Crypto & blockchain are currently providing a wealth of new opptunities that are not to dissimilar to that of the internet in the early 90s, passive income is one of them.
One such opportunity that is currently being under looked, probably due to the media giving the likes of bitcoin and Ethereum the spot light, is the ability to earn high passive income returns through crypto, decentralised apps and platforms that have been built in this space.
Disclaimer: Nothing in this article is financial advice! This article is purely for educational purposes and you should do your own research before diving in!
In this article I will be providing you with an overview of 4 ways to generate passive income with crypto, all of these I use myself. There are a few more options but I have decided to keep to the options below as it is more accessible to most people.
Proof of stake is a new method of reaching consensus in a rețea descentralizată. Instead of using a mining process, like Bitcoin does, Stakers use their coins to validate transactions. Coins used to stake are locked in a wallet for a predetermined amount of time, usually 7, 15, 30, 60 or 90 Days. The more coins a wallet contributes to validating transactions, the larger the reward is.
The main benefit of staking is that you will get a reward for participating in the network. Rewards are traditionally anywhere from 5% to 25% per year depending on the type of network but often will go way above that, however there is a generally a higher risk when heading above the 30% range.
There are a few different ways of participating in staking however the easiest, probably the best way for most people, is to simply delegate your crypto of choice to a trusted pool on a platform such as Binance. I have done this recently myself, delegating most of my AVAX to a pool on Binance which is paying 12.9% APR and being held for 30 days.
There are some risks associated with staking and you should consider them before taking part. One such risk is that you will not be able to sell your staked crypto while it is locked away and it will be susceptible to price volatility, personally I hold my crypto for the long term so this is not problem for me.
The other main risk is that you have to trust whoever is holding your crypto while it is being staked, this however is a relatively low risk if you are using trusted platforms such as Binance.
Overall though, staking is a great method for earning high interest returns in a short space of time, it’s best suited to those who are not worried about the fluctuations in price and are holding crypto for the long run.
There are a multitude of platforms out there that will pay you interest for simply holding your funds in one of their portofele. Platforme precum Nexø, BlockFi și Celsius offer interest on Bitcoin, Ethereum, Litecoin and many Stablecoins(Coins backed by and pegged to regular fiat monedă) as well as regular fiatele monetare such as the Dollar, Pound Sterling and the Euro, essentially these companies are the crypto equivalent of a bank.
There are many other platforms out there but the three mentioned above are the most reputable. There is a lot to these platforms, most of which is beyond the scope of this article, but I will give a brief outline on each below.
Nexø
Nexo is a lending platform that allows it’s users to either lend or borrow cash / crypto. Crypto is used as collateral by the borrower and it is over collateralised to account for the volatility in the crypto market.
Nexo pays 4% interest, Daily, on regular fiat currencies, increasing to 6% if you receive that interest in Nexo token rather than the fiat currency that you are providing. In terms of Crypto, you can get up to 12% on Stablecoins such as USDT, USDC and TUSD.
One nifty bonus that comes with Nexo is that it’s token(NEXO), is a dividend paying token and anyone who holds NEXO will be paid out yearly from the profits that the Nexo platform generates.
Okay, so this sounds to good to be true, what’s the catch? Well, the only catch is that you are trusting a platform to manage the loans correctly and to prevent themselves from becoming over exposed. The good news is though that Nexo is ensured by Lloyds din Londra and has a vast reserve to cover any losses.
What I love most about Nexo is that you are potentially creating three income sources, if you get paid interest in NEXO. Two of which are passive (Dividend and Interest Payments) while the third is the potential of capital appreciation from holding NEXO.
You can learn more about Nexo aici.
BlockFi
BlockFI is another crypto lending platform that offers a very similar offering to NEXO, minus the dividend paying token. With BlockFI you can earn up to 8.6% APY on Crypto, Interest accrues daily and is paid monthly.
If you want to know more about the ins and outs of how BlockFI works, the team behind it and the investment that has made it a success then I would recommend taking a look at acest articol by CoinCentral as it highlights some great points and provides some useful info.
BlockFI have some competitive rates that you can find aici. One highli8ght is the 9.3% APY un USDT.
Celsius
Celsius is another platform that offers the same services to its user base. The cool thing about Celcius is that it has a broader range of Cryptos available and has higher rates of interest, going up to 17.78% APY when you hit platinum level.
One of the highlights is the 12.65% APY that you can earn with StableCoins such as USDT and USDC. As with the other platforms mentioned above, you can earn higher interest rates when receiving that interest in the native token that the platform provides.
You can read more about Celsius aici.
Using any of these platforms to hold your crypto, even your regular fiat currency, is a great way to make your money work for you. Personally, I use all three of the platforms mentioned above as it spreads risk that comes from holding all of your eggs in one basket.
In recent years, crypto dividende have emerged as another way to make passive income with crypto. Dividends is a win-win for both the company and the investors. For the company, it is a way to reward their investors for holding on to their crypto tokens. For the investor, it means they get free money for doing nothing. The investor simply holds on to their crypto assets in a crypto wallet and earns dividends.
The cool thing about dividend paying tokens is that you purchase a token at a set price and are paid consistently over years to come, as a result, a point in time will come when the money you have been paid via a dividend pays off the cost of the initial investment.
It is a good idea though to invest in projects that you understand and believe in, so please do your own research before purchasing any crypto assets. I have listed a few dividend paying tokens below but there are many more.
- Nexø
- Komodo
- Ascendex
- KuCoin
Dividend paying assets are awesome as it provides a source of cashflow, I also own a dividend stock portfolio so am slightly biased towards them but I have seen the benefits of owning dividend paying assets and there is not a lot going against them.
As with anything in finance, there are risks associated with this method. The main one is that the company behind the token goes out of business, in this instance it is inevitable that the token, and its dividend paying properties, will disappear and be worthless. This is a risk that you take with almost any crypto investment though, so consider it carefully.
For a good article on dividend paying cryptos, I recommend taking a look at acest articol by Coinsutra, it covers some of top dividend paying cryptos.
Liquidity is the term used to describe how easily a cryptocurrency can be purchased or sold without affecting the price. A cryptocurrency that has high liquidity will have lots of buyers and sellers, which, coincidently, means better market conditions and larger fee volumes for exchanges, making them more money.
The result is that exchanges such as Binance and kuCoin will provide you with rewards when you provide your crypto to a Liquidity Pool. Liquidity pools are one of the foundational technologies behind the current DeFi(Finanțe descentralizate) ecosistem.
There is significant upside here though, it’s not uncommon to see returns in high double figures. At the time of writing you can find a FRONT/BUSD pair yielding 85.87% on Schimb de lichid Binance.
Providing liquidity via a pool is by no means risk free, in fact it is more on the risky side when compared to over options discussed on this list. The market price of tokens can fluctuate greatly, as a result the income may be lower than the income of ordinary holding of the tokens, possibly leading to a loss.
As blockchain adoption progresses and more organisations start to get involved, the opportunities available to increase passive income will only increase.
While we wait, the four examples given above are a great way to generate passive income in the crypto space and all they really require is a little bit of research and patience.
Thank you for taking the time to read, have a wonderful day!
George
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