The world of crypto is known for its volatility and talk of people making big money through trading. However, this isn’t the only way you can earn through the popular financial technology. If trading doesn’t suit you as an investor, there are still ways you can earn passively through crypto. And although you won’t be actively involved, you will still benefit from the long-term movements in the price of BTC and other cryptocurrencies.
In this guide, we’ll look at several ways you can earn passive income through crypto.
Since there’s no third party like a bank when it comes to crypto, transactions are usually verified by other people in the blockchain. One of the methods used to do this is known as Proof-of-Stake (PoS), and it involves users providing their crypto to make verification possible. If you provide yours in a POS blockchain such as Ethereum or Cardano, you will be doing what is known as staking. This will change you from being a mere crypto holder and make you an active participant in the network. You will then be rewarded with additional tokens.
The beauty of staking lies in the fact that you won’t have to actively monitor price charts with bated breath. All you need to do is set your crypto in a supported wallet and earn from it. When withdrawing yourself from staking, you will also benefit from the general price increase from when you staked.
Lending and borrowing are also possible in the crypto space. In fact, it works more like traditional banks. When you deposit money in a savings account, the bank lends it to borrowers, and you get to share the profit. In crypto, this is made possible by smart contracts as there’s no intermediary. You can deposit your Bitcoin, Ethereum, or any other crypto in a lending platform’s contract, and you’ll start earning at an agreed-upon interest rate.
Crypto lending usually offers much better returns when compared to bank savings. For example, lending Bitcoin can get you a return rate of up to 28%. To protect lenders, most lending platforms usually require borrowers to offer collateral of more value.
Crypto is full of innovation, and these are two of the most innovation ways you can earn some passive income. In liquidity provision, you get to contribute your tokens to a liquidity pool that is on a decentralized exchange (DEX). The exchange benefits from your tokens as they make it possible for it to carry out its various activities. And for that, it gives you a share of the trading fees it gets. Typically, you would need to provide two tokens, for example, USDT & ETH. And in exchange, you’ll get liquidity pool tokens which will represent your capital in the pool.
Yield farming takes this concept further. It makes it possible to move your assets strategically between different liquidity pools, with the aim being to maximize your returns. Through the concept, you will be able to swap your tokens and provide liquidity across various platforms. This gives you the chance you take advantage of the highest interest rates or rewards available.
When you buy into a company at the stock exchange, you are usually rewarded with dividends at the end of the year. The same is actually also possible in crypto. There are various projects that will let you earn a passive income if you buy into them, and one of them is KuCoin. It is a popular exchange, but it also people who hold KCS tokens.
However, before you engage in a dividend-paying project, ensure that you do proper research and analyze its sustainability.