Disclaimer: This is for informational purposes and is not meant to serve as financial or investing advice.
Crypto passive income opportunities are safer ways to invest money and can aid in offsetting losses during market volatility, downturns, and crashes. They are also considered a more progressive way to grow your crypto investments rather than using the traditional HODL strategy of buying and holding.
In this current market, buying and holding are no longer optimal. There are many ways to earn passive income on your idle crypto investments; read on with Pluto to find out more.
1. Airdrops
Airdrop has become a popular marketing strategy to build awareness around a new token, coin, or altcoin, as well as a way to make passive income.
This involves sending small amounts of coins or tokens to wallet addresses of active members in the blockchain networks for free in return for a service like retweeting a post by the new company or writing a blog.
The goal of an airdrop is to gain the attention and circulation of new crypto coins.
2. Masternodes
A masternode is defined as a server on a decentralized network. The masternode can complete specific actions that another node on a different network cannot. For example, masternodes validate direct or private transactions.
Masternode operators perform masternode operations. Those who operate masternodes can earn passive income on an ongoing basis without having to mine any coins.
Miners secure the blockchain, like Bitcoin (BTC), while masternodes are responsible for storing, validating, and sharing the blockchain.
As an investor, you must stake a large holding of Proof of Work (PoW) coins, allowing masternode operators to generate passive income.
3. Proof of Stake (PoS) Staking
Crypto staking is a popular passive income strategy that involves locking your assets on a proof of stake (PoS) blockchain network. This mechanism ensures that all participants agree on the data that enters a blockchain. This is critical because each contribution aids in the governance involved in validating transactions.
To gain passive income, you are required to “stake” or lock in a sum of your funds to a blockchain network, and in return, the PoS blockchain rewards you in tokens of their native currency.
There are different ways that you can go about crypto-staking your assets. If you want to be more hands-on, you can run a validator node or delegate the task to another total validator.
The rewards granted to validators are slightly higher than that of a delegator.
Some standard PoS blockchains to consider are:
- Cardano (ADA)
- Ethereum 2.0 (ETH)
- Polkadot (DOT)
- Solana (SOL)
4. Hard Forks
A hard fork occurs when there is a change in a blockchain protocol that causes a split in the network. When this happens, the new update isn’t compatible with the old blockchain protocol, causing a permanent break.
This can happen when there are updates to a blockchain’s functionality and security measures or resolve disagreements within a blockchain community.
This can serve as passive income for a user who holds an existing investment in the blockchain before a hard fork, in which you will receive the new blockchain token to hold or sell.
5. Interest-Bearing Digital Asset Accounts
Investors can use interest-bearing crypto accounts to earn fixed interest on their idle digital assets. It can be thought of as a high-yield savings account. The only difference is that this account only accepts crypto deposits.
Instead of holding your digital currencies in a crypto wallet, this account will receive either daily, weekly, monthly, or yearly earnings depending on the interest rate.
6. Lending
Crypto lending has gained momentum in both centralized and decentralized segments. Investors can lend digital assets to borrowers with interest. There are four significant ways to go about crypto lending:
Margin
Margin or leverage trading is when an investor loans funds to a borrower for trading. With the borrowed funds, traders can amplify their position to make more significant profits and repay the lender with interest. Most crypto platforms will act as lending services; you only need to provide digital assets.
Peer-to-Peer
Peer-to-peer lending in crypto works like a loan, except you are the loaner. If you wish to lend out funds to gain interest, you can find a lending platform that will match you with a designated borrower.
All you need to do is deposit your allocated digital funds in the lending platform’s custodial account beforehand.
DeFi or Decentralized
This lending strategy allows crypto investors to handle lending services directly on the blockchain. Unlike peer-to-peer and centralized lending, DeFi lending cuts out the middleman.
Instead, lenders and borrowers communicate through self-executing smart contracts. Through smart contracts, interest rates are set autonomously and periodically.
Centralized
For this type of lending, you, as the lender, rely on third parties to handle processes.
Note with centralized lending, rates are fixed, and so are lock-up periods.
Similarly to other lending formats, you will be required to deposit your crypto assets into the lending platform’s account before you can receive interest.
7. Cloud Mining
Mining cryptocurrency on a blockchain is known as crypto mining and is an excellent way to earn some income.
This process entails a more computer-intensive approach where users need to prove their eligibility to a blockchain to become a validator.
Validators are more commonly known as miners, who compete against each other by solving complex mathematical puzzles.
This process is timely and tedious, so investors would instead opt for an alternative method, such as cloud mining.
In cloud mining, you can pay third-party miners to take up these tasks on your behalf. You earn passive income by putting up a lump sum of money to a platform or purchasing mining machines or facilities, and you can make massive profits off it- similar to a business model.
8. Dividend-Earning Tokens
Dividend-earning tokens are specific cryptocurrencies that offer a percentage in rewards to their holders based on the token’s built-in functional mechanism. Similarly to dividend-earning stocks, holders gain a fraction of the company's revenue earnings.
Dividend-earning tokens are among the top 100 in the crypto market today. They allow holders to gain passive income by just holding their coins.
Some examples of dividend-earning tokens are:
- Looks
- Komodo
- Ascendex
- Kucoin
- NEO
9. Affiliate Programs
Like affiliate programs found on major platforms such as Facebook and popular blogs, crypto platforms have adopted the affiliate program model based on cryptos.
Implementing crypto affiliate programs would be a great way to gain passive income if you are on social media or run a blog that brings in a reasonable amount of traffic. You can make money if you refer a user to these websites or by a certain number of clicks.
NFTs
The NFT, Non-Fungible Tokens market in crypto is growing rapidly, and there are more and more ways to make passive income through NFTs. One way is by becoming an affiliate for a company that deals with NFTs, like Binance and Fiverr.
Crypto Games
Crypto games are also gaining traction in the crypto world, and so are opportunities to make money with affiliate programs. For example, you can earn rewards whenever you refer someone to play the crypto game. This can be an easy and lucrative way to make income if you are playing crypto games daily.
Crypto Exchanges
There are numerous crypto exchange affiliate programs out there. These companies utilize affiliate marketing programs to grow their customer base, sales, and trading volumes. You can quickly participate in one of these programs if you have a blog, youtube channel, or sizable social media presence in which you can advertise and make passive income.
10. Yield Farming
Yield farming is another DeFi or decentralized way of earning passive income with crypto. You can exercise yield farming on decentralized exchanges, a fancy term for trading platforms where users will engage in smart contracts and with investors who will provide the liquidity needed to execute trades.
Investors, also known as liquidity providers, must deposit a specific ratio of two or more digital assets into a liquidity pool or smart contract. Users will trade against these funds, and liquidity providers receive a percentage of the transaction fees of the liquidity pool.
Once the crypto assets are deposited, the decentralized exchange will transfer liquidity provider tokens representing your share of the total funds in the designated liquidity pool. You are then able to stake these tokens and gain interest in them.
With the yield farming strategy, you can earn two income streams with interest from a single deposit.
What Are the Advantages of Using Crypto To Earn Passive Income?
Future Wealth Building
Crypto passive income opportunities can help you grow your wealth with a hands-off approach. Unlike active day trading, when you invest your crypto assets with the right strategies, you can sit back and watch your future wealth blossom.
Diversify Your Income Stream
You are heavily diversifying your wealth portfolio by engaging in one too many crypto passive income opportunities. Diversifying is vital to mitigate risk.
(Potentially) Avoid Capital Gains Taxes
Buying and reinvesting crypto is not taxed unless it is cashed out and converted for USDT dollars. If you invest your crypto assets and stake them, you will not incur capital gains taxes.
What Are the Disadvantages of Using Crypto To Earn Passive Income?
Scams
As it comes with the territory, many scammers are lurking in the crypto world. As an active investor, ensure you take great care and watch out for unreliable operators involved in scams and rug pulls.
Fast-Paced Industry
Unlike traditional finance investments, even crypto passive income investments can change suddenly. With market volatility, constant new coins emerging, and fluctuating APY rates, it is essential to keep up with the fast-paced industry and stay up to date with your investments.
Possibility of Project Failure
As seen this year, there are many possibilities of project failures where the current market downturns affect ongoing projects, and customers cannot be paid out. This is likely in this market and is a disadvantage of investing in cryptocurrencies.
The Bottom Line
There are many crypto passive income opportunities that you can leverage, especially right now during a bear market. Investors actively trading crypto would be wise to invest some of their assets into passive income streams to diversify their portfolios and mitigate risk.
It is vital to research the best strategy for you and your goals before diving right in. If you have any concerns about investing, we can help you. Visit Pluto for more information.
Sources:
HODL: The Cryptocurrency Strategy of "Hold on for Dear Life" Explained | Investopedia
What Does Proof-of-Stake (PoS) Mean in Crypto? | Investopedia
Top Crypto Passive Income Generators 2022 | CoinDesk
What Is Crypto Lending? | Investopedia
How to Earn Passive Income from Cloud Mining | Cryptopolitan
Crypto Affiliate Program to Join and Make Money | Geekflare
Cryptocurrency Airdrop: What Is It and How Does It Work | Investopedia
Yield Farming for Beginners: Earning Crypto Passive Income! | Coin Bureau
MasterNodes: What you Need to Know to Make Passive Income | Coin Bureau
