6 Smart Ways to Make Passive Income with Crypto

There was a time when crypto holders, for income, used to depend on buying and selling crypto assets based on the price. However, that was not less than a nail-biting task due to the volatility of the price of cryptocurrencies. Besides, keeping track of trading portfolios, capitalizing on opportunities, and managing the positions also increased tension.

But now, you can easily make passive income with crypto, and we have curated the following strategies for you.

Adopting Proof-of-Stake (PoS)

Proof-of-Stake (PoS) is a blockchain consensus system that allows network nodes or users to proceed with an agreement when new data enters the blockchain. This way, blockchains allow processing open and decentralized networks where users can participate in governance and validate transactions.

This community-driven approach can remove the need for central authorities such as traditional banks. Moreover, blockchains randomly select users, make them validators, and gives rewards for their effort.

However, the mechanisms can differ from blockchain to blockchain in picking those validators. For example, some blockchain needs participants to deposit some amount or commit their financial resources to the blockchain network. 

These blockchain networks pick validators from the crowd of participators who have staked some digital tokens or assets. Validators, in return, receive some interest on the staked assets for contributing to transaction validation in the network. 

PoS is an alternate to Bitcoin’s Proof-of-Work (PoW) that offers miners new block rewards. Once you finish staking, the yield generation turns into passive income, meaning it needs little to no supervision or intervention. Besides, you can liquidate your yieldings regularly to avoid price volatility. Or, if you believe the crypto coin increases in price, you can hold staking for the long-term.

There are several crypto staking platforms and services available now. In addition, many blockchains or cryptocurrencies offer staking rewards, including Cardano, Polkadot, Ethereum 2.0, Solana, etc.  

You can deposit some crypto amounts to the blockchain network as per requirement and start earning passive income. For example, if you want to be a validator in the Ethereum 2.0 blockchain, you need to deposit at least 32 ETH. 

Renting in Cloud Mining 

Cloud mining is an alternative to Proof-of-Stake, which requires a computer-intensive approach and more technical knowledge to prove their eligibility to be validators. Some blockchains, including Bitcoin, test users via complex mathematical puzzles. It is called crypto mining.

However, there is massive competition in this mining mechanism where miners need to invest in computers and hardware and pay unnecessary electricity bills. So, this mining approach is time-consuming, expensive, and more technical, and most people can not afford this.

Instead of deposing a new mining rig, users can rent the hashing power from an established platform or operation. This way, people can purchase cloud mining contracts in exchange for a fixed amount. This helps contract owners assign tenants a specific hash rate for a particular period. As a result, the contract owners earn new coins based on the size of their contract.

Managing Interest-Bearing Crypto Accounts

Interest-bearing crypto accounts work like a bank savings account that offers interest on deposited amounts. So, this can be a good opportunity for investors and savers as traditional bank account yields have been dropping over the recent few years.

Instead of crypto wallets, holders can deposit their digital assets to Interest-bearing crypto accounts and earn passive income crypto interest offers. You can schedule your crypto deposit and receive daily, weekly, monthly, or yearly income on the agreed interest.

Many decentralized platforms offer Interest-bearing crypto accounts.

Here are the best in October 2024:

• Binance
• Coinbase
• Nexo
• Crypto.com
• CakeDeFi

Earning the interest from these accounts is pretty simple— you can automate your savings for your ease. You need not have any deep technical knowledge for this. 

Lending Cryptos

Lending is one of the popular passive income streams for investors for both the centralized and decentralized departments of the crypto world.

As an investor, you can lend crypto assets and charge some fees. This way, you can get some interest which will depend on the total value of crypto being lent, duration of the loan, and interest rate.

The loans with a higher interest rate for a longer loan period can help you earn handsome passive income. 

Lending crypto works in four ways.

Peer-To-Peer (P2P) Lending 

There are many platforms that include a vast network of crypto users who are lenders and borrowers. These service platforms allow lenders to set the lending terms and amount they want to lend for countable periods. Then system connects lenders and borrowers through loan offers and operates P2P lending agreements. 

Centralized Lending

In this lending strategy, the investors have third parties like P2P lending to process loans to borrowers. Interest rates and lending periods are fixed based on the platform’s infrastructure. You need to transfer your crypto balance to the platforms to earn interest. 

Decentralized Or Defi Lending

According to this strategy, investors lend on the blockchain network directly. There will be no mediator in this Defi lending. Unlike P2P and centralized lending methods, lenders and borrowers interact via smart contracts and set an agreement.

Margin Lending

It is a process of lending cryptos to traders who borrow funds to amplify their trading position and repay the loan with interest. In this strategy, crypto exchanges run on behalf of investors, so they only need cryptos to start earning. 

Joining a Guild

You must have noticed the hype and popularity of play-to-earn (P2E) games that reward players via tradable in-game tokens and nfts. Thanks to the advent of guilds that help players have the earning benefits. 

The advent of guilds connects P2E investors and players to collaborate for mutual benefits. Invests provide players with funds and assets needed to invest in the games. When players start yielding through the funds in the games, the profit is split between player and investor.

There are few platforms that allow nft holders to stake their cryptos as a part of the guild. However, others organize direct peer-to-peer (P2P) NFT lending between holders and borrowers on a financial agreement. 

Yield Guild Games (YGG), Merit Circle, and Good Games Guild (GGG) are some of the example platforms in a group of guilds. 

Participating in Yield Farm

Yield farming became popular after decentralized exchanges increased in use, depending on smart contracts and funds or liquidity provided by investors. It is another Defi or decentralized strategy for passive income crypto yields. 

This crypto income approach depends on decentralized exchanges where users need not trade against brokers and other traders. Instead, they can trade against the balance deposited via investors, aka liquidity providers. In return, liquidity providers can earn via trading fees.

Thus, you need to be a liquidity provider on such DeFi exchanges to earn passive income cryptos avails. There are some platforms such as UniSwap, PancakeSwap, and Aave to start investing. 

These platforms will ask you to deposit a particular ratio of two or more cryptocurrencies in an asset liquidity pool. For instance, you need to deposit ETH and USDT tokens to offer liquidity to the ETH/USDT pool.

Once you finish depositing the assigned liquidity, the decentralized platform will transfer LP tokens with the agreed share based on the locked funds. Then, you can hold the stakes of these LP tokens and start earning interest. 

Bottom Line

Investing in crypto and expecting returns definitely sounds lucrative. Unlike past, people have multiple choices to invest in cryptos and receive a handsome amount of money in a short period.

However, it is not even like a free lunch. Before you jump in to invest in anything, you need to research, evaluate risk, and do additional homework.