How To Earn Crypto Passive Income: A Step-By-Step Guide

Updated on March 14, 2025

Earning passive income with cryptocurrency lets investors grow their holdings without a significant initial investment or active trading. Some strategies, like staking and lending, require minimal effort, while others, like yield farming, need active management. Each method comes with different risks and rewards.

Understanding how they work helps in choosing the best approach for financial goals.

This guide covers how to make passive income with crypto, with step-by-step explanations, risk factors, and key considerations for both beginners and experienced investors.

What is crypto passive income

Crypto passive income is a way to earn money from your cryptocurrency without having to actively trade or spend time managing it. Instead of constantly buying and selling to make a profit, you set up a system where your crypto generates passive income on its own.

Think of it like putting money in a savings account that pays you interest—except instead of traditional banks, you're using cryptocurrency platforms. Once everything is set up, you can earn dividends over time into your crypto savings accounts.

This concept appeals to many crypto holders because it allows them to make use of their assets beyond simply holding them and waiting for a fair market value. Instead, they can generate passive income through different methods, some of which require very little involvement.

However, it’s important to understand that crypto passive income isn’t completely effortless or risk-free. Some methods require locking up your funds for a period of time, while others depend on market dynamics that can change quickly.

In the next sections, we’ll explore the best ways to start earning passive income with crypto, how each method works, and what beginners should keep in mind before getting started.

Ready to earn extra cash online?

Explore easy micro jobs. Complete simple tasks and start earning right away with JumpTask.

1. Cryptocurrency staking

Experience level: Beginner
Difficulty: Easy

Crypto staking is a way to earn passive income by locking up your cryptocurrency to help secure a blockchain network. In return, you receive rewards, similar to earning traditional bank interest on a savings bank account.

Many popular cryptocurrencies, including Ethereum, Cardano, and Solana, offer staking options, making it accessible even for beginners.

Here’s how to begin staking:

Choose a cryptocurrency that supports staking.
Select a staking platform or wallet.
Lock your coins and start earning rewards into your crypto savings accounts.

Some platforms require you to lock your staked tokens for a certain period, while others let you withdraw at any time. The main risk is price fluctuations, which can affect your earnings. To start staking, choose a reputable platform, check the estimated rewards, and stake your chosen cryptocurrency.

Staking is best for long-term investors who plan to hold their crypto anyway. It’s a low-risk, hands-off way to grow your holdings while supporting the blockchain network.

2. Crypto lending

Experience level: Beginner
Difficulty: Easy

Crypto lending is an easy way to earn passive income by loaning out your crypto and receiving interest in return. Just like a savings account in traditional finance, you deposit your funds, and borrowers pay interest to use them.

Many crypto lending platforms connect lenders with borrowers, making it simple to get started.

Lending works by putting your crypto into a lending platform, which then loans it out to traders, institutions, or other users. The process is straightforward:

Choose a lending platform with good network security and interest rates.
Deposit your crypto into a lending pool.
Start earning interest, usually paid daily, weekly, or monthly.

Interest rates vary significantly based on the platform, the type of cryptocurrency, and market demand. Stablecoins often offer more predictable returns, while riskier assets may provide higher rewards. To minimize risk, choose well-known platforms and consider spreading your funds across multiple services.

Crypto lending is a low-effort way to earn passive income, making it ideal for beginners who want steady returns without active management.

3. Cloud mining

Experience level: Beginner
Difficulty: Moderate

Cloud mining lets you earn crypto mining rewards without owning expensive hardware or dealing with high electricity costs. Instead of setting up your own cryptocurrency mining equipment, you rent mining power from a company that handles everything for you. This makes it an easier option for beginners, though it does come with some risks.

When you sign up for a cloud mining service, you pay a fee to rent computing power. The provider runs the mining hardware, and you receive a share of the mined cryptocurrency.

Here’s how it works:

Choose a reputable cloud mining provider.
Select a mining contract and pay the upfront fee.
Start receiving your share of crypto income and mining rewards.

The biggest advantage of cloud mining is convenience. You don’t need to maintain any equipment or worry about operational costs. However, some providers have high fees or unreliable payouts, so it’s important to research carefully before committing.

Cloud mining is best for those who want a cryptocurrency mining experience without the technical hassle, but it requires careful selection of a trustworthy provider to avoid scams.

4. Yield farming

Experience level: Intermediate
Difficulty: Moderate

Yield farming is a way to earn passive income by providing liquidity to decentralized finance (DeFi) platforms. Instead of just holding your crypto, you deposit it into a liquidity pool where traders can swap between different cryptocurrencies. In return, you earn a share of the trading fees, and sometimes bonus crypto tokens.

Yield farming works by supplying your crypto to decentralized finance (DeFi) platforms, which use your funds to facilitate trades.

The process involves:

Choosing a DeFi platform with high liquidity and good rewards.
Depositing your crypto holdings into a liquidity pool.
Earning rewards based on trading activity and platform incentives.

Yield farming can offer high returns, but it also comes with risks. One major risk is impermanent loss, where the value of your deposited digital assets changes significantly compared to simply holding them. Security risks, such as smart contract vulnerabilities, are also a concern.

This method is best for users who are comfortable with DeFi platforms and willing to actively monitor their investments.

5. Liquidity providing (LP tokens)

Experience level: Intermediate
Difficulty: Moderate

Liquidity providing allows you to earn passive income by adding funds to a liquidity pool on decentralized exchanges (DEXs). These pools enable users to trade cryptocurrencies without relying on traditional buyers and sellers. In return for supplying liquidity, providers earn transaction fees.

When you provide liquidity, your funds help keep the cryptocurrency market functioning efficiently. The process is simple:

Select a DEX and a trading pair to provide liquidity for.
Deposit an equal value of two different tokens into a liquidity pool.
Earn a percentage of the transaction fees from swaps in that pool.

Liquidity providing offers steady income but comes with significant risks, including impermanent loss, which happens when the price of one token in the pair changes significantly. To reduce risk, it’s best to provide liquidity for stablecoin pairs or well-established cryptocurrencies.

This method is best for users comfortable with DeFi and market fluctuations, as it requires some knowledge of liquidity pools and decentralized exchanges.

6. Masternodes

Experience level: Advanced
Difficulty: Difficult

Masternodes are special blockchain nodes that help maintain and secure a cryptocurrency network. Unlike regular nodes, masternodes perform additional tasks such as validating transactions and enabling advanced blockchain features. In return, operators receive regular crypto rewards.

Running a masternode requires locking up a large amount of cryptocurrency as collateral and maintaining a dedicated server. The process involves:

Choosing a cryptocurrency that supports masternodes.
Meeting the minimum collateral requirement (often a significant investment).
Setting up and maintaining a server to run the masternode.

Masternodes offer consistent rewards but require significant upfront capital and technical knowledge. Since your funds remain locked while the masternode is active, you can’t easily sell them if prices drop.

This method is best for experienced investors with technical expertise and long-term commitment, as it requires maintenance and a high initial investment.

Other emerging opportunities

Beyond staking, lending, and liquidity providing, new ways to earn passive income with crypto continue to emerge. Some of these methods allow users to earn crypto without large upfront investments.

One fast-growing trend is NFT rentals, where users lend out their NFTs in blockchain games or virtual worlds in exchange for a share of the earnings.

Blockchain gaming rewards also offer passive income through "play-to-earn" games that distribute tokens based on gameplay activity.

Social media monetization on decentralized platforms rewards content creators with crypto based on engagement, similar to ad revenue on YouTube.

For those wondering how to make money with cryptocurrency without investing anything, JumpTask provides a beginner-friendly alternative. Instead of committing funds to risky investments, users can complete microtasks like surveys, app testing, and gaming to earn crypto instantly.

While these emerging methods can be exciting, they also come with some significant risks. Always research platforms carefully and be cautious of projects that seem too good to be true.

Comparing different crypto passive income strategies

The table below provides a quick comparison of passive income methods in crypto, helping you choose the best option based on your experience level, effort required, and potential rewards.

Method	Description	Experience level
Staking	Locking up crypto to support a network and earn rewards.	Beginner
Crypto lending	Lending crypto to earn interest from borrowers or platforms.	Beginner
Cloud mining	Renting mining power from a company to earn mining rewards.	Beginner/Intermediate (due to scams)
Yield farming	Providing liquidity in DeFi protocols to earn rewards.	Intermediate
Liquidity providing	Depositing funds into a liquidity pool to earn a share of trading fees.	Intermediate
Masternodes	Running a full node that supports a blockchain and earns rewards.	Advanced (requires high capital and technical setup)
NFT rentals	Renting out NFTs for use in blockchain games or virtual worlds.	Beginner
Blockchain gaming rewards	Earning crypto by playing games or staking in-game tokens.	Beginner
Social media & content monetization	Earning crypto by creating content or engaging with decentralized platforms.	Beginner

How to choose the right passive income strategy

Choosing the right passive income method depends on your goals, risk tolerance, and how much effort you're willing to put in.

