Displaying interest on your dormant crypto assets is a great way to make your money work for you or passive income. Here are the best ways to earn crypto passive income.
Passive income is money that is generated from a business in which an individual is not actively involved. For the most part, all you need to do is use your money or digital assets in a particular crypto investment strategy or platform and make a profit. In some cases, the earnings are fixed and predictable. On the other hand, some factors beyond your control may come into play.
Simply buying and holding crypto assets for a long time does not guarantee you will make a profit. In fact, it is very possible that you could lose money. As such, the proprietary crypto HODLing cannot be considered a true passive income generator.
A wallet is a device or application where you can store a special key (private key) that gives access to your cryptocurrency. The non-custodial variant allows you to store the private key on your personal devices, including computers, mobile phones, or custom-built wallet devices. With this, you have complete control over your private keys and, ultimately, your digital assets. In comparison, with a custodial wallet, a third party controls your private keys.
1. Staking: Proof-of-stake (PoS)
The first way to get passive income crypto is Proof-of-stake is a type of blockchain convention mechanism designed to allow participants of a distributed network to reach agreement on new data entering the blockchain.
Knowing that transaction validation may be technical in nature, you can opt for a PoS blockchain that allows you to delegate your bets to other participants who are ready to take on the wagering requirements.
2. Defi Lending
Decentralized lending or DeFi: This strategy allows users to execute services directly on the blockchain. In contrast to P2P and credit strategies, there are no intermediaries involved in DeFi credit. In contrast, lenders and lenders interact with programmable and self-executing contracts (also known as smart contracts), which are autonomous and set interest rates.
3. Yield Farming
Yield Farming is another decentralized, or DeFi, method of earning passive crypto income. This is made possible by the dynamic operation of centralized exchanges, which are essentially trading platforms where users rely on a combination of smart contracts (programmable and self-executing computer contracts) and investors for the liquidity needed to make trades.
Here, users do not trade against other brokers or traders. As such, they trade with funds held by investors – known as liquidity providers – in special contracts known as pools. With us, liquidity providers receive a proportionate amount of trading fees from the pool.
To earn passive income through this system, you must first act as a liquidity provider (LP) on a DeFi exchange like Uniswap, Aave or PancakeSwap.
To start earning these fees, you must deposit a certain ratio of two or more digital assets into the liquidity pool.
For example, to provide liquidity to an ETH/USDT pool, you need to deposit ETH and USDT tokens into it.
Once you deposit liquidity, the decentralized exchange will transfer LP tokens representing your share of the total funds locked in pool liquidity. You can then stake these LP tokens using any supported decentralized credit platform and earn additional additional interest. This strategy allows you to earn two separate interest rates from a single deposit.
The passive income opportunities listed in this guide are just a few of the many ways you can earn extra profits with your idle digital assets. Note that none of these opportunities are risk free. Therefore, it is advisable to do your own research, seek professional guidance from your qualified friends and determine what suits your investment goals.
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