A guide on how to passively multiply your crypto and wealth
Passive income is all-the-rage these days as internet gurus tout the path towards financial freedom. This approach focuses on creating revenue streams that payout over time. Depending on the revenue stream, you may be able to put work in upfront that turns into a steady payout over months (or even years).
The world of cryptocurrencies isn’t just limited to active investing or HODL (hold on for dear life) strategies. We have collected some of the most promising passive investing options for crypto pros. Check out your passive crypto investing options below:
Passive Income Explained
The first goal of passive income generation is to create a set-and-forget revenue stream. Classic examples include eBooks, dividend stocks, rental properties, and creating an app. All of these examples require work to put in place, but after that, offer the chance to generate income over time.
Of course, not all types of passive income are equal. Here are a few characteristics to consider: upfront costs, time to set up, average hours per week, perceived risk, ease of creation, and ongoing costs.
Often a good strategy is to cultivate two or more different passive income possibilities, with the hope of establishing one (or more) that creates a nice income stream.
Ways to earn passive income with Crypto
a. Market Knowledge Strategies
Passive income strategies in this category require some level of familiarity with buying, selling, and holding the right currencies, and how those cryptocurrencies and their networks function. Here, the crypto you own is used to make money for you through borrowing, lending, earning dividends, or appreciation.
1. Network Staking
Proof of Stake (PoS) cryptocurrencies run on a consensus algorithm. In short, this means the creator of a block on the network is chosen through some combination of wealth or age. Unlike Bitcoin (BTC) which is a mining-driven cryptocurrency, PoS cryptocurrencies users commit some of their balance to essentially power the network. Those who commit more of their balance have a higher chance of being selected by the network to power the stake. Rewards are given for those users involved in staking the network.
Some possible cryptos to stake include:
Results may vary here, as those with larger wallets can effectively crowd out less wealthy members on a network.
2. Exchange Dividends
Some cryptocurrency exchanges have native coins that offer fee reductions or dividends when held on the exchanges. These represent one effective way to generate passive income in the cryptocurrency space. With initial exchange offerings (IEOs), more exchanges are showing up with tokens that may offer some real value in the future. As always, proceed with caution with IEOs.
Depending on the exchange, users can stake exchange tokens that offer dividends or to pay for fees on the exchange. Some of these tokens have grown in value, such as Binance’s BNB coin, a top-eight cryptocurrency at the time of writing. Below are a few other exchanges and the tokens used to power the exchanges.
Lending your owned cryptocurrencies is a great way to earn extra income. In short, you give out your cryptocurrency to a third-party for a fee, who then tries to further profit off of your crypto. This is similar to what banks do when they pay you interest to hold your cash. The crypto-world offers many different types of lending options:
- Peer-to-peer lending: Ethlend
- Regular financial services: Blockfi and Celsius Network
- Decentralized financial services: Compound
- Exchange lending (on margin): Bitfinex, Bitmex, and Poloniex
- Exchange interest programs: Bitrue
- Automated (bot) lending: Coinlend and Cryptolend
This isn’t exactly a passive income strategy, but it will give you more leverage and capital to play with. SALT Lending lets you leverage your blockchain assets to get cash loans. This is probably riskier than most of the other strategies, so make sure you read through the terms and understand your plan.
b. Technical Skills
Passive income strategies in this category require some technical know-how, programming skills, or a deeper understanding of how blockchains function.
BTC and other cryptocurrencies that use a proof-of-work system are run by miners, computers that verify network transactions for rewards. While mining for BTC has become prohibitively expensive and energy-consuming, less popular cryptocurrencies like Litecoin can still be mined.
Depending on the cryptocurrency, you may be able to mine with your CPU, a dedicated GPU, or you may have to purchase specialized hardware. Check out what cryptos you can mine here.
Masternodes on a blockchain are computer wallets that host an entire copy of the network. They fulfill an important network function, and while hard to set up, can be profitable. DASH and Energi (NRG) are two altcoins you can masternode. Visit masternodes.online to learn more.
7. Trading Bots
If you can configure a trading bot correctly, it can buy and sell cryptos for you automatically when prices meet pre-selected parameters. You can also arbitrage cryptos, exploiting the bid-ask spread between exchanges. Gunbot is one popular cryptocurrency trading bot.
c. Right-time Right-place
Our passive income strategies so far require work, skill, and some risk. Not so with these next strategies. Luck and being in the right place at the right time will get you further with here.
8. Airdrops, Forks, Burns, and Buybacks
- Airdrops are cryptos dropped into your wallet by an exchange, usually as part of a new crypto offering. Watch for airdrops here.
- Forks happen when a software update or upgrade creates two versions of a blockchain. Owners of cryptos on the original network get holdings on the new network, as happened with Bitcoin Cash.
- Burns and buybacks happen when a cryptocurrency is purchased from owners and ‘burned’ in a wallet. Bitfinex and its LEO exchange token is one recent example.
Cryptokitties are digital collectibles that live on the Ethereum blockchain. You can collect, breed, and sell these kitties will earning rewards. Get started right meow.