Crypto assets worth $432 million got liquidated in less than 24 hours during the crypto market downturn in September 2022. This number reflects the degree of risk involved in the crypto market. Crypto is an ocean of opportunities, but you have to watch the charts all the time and stay ahead of trends to make informed decisions. Active trading requires substantial efforts and deep knowledge of the industry. For beginners specifically, making a profit in the crypto market is extremely challenging. A safer alternative is to go for passive ways. There are plenty of ways to generate passive income from the crypto market.
As said earlier, the crypto market is an ocean of opportunities with plenty of ways besides trading to generate income. Imagine being able to earn thousands of dollars in crypto on a monthly or weekly basis without any active trading. Sounds fun, right? Let’s dive deeper into this.
How To Generate Passive Income From Crypto
Staking: Staking is one of the most common ways to generate passive income from crypto. It is a by-product of the proof-of-stake (PoS) consensus mechanism, an efficient alternative to the proof-of-work mechanism. Staking, which essentially means locking up a certain number of tokens for a fixed period to power the network, allows token holders to earn a yield. A lot of cryptocurrencies, such as Solana, Avalanche, Matic, PolkaDot, and Landshare, offer staling options. The APY varies from token to token and exchange to exchange. Some staking variants also require users to set up a validator node to participate in the pool. Users get yield from the network fee of the inflation in the cryptocurrency. You can easily earn up to 100% APY through staking.
Become A Lender: The crypto market has several options, like traditional banking, that allow users to earn a yield on their cryptocurrency deposits. Centralized crypto savings accounts like Crypto.com and BlockFi use your deposits to provide overcollateralized loans to institutional players and reward you in exchange. Similarly, leading exchanges like Binance allow users to earn a yield on their crypto deposits. Another option is to put your funds in platforms like Yearn Finance, which moves your crypto funds between different DeFi products to maximize yield. This option allows you to earn up to 50% APY.
Providing Liquidity: Several crypto exchanges have gone one step further, allowing users to become liquidity providers for the network. It is a beneficial deal for both sides, and the network gets security while the liquidity providers generate a yield without having to trade in crypto. You can generate up to 100% APY by becoming a liquidity provider. Several platforms offer decentralized liquidity pools where you can trade as well as contribute to the platform’s liquidity.
Yield Farming: Yield Farