Sticking with the basics
You can only be financially free when your passive income exceeds your expenses.-T. Harv Eker-
Cryptocurrency gives people the opportunity to make a profit through trading and investment. However, if you are like many avid crypto traders trying to make profits, trading and investment can be risky, time-consuming, stressful, and requires your undivided attention.
Buying or holding crypto assets for long does not guarantee you will ever make a profit. However, it also does not suggest that you may run at a loss. Since the committed time, resources, consistent tracking of your portfolio, and regular managing of your positions, do not yield productive and fulfilling results, there are other ways to earn income in cryptocurrency without stress.
What is passive income in Crypto?
Passive income is revenue generated from activities that do not require the total commitment of an individual. In passive income, the individual puts in minimal effort and watches their investment grow to their predicted earnings. There are several passive income strategies cryptocurrency traders can utilize with their current profit-earning scheme to maximize their profit; these passive income strategies include:
Cryptocurrency staking is a strategy used by millions to earn passive income on their investments. For the users, it is a way to get returns for holding cryptocurrency tokens for some time, while crypto projects see staking as a process that helps in transaction verification. Although not all cryptocurrency tokens or altcoins allow staking; however, you can stake crypto assets, especially in the DeFi space.
How does staking work?
Think of staking as putting or storing your money in a savings account that promises huge returns. When you deposit your tokens in that bank for a long time (say 3 to 6 months or as stated by the bank), the bank then collates your staked deposit and other deposits of other individuals and lends them to others. As a bonus for tying up your money, you get rewards in weekly or monthly payments.
Checkout this report by Statista about the biggest cryptocurrencies in the world based on total staked value.
As said earlier, most DeFi projects allow users to stake their assets, and the vast majority of them use the Proof of Stake consensus mechanism. This type of blockchain technology ensures all transactions are verified, thus protecting the finances of the holders.
Yield farming is a passive income strategy used by crypto holders on the blockchain to maximize their profit. Since it helps the users grow their cryptocurrency batch, it is tagged farming.
Farming uses the decentralized ecosystem on Ethereum and may now change the entire system of how holders ( HODL) in the future. Although many compare farming to staking, these two passive income strategies have a lot of technologies going on behind them.
How does yield farming work?
Crypto holders lend their digital assets to DeFi platforms. Then, the tokens are locked in the liquidity pool for a certain period.
This liquidity provides the use of the tokens as a borrowing and lending platform. Here, no centralized body holds the locked funds, and asset disbursement is immediate as lenders fulfill the requirements. In this set up fees are incurred from the user and paid equally to the liquidity providers.
One of the most undervalued and untapped potentials of passive income strategy in cryptocurrency is lending. Many crypto holders overlook the possibility of earning big as they aim to achieve 100% or more in weeks rather than 10% in years. If you have some Ethereum or Bitcoin assets you are holding on to in case of a future spike in price, there are other ways to earn more while holding.
Lending to centralized finances like Celsius, Nexo, BlockFi, YouHolder, and CoinLoan offers a high-interest rate, i.e., 4.50% to 13.00%. The rate is more stable in centralized lending because the lending entity determines the interest rate. However, volatility and other forces controlling market price determine the rates of decentralized lending.
Airdrops are also one of the popular ways crypto holders earn passive income. It is a marketing stunt or strategy run by a crypto project and involves sending a certain amount of their tokens to your wallet address for free. It often requires the holders to perform some tasks, i.e., promote it and create awareness about the project and its tokenomics.
How does airdrop work?
Crypto projects announce airdrops via the official links of the company, social media pages like Twitter, and community forums like Reddit. Note: Ensure you verify the authenticity of an airdrop so that you dont expose yourself to phishing sites and scams. Projects like Gains Network, Metafity, and Glass Coin are running airdrop events.
Generally, most airdrops require the users to hold a certain amount of crypto tokens in their wallet, create promotional messages on their social media platforms, join a group, write a blog post, or refer a certain amount of people.
A legitimate airdrop will never request users to invest before they are eligible.
Also, red flags like pre-mined tokens ready for disbursement expose the loophole of such a crypto project. After completing the requirement, you receive a mail, message, or DM from the projects official page, congratulating you and putting you through the next step to claim your reward. This reward can range from a few dollars to thousands of dollars.
Many cryptocurrency companies are seeking ways to grow their user base. Hence, they have developed affiliate programs for their existing userbase. Affiliate programs are similar to referral marketing, whereby a user invites one or more people to the website and gets rewards per invite. The payment scheme for affiliate programs in cryptocurrency companies ranges from cost per sale, pay per lead, or pay per transaction.
Cost per sale method means an affiliate gets rewards after successfully selling one or more digital products; pay-per-lead means a payment from every invited customer. In contrast, pay per transaction is paid for every successful transaction carried out by your invited customer.
Here, the reward may not necessarily be money, a deposit or PayPal. Instead, it can be discounts, free products, or free trading features. Luckily, many of these programs have a cookie duration of 69 to 90 days, allowing the affiliate to get enough referrals within that period.
Crypto holders can incorporate several other passive income strategies into their regular trading to increase their earnings. The recommended passive income strategies do not guarantee immense profits or sales; instead, they act as a supplement and can provide you with enough to settle specific bills.
Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble. -Warren Buffet-