Passive income meaning in English is often defined as “making money while you sleep”. If you have a sufficient amount of money, you can buy assets like an Airbnb rental property, cryptocurrency, and stocks that make money on autopilot. As cryptocurrency is becoming more mainstream, it opens opportunities for passive income.
To get you started, we will be covering some of the possible ways to create crypto-powered passive income-earning opportunities. You can also combine a few of these mETHods to build multiple automatically-recurring revenue streams. However, there are no guarantees that the following methods will work or are suitable for you.
Passive Income Meaning In English
Trading or investing in projects is one way to make money in the blockchain industry. However, that typically requires detailed research and a substantial investment of time yet still won’t guarantee a reliable source of income.
There are other mETHods than trading or investing that can help you increase your cryptocurrency holdings. These can pay ongoing income similar to earning interest, but only require some effort to set up and little to no effort to maintain – hence the term passive income.
This way, you can have several streams of income that, in combination with each other, can add up to a significant amount.
Ways To Earn Passive Income In Crypto
Mining
Mining essentially means using computing power to secure a network to receive a reward. Although it does not require you to have cryptocurrency holdings, it is the oldest mETHod of earning passive income in the cryptocurrency space. Today, Bitcoin mining has mostly become a corporate business rather than a viable source of passive income for an average individual.
On the other hand, mining lower hash rate Proof of Work coins can still be a profitable venture for some. On these networks, using GPUs can still be viable. Mining lesser-known coins carries a higher potential reward, but comes with higher risk. The mined coins might become worthless overnight, carry little liquidity, experience a bug, or see themselves hindered by many other factors.
It is worth noting that setting up and maintaining mining equipment requires an initial investment and some technical expertise.
Staking
Staking is essentially a less resource-intensive alternative to mining. It usually involves keeping funds in a suitable wallet and performing various network functions (such as validating transactions) to receive staking rewards. The stake (meaning the token holding) incentivizes the maintenance of the network’s security through ownership.
Typically, staking involves setting up a staking wallet and simply holding the coins. In some cases, the process involves adding or delegating funds to a staking pool. Some exchanges will do this for you. All you have to do is keep your tokens on the exchange and all the technical requirements will be taken care of.
Staking can be an excellent way to increase your cryptocurrency holdings with minimal effort. However, some staking projects employ tactics that artificially inflate the projected staking returns rate. It is essential to investigate token economics models as they can effectively mitigate promising staking reward projections.
Lending
Lending is a completely passive way to earn interest in your cryptocurrency holdings. There are many peer-to-peer (P2P) lending platforms that allow you to lock up your funds for a period of time to later collect interest payments. The interest rate can either be fixed (set by the platform) or set by you based on the current market rate.
Some exchanges with margin trading have this feature implemented natively on their platform.
This mETHod is ideal for long-term holders who want to increase their holdings with little effort required. It is worth noting that locking funds in a smart contract always carries the risk of bugs.
Affiliate Programs
Some crypto businesses will reward you for getting more users onto their platform. These include affiliate links, referrals, or some other discount offered to new users that are introduced to the platform by you.
If you have a larger social media following, affiliate programs can be an excellent way to earn some side income. However, to avoid spreading the word on low-quality projects, it is always worth doing some research on the services beforehand.
Blockchain-based Content Creation Platforms
The advent of distributed ledger technologies has enabled many new types of content platforms. These allow content creators to monetize their content in several unique ways and without the inclusion of intrusive ads.
In such a system, content creators maintain ownership of their creations and usually monetize attention in some way. This can require a lot of work initially but can provide a steady source of income once a more substantial backlog of content is ready.
Risks Of Earning Passive Income With Crypto
- Buying a low-quality asset: Artificially inflated or misleading return rates can lure investors into purchasing an asset that otherwise holds very little value. Some staking networks adopt a multi-token system where the rewards are paid in a second token, which creates constant sell pressure for the reward token.
- User error: As the blockchain industry is still in its infancy, setting up and maintaining these sources of income requires technical expertise and an investigative mindset. For some holders, it might be best to wait until these services become more user-friendly, or only use ones that require minimal technical competence.
- Lockup periods: Some lending or staking mETHods require you to lock up your funds for a set amount of time. This makes your holdings effectively illiquid for that time, leaving you vulnerable for any event that may negatively impact the price of your asset.
- Risk of bugs: Locking up your tokens in a staking wallet or a smart contract always carries the risk of bugs. Usually, there are multiple choices available with various degrees of quality. It is imperative to research these choices before committing to one. Open-source software might be a good starting point, as those options are at the very least audited by the community.
Closing Thoughts
The number of ways to generate passive income in the blockchain industry are growing and gaining popularity. Blockchain businesses have also been adopting some of these mETHods, providing services commonly referred to as generalized mining.
As the products are getting more reliable and secure, they might soon become a valid option for a steady source of income. Having learnt the passive income meaning in English along with some mETHods to generate these new income streams, take the time to conduct further research on whichever seems the most feasible to you!
