Cryptocurrencies have established themselves as an asset class, and that raises the most important question: How can we earn passive income with cryptocurrencies.
And if you are one of those who has overlooked this avenue until now, it is time you stop ignoring it because you can easily earn extra passive income from cryptocurrencies if you follow the right path.
Well, the obvious question is, what is the right path?
Not getting caught in scams in the crypto space is the right way, and so is finding the right avenues.
Therefore, in this post, I will walk you through some of the popular and interesting ways that can help you make passive income with cryptocurrency.
I would recommend these posts by CoinSutra on how not to get scammed.
- 7 Most Common Types Of Cryptocurrency Scams & Tips to Avoid Them
- 5 Smart Tips For Beginners Before Investing In ICOs
What is Passive income?
The money that you generate without actively involved is known as passive income. An example of this would be rental income. If you are renting out your apartment, office space or any real-estate, the income you generate from that is passive income. The income that you generate from your business or your job is an active income source.
On an average, a millionaire have usually 5+ income sources (Active + passive), and you should also aim for as many as passive income source, so that you could live a boss free life, just like me.
Passive Income on Crypto – Top Ways
1. HOLDING (#HODL)
One of the easiest ways of earning money from cryptocurrencies is to buy good cryptocoins and hold them. By good coins, we mean coins that have good fundamentals and a use case that shows that its value is bound to increase over a period of time.
Now the big question: How to identify coins with good fundamentals?
Well, this is where CoinSutra can give you a headstart in the right direction. At CoinSutra, we regularly keep covering the coins that we think have great fundamentals and a better future. Take look at our coverage below, but also understand that this is not a piece of investment advice.
You should ideally hold such coins for anywhere between 6 months to a 2-year period and take out your principal amount from the profits you are generating on the go!
This is popularly also known as HODL.
2. Liquidity mining:
The history of DeFi is not too old, but it is slowly changing the financial world we know of. With the help of automated market maker DApps like Uniswap, Pancakeswap and others, now you can earn income from the transaction of these dexes.
Here is a screenshot of Uniswap, where a user have provided liquidity to a few pool, and now earning the transaction fees of others users.
Though liquidity mining is profitable, but it also comes with the risk of impermanent loss. What it meant is, you will be providing liquidity in the proportion of 1:1, but it could change the proportion, and you could experience a loss due to changing price of the underlying cryptocurrencies.
However, in a long run with fees and price appreciation, you may be in profit. Especially if you are seeking to earn passive income with cryptocurrencies, this is something you should worth exploring.
There are also new techniques used by platforms like Bancor, Thorchain which tackles impermanent loss. If you want to learn more about it, I would highly recommend you to join our Telegram group where I keep sharing more details on liquidity mining and profitable opportunities.
3. Holding Dividend Paying Cryptos
This is another smart way to HODL cryptocurrencies.
It is extremely simple. You don’t need to do much to receive the extra income. You just need to find out good cryptocurrencies that pay dividends regularly and keep it to yourself.
There are many such currencies that give out dividends but not all are worth buying and holding.
However, there are some that are worth every penny:
- NEXO: Nexo is a popular service that pays dividends for Nexo owners.
- KuCoin Shares (KCS): By holding this KuCoin shares, you receive a daily bonus/dividend called KuCoin Bonus. The bonus you receive is 50% of the trading fees.
4. Staking Crypto to earn passive income
Staking cryptocurrencies is the easiest way to make extra passive income through cryptocurrencies that you already hold.
Here, you need to keep your proof-of-stake coins in an open-wallet for the maximum time to generate new similar coins.
For example, Tezos (XTZ) is a POS cryptocurrency. If you stake, let us say 10 NEBL coins, over time in a year you will have 11-12 XTZ coins by just holding and staking them. No extra effort. Isn’t it wonderful?
Binance is a platform which let you buy these coins, and stake them at the same time.
