Are you a cryptocurrency hodler looking to earn passive income with crypto? Or do you want to put your crypto to work while waiting for markets to rise? If you have nodded along to any of those, this is the ultimate beginner’s guide for you.
If you have looked into achieving financial freedom and retiring early, you have probably come across passive income. It is no secret that passive income is one of the ways to build and maintain your wealth. But what exactly is it?
What is Passive Income?
Passive income is an additional income stream that requires minimal effort to generate. Think of it as extra money you earn while gaming, going for spin classes, or even sleeping, just to name a few.
More than just additional money, passive income offers a safety net by diversifying your income streams. It provides you with flexibility in times of unforeseen emergencies or investment opportunities. It gives you the option to retire earlier.
The crypto industry has created a new wave of opportunities for individuals to earn passive income online. While trading or investing in crypto projects is one way to make money, it often involves a significant amount of time for research and does not guarantee profits. When you hodl crypto, you do not earn interest. Even fiat currency earns you some interest when kept in your bank accounts.
The good news is there are a number of beginner-friendly ways to earn passive income with crypto or increase your crypto holdings with little to no effort. Even if you have missed out on the early rise, it is not too late to benefit from crypto.
How to Earn Passive Income With Crypto?
Staking is a simple and predictable way to earn interest on your crypto.
Crypto transactions need to be validated for the integrity and security of the crypto network. When you stake your crypto, you allow your coins to be used to validate transactions and secure the network. This is a consensus algorithm known as Proof of Stake (PoS) - a more environmentally friendly and less hardware-intensive method as opposed to Proof of Work (PoW) which is achieved through mining.
Staking your coins locks them up for a predetermined amount of time, usually 7, 15, 30, 60, or 90 days. In return, you will be rewarded with interest on your crypto for your contribution to the network.
Many exchanges, such as Binance, offer staking. All you have to do is keep your coins on the exchange, follow the steps provided, and the technical requirements will be handled by the platform.
One drawback of staking is the continued susceptibility to price volatility. You risk not being able to sell your crypto when they are locked away. However, if you plan to hodl crypto for the long term, staking is a fuss-free, guaranteed way to increase your crypto pool.
2. HODLing Dividend-Paying Coins
Another easy way to earn passive crypto income is through dividend-paying coins. This concept is borrowed from the stock market, where a portion of a company’s profits is distributed to their shareholders.
To earn dividends on applicable coins, you typically have to hold your coins on the issuing exchange or in an external wallet. Dividend payouts are dependent on the issuing company, be it its frequency or amount.
One drawback is the reliance on issuing companies to their performance indicators. This is not predictable and outside of your control. That being said, companies are usually driven and committed to making profits. In this case, hodling dividend coins from a company with a sound business model will give you regular rewards without additional investments, even in bear markets. On top of that, you may even profit from a possible appreciation of their coin.
3. Earning Interest Through Lending Platforms
Similar to traditional cash loans, you can earn interest from lending your crypto to interested borrowers.
Naturally, different platforms offer different benefits. With crypto lending platforms., some benefits you should look out for include interest rates, flexibility, security, supported cryptocurrencies, and geographical restrictions.
Examples of popular lending platforms include BlockFi (up to 7.5% APY) and Gemini (up to 7.4% APY), both of which support a wide range of cryptocurrencies and have fixed interest rates generated from institutional and corporate borrowers.
ShuttleWallet, on the other hand, offers one of the highest interest rates in the market (up to 10% APY), but only on USDC stablecoins. This is generated from real assets and business loans.
If you prefer to set your own interest rates, there are platforms such as KuCoin that offer peer-to-peer (P2P) lending.
As always, it is important to do your own research (DYOR) to find out which platform best suits your needs.
Airdrops are a marketing tactic where small amounts of crypto are sent to existing members of the blockchain community either for free or for a small task such as social media mentions or writing a blog post.
Coins are distributed for free following the task and no purchase is required.
There are many twitter accounts, telegram channels, reddit threads, and websites to find crypto airdrops. One example is AirdropsMob.
It is important to note that airdrops only require a wallet address and will never require your private key. As with all crypto projects, protect your identity and data and stay safe from potential scams.
5. Providing Liquidity
In essence, liquidity pools are a collection of locked funds used to facilitate DeFi (decentralised finance) trading, lending, and more.
Liquidity pools are funded in trading pairs. This means that your deposit will be converted into two coins according to their current price ratio.
When you provide your crypto to the liquidity pool, you will receive transaction fees as rewards. While it is common to see rewards in high double-digit figures, do note that profits are pegged to the value of the cryptocurrency. As such, when the price of the coin fluctuates, your profit may not be of the same value, and may even result in a loss.
Before you dive into any of the listed ways to earn passive crypto income, it is crucial to point out that as with traditional investments, none of them are risk-free. It is always good practice to DYOR, understand your needs and risk appetite, and invest only in high-quality assets.
In an inflationary world, diversifying your income streams is a gamechanger. As the blockchain industry progresses and grows, investing in the right coins and integrating passive crypto income strategies are an increasingly reliable and secure source of income. With crypto’s compounding power, reinvesting your passive income can also yield higher returns.
For the more experienced and technical crypto hodlers, mining and running lighting or master nodes are other ways to earn passive crypto income.
For a simpler, fuss-free method, download the ShuttleWallet app to earn up to 10% APY on your stablecoins. With ShuttleWallet, your funds are held in USDC stablecoins pegged to the U.S. dollar, protecting you from bear markets and price volatility of crypto coins. Visit the ShuttleWallet page to find out more today!