Here’s how to decide which strategy is right for you:

Consider your risk tolerance. Staking and lending stablecoins are low-risk, while yield farming and liquidity providing offer higher returns but need active management.
Look at your available capital. Staking and lending require small investments, while masternodes and cloud mining need significant upfront funds.
Assess your level of involvement. Staking and lending are hands-off, while yield farming and liquidity pools require regular monitoring.
Understand lock-up periods. Some methods, like staking and masternodes, lock your funds, while lending often allows flexible withdrawals.
Diversify your income sources. Using multiple strategies can reduce risk and create more stable earnings.

Choosing the right passive income strategy is about balancing risk and reward while keeping your goals in mind. Low-maintenance income options work best for some, while others may prefer higher-risk opportunities. Understanding each method helps you make the best choice.

Quick tasks, fast payouts

Join JumpTask and get rewarded for simple online activities.

Tax considerations for crypto earnings

Earning passive income with cryptocurrency can be profitable, but it also comes with tax implications. In many countries, crypto earnings are considered taxable income, meaning you may need to report and pay taxes on them.

The exact rules depend on your location, but here are some key points to keep in mind:

Crypto digital assets are often taxed as income. Staking rewards, lending interest, and yield farming profits are usually classified as income and may be subject to income tax.
Selling earned crypto may trigger capital gains tax. If you earn crypto and later sell it at a higher price, you may have to pay capital gains tax on the profit.
Some jurisdictions require detailed reporting. Tax authorities in many countries expect crypto holders to keep records of earnings, transactions, and withdrawals.
Not all crypto earnings are taxed the same way. Some governments treat rewards from staking or liquidity providing differently from mining or lending income.
Tax laws are constantly evolving. As cryptocurrency adoption grows, regulations change. Staying updated with tax laws in your country is essential.

To avoid issues, keep track of all your crypto earnings, including dates, amounts, and sources. Many crypto tax tools can help organize transactions and generate reports for tax filing.

If you're unsure about your obligations, consulting a tax professional familiar with cryptocurrency can help you stay compliant and avoid unexpected tax bills.

Key takeaways

Staking earns rewards by locking up crypto assets to secure networks.
Lending provides interest income, with stablecoins offering steady returns.
Cloud mining allows mining without hardware but requires careful provider selection.
Yield farming & liquidity providing offer high returns but come with risks.
Masternodes require a large investment but offer stable rewards.
Emerging opportunities like NFT rentals and blockchain gaming provide alternative income.
Choosing the right strategy depends on risk tolerance, capital, and effort.
Taxes apply to most crypto earnings, so tracking income is essential.

FAQs

Yes, staking is generally safe if done through trusted platforms. However, risks include price volatility, lock-up periods, and potential penalties for blockchain network issues. Beginners should stake established cryptocurrencies like Ethereum and use reputable crypto exchanges or wallets with strong security.

Yes, stablecoins can generate passive income through lending or liquidity pools. Since they’re pegged to fiat currencies, they offer lower risk than volatile cryptos. Lending stablecoins on reputable platforms typically yields 4%–12% annually, making them a safer option for passive income.

Cloud mining costs vary by provider and contract length. Some services offer plans starting at $100, while others require higher upfront investments. Always check transaction fees, payout structures, and profitability calculators before committing, as returns depend on crypto market conditions.

Break-even time depends on the staking rewards or lending interest rate, platform fees, and crypto market prices. Typically, it takes several months to a few years to recover your initial investment, assuming stable market conditions and competitive reward rates.

In most countries, crypto rewards from staking, lending, and mining are taxable as income. If you later sell your earned crypto, capital gains tax may also apply. Keeping detailed records and consulting a tax professional ensures compliance with local regulations.

Platforms like JumpTask provide an easy way to earn crypto directly from a mobile device. Other mobile-friendly options include staking apps, lending platforms, and DeFi wallets with built-in passive income features. Always choose platforms with strong security and user-friendly interfaces.

Adomas Ronkaitis

CBDO

Meet Adomas, Chief Business Development Officer at JumpTask and an expert in building partnerships and driving growth. With a background in management consulting and business strategy, he helps companies find new ways to connect with audiences and grow in the digital space. Adomas holds a degree in International Business and Economics from Erasmus University Rotterdam. Combining business insights with hands-on experience, he shares practical advice on web3, online earning, and creating value through digital platforms.