But in some POS currencies such as NEO, you need not even keep your coins in an open wallet 24 x 7!
Some of the notable cryptocurrencies to hold and stake are:
5. IEO INVESTING
IEOs, also known as Initial exchange Offering, is a modern-day method of getting crowdfunding.
IEOs are also referred to as token generation events or token sales which is the same. But earning money from investing in IEOs or token sales is not as easy because you need to do a lot of due diligence on a lot of things when buying an IEO. Some of these things are:
- Use case feasibility
- Competency of team
- Government regulations
- Technical barriers
- Token-economics etc…
If you don’t research enough, you might find yourself in scams similar to what happened in earlier ICO phase, such as CoinDash ICO scam.
Airdrops is another exciting and novel way of earning from cryptocurrencies.
Airdrops are basically when you are freely given or airdropped new cryptocurrencies or crypto-tokens because you were holding some other cryptocurrencies.
But to claim such airdrops, you need to control your parent funds on which airdrop will be done, which basically means you should have access to the private keys of your parent funds.
In 2021, interacting with DeFi protocol will help you to earn free airdrop. Earn.fi is one such service that let you check if you are eligible for free airdrop or not. All you need to do is, enter your Ethereum wallet address, and it would show you if you are eligible for any airdrop or not.
also learn how to claim your:
Note: Never give out your seed or private keys to anyone.
7. Running Masternode
Running masternodes of POS or POW cryptocurrencies is another lucrative way of earning extra income from cryptocurrencies while holding them.
For the uninitiated, “Masternode is simply a cryptocurrency full node or computer wallet that keeps the full copy of the blockchain in real-time and is always up & running to perform certain tasks in order to get extra rewards”.
Some of these tasks are:
- Doing instant transactions
- Increasing privacy of transactions
- Participating in governance and voting
- Enable budgeting and treasury system in cryptos
But for every currency, there are certain eligibility limits of minimum coin holdings to run a masternode, plus the hardware required to run different nodes can also vary slightly.
- One needs a minimum amount of coins of that particular crypto. (For DASH MN you need 1000 DASH units and for PIVX MN you need 10,000 PIVX units). The minimum number varies from cryptocurrency to cryptocurrency.
- One needs a VPS or server to host that wallet 24×7
- One needs a dedicated IP address for that
- One needs some storage space to save the whole blockchain.
Some resources to set-up your own masternodes are:
Conclusion: Crypto Passive Income
Holding your cryptocurrencies and simultaneously staking, running a masternode, or keeping dividend-paying crypto in your portfolio has dual benefits.
This way you earn in two ways – one, from the price appreciation of the underlying asset, and second, from the reward staking reward, masternode reward, or dividend rewards for holding that asset.
This accelerates the rate at which one earns money through crypto. And not to say, of course, I understand the limitations such as minimum coin holdings and hardware requirements etc., but if you acquire some extra coins to satisfy the eligibility, it is totally worth it.
Write back to us: What coins are you currently holding, and why?
Do you know of any other good coins that one can hold as well as stake, run masternode or receive dividends for? Let us know in the comment section below.
A few other hand-picked articles for you to read and widen your knowledge base:
- Airdrops In Cryptocurrencies: Everything A Beginner Needs To Know
- Top 5 Bitcoin Myths That Need To Be Busted
- How Is Ethereum Blockchain Different From Bitcoin’s Blockchain?
- 7 Best Crypto That Pays Dividends
- Coins vs Tokens: Know The Difference [Crypto Basics]
Harsh Agrawal is the Crypto exchange and bots expert for CoinSutra. He founded CoinSutra in 2016, and one of the industry’s most regarded professional blogger in the fin-tech space.
An award-winning blogger with a track record of 10+ years. He has a background in both finance and technology and holds professional qualifications in Information technology.
An international speaker and author who loves blockchain and crypto world.
After discovering about decentralized finance and with his background of Information technology, he made his mission to help others learn and get started with it via CoinSutra.
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