• Cryptocurrency Has 6 Ways to Earn Passive Income

  • Individuals all over the world can earn passive income in digital currencies and tokens thanks to the rapidly expanding crypto ecosystem. Continue reading to learn about six ways to generate passive cryptocurrency income.

    Depositing cryptocurrency on the CeFi lending platform

    Depositing bitcoin (BTC) and other digital assets into a centralized lending platform is arguably the simplest way to earn passive income from them.

    While most experienced crypto users advise against depositing crypto with third-party providers, CeFi’s (centralized finance) lending platform’s user-friendliness has resulted in billions of dollars in crypto flowing into CeFi lending. Users earn interest once their funds are deposited (typically paid in the deposited assets).

    BlockFi and Nexo are two popular CeFi lenders.

    Cryptocurrency deposits in a DeFi lending protocol

    Autonomous lending protocols such as Compound (COMP) and Aave are more decentralized alternatives to BlockFi and Nexo (AAVE). DeFi lending apps allow cryptocurrency owners to deposit funds into smart contract-powered lending pools in order to earn interest.

    The primary distinction between CeFi and DeFi lending is that the latter provides users with complete control over their funds and does not require any KYC (know-your-customer) documentation or onboarding procedures.

    Supply and demand determine yields, which vary from platform to platform. Furthermore, some DeFi lending apps carry a higher risk than others. DeFi’s high yields come at the cost of a higher level of risk.

    Yield farming and providing liquidity in liquidity pools

    Individuals can earn passive income by depositing crypto into decentralized trading pools, known as liquidity pools, in addition to lending on the DeFi markets.

    Depositors are rewarded with trading fees and liquidity provider (LP) tokens for providing liquidity to an autonomous trading pool. Users can then stake the LP tokens in so-called “yield farms” to earn additional yield on deposited digital assets.

    Yield farming has become a popular way to earn passive crypto income, but it is one of the riskier ventures in the crypto markets, similar to DeFi lending.

    Uniswap (UNI), SushiSwap (SUSHI), and PancakeSwap are three popular liquidity pools (CAKE).

    Cryptoassets with a Proof-of-Stake (PoS) model for staking

    You could also hold and stake proof-of-stake (PoS) coins to generate passive income through staking rewards.

    To secure the blockchain, PoS-based crypto networks require validators to “lock up” a stake in the network’s native asset. Earning a share of the block reward in the form of newly minted coins is an incentive to contribute to a crypto network in this way.

    The staking process varies by network, with some requiring advanced software configurations and a continuously running validator node, while others simply require you to keep the assets in the official wallet.

    Operating a masternode

    You could run a masternode if you want to up your staking game and earn more crypto passive income.

    Masternodes, also known as bonded validator systems, are specialized nodes that carry out specific tasks within a crypto network.

    Masternodes, for example, power the Dash (DASH) network’s PrivateSend and InstantSend functions and provide operators with governance voting rights. Operators must stake DASH 10,000 (USD 1.6 million) to run a Dash masternode, making it a capital-intensive affair to receive yield (in the form of newly minted tokens) on their holdings.

    Fortunately, there are masternodes that require far less capital and pay out in the network’s native token, with double-digit yields.

    A Lightning node in action

    If you are a bitcoiner who prefers to earn passive income from Bitcoin, you could set up and run a Lightning Network (LN) node.

    You can earn a few sats every time someone transacts through your payment channel by supporting the rapidly expanding Lightning Network. While the earnings may not be worth bragging about on #BitcoinTwitter, running an LN node means you are contributing to the world’s most powerful open monetary network, which has the potential to bank the unbanked. Furthermore, you can stack sats by contributing.

    Before you go off and try every method on this list, keep in mind that each one carries a different level of risk. Make your own research and never put more money into something than you can afford to lose.

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