When you own cryptocurrencies you can get passive income from them. Investors are turning towards passive income strategies and finding ways to put their crypto to work. You have a lot of options to earn passive income.
Here, we have the top seven ways to put your cryptocurrencies to work and earn passive income.
Staking is a popular method to earn passive income in the crypto world. By holding certain cryptocurrencies in your wallet, you can support the network and earn rewards in return. Staking is similar to time deposits, where the assets owned by the investors are locked for a certain period and investors will get interest from the locked assets. You can stake tokens when you have cryptocurrency that uses a proof-of-stake mechanism. Staking locks up your assets to participate and helps maintain the security of that network’s blockchain. In exchange for staking crypto, validators receive staking rewards.
Staking platforms- Coinbase, KuCoin, Kraken.
- Yield Farming
Yield farming is the way to lock crypto assets to DeFi platforms to earn rewards. Through this, you can grow your crypto assets. The concept is similar to traditional banking practices. Banks will distribute the customer’s funds to borrowers, the borrowers will be charged interest, part of which will be used as a reward to the customers who lend their funds.
As a liquidity provider investor must lock the assets into a liquidity pool. Later, the assets will be used for lending purposes to other users. In return, liquidity providers earn interest.
Yield farming platforms – PancakeSwap, UniSwap, AAVE.
- Play-to-Earn (P2E) Games
Play-to-Earn (P2E) games are a type of game that allows players to earn winnings. Play-to-Earn driven gaming platform and offers players a new opportunity to earn passive income while gaming. A Play-to-Earn game is a free-to-play game where players can earn in-game currency by playing the game and completing the missions or activities. Play-to-Earn games provide rewards to players in the form of non-fungible tokens or crypto assets.
Play-to-Earn Games- Axie Infinity, The Sandbox, Decentraland.
Masternodes are an advanced method of earning passive income with cryptocurrency. By running a full node and locking a specific number of coins, you can participate in network governance and receive regular rewards. Masternodes are like digital wallet that is fully integrated and connected with the relevant blockchain network. Dash, and Horizon are famous platforms for masternodes.
Mining relies entirely on trial and error. Miners find the value of the hash and aim at solving the algorithm before anyone else. Once the block is created and verified miners are rewarded with a specific amount of cryptocurrency which they are supporting. When miners start out mining first they choose the cryptocurrency they want to mine and select the best resources to support it. Most cryptocurrencies that use a proof-of-work mechanism can be mined. Examples are Bitcoin, Litecoin and many more.
Proof-of-work is a process of adding new blocks to a blockchain.
However many cryptocurrencies do not support mining which uses proof-of-stake they rely on a more energy-efficient process known as staking.
Airdrop is a kind of crypto token giveaway. It involves the distribution of a particular cryptocurrency token to the token holders of that token. The goal of airdrops is to increase awareness and grow the community. Airdrop helps to promote the project in its early stages. You can earn passive income by participating in airdrops.
- Liquidity Pools
Liquidity pools are smart contracts containing locked crypto tokens that have been supplied by the platform’s users. They are self-executing and support Automated Market Makers (AMMs). Participating in liquidity pools is a method of generating passive income by contributing cryptocurrencies to digital pools locked in smart contracts
Above all are the most popular way to earn passive income there is plenty of opportunities that can bring a substantially better return on capital.
Frequently Asked Questions (FAQs)
Is passive income from crypto taxable?
Yes, passive income from crypto is taxable.
What is the fastest way to make money with crypto?
It depends on various factors including the method you choose, the amount of capital you invest and market conditions.
What are the risks in crypto passive income?
Generating passive income with cryptocurrencies can be profitable but it also comes with risks such as volatility of the crypto market, security threats and regulatory uncertainties.
Which crypto gives passive income?
Several projects offer crypto users the possibility of earning passive income.
What is the most profitable passive income?
Staking and yield farming are the most profitable passive income methods.