their native coins.
Others are based on digital asset exchanges and smart contracts, where each generation or trade of the digital asset will net the holders/users of their cryptocurrency a small payment, thus earning passive income for them.
In this article, we discussed six different ways to earn passive crypto income by making use of various platforms, DeFi solutions, and other ways to make your funds grow without engaging in trading or other active earning means. To summarize:
Arguably the oldest method to get some passive income that is no longer financially viable. The value of investment needed just to start is very big, with the upkeep costs possibly being even larger.
An easier option that does not require such large investments. It has potential value, though, again requires a bit of starting investment. Considering the ease of it, if you have some money to spare, it can be a good option.
A very easy way to earn some passive income. A lot of users are engaged in this way to earn, be it on JumpTask or other services. It is a great option for both new players and old ones.
Potentially a high-risk, high-reward affair that could bring users a lot of passive income, yet it could also make all the funds disappear. It also requires further research and is not as easy as the other options, by all accounts.
Nothing is hiding behind this one. Depending on the services that you choose, it could be a great way to gain some crypto passively in this turbulent market. Be it lending on a DeFi or a CeX, it is not difficult and could be profitable.
One of the easiest ways to earn passive income with crypto. All it involves is picking out a coin on the market that gives out dividends and holding it in your wallet.
Although some options are risky, there are some that are completely risk-free. One of them is JumpTask, a platform where crypto is given for completing small tasks, meaning that there is no lending to other accounts involved, nor there are any assets adding to a liquidity pool or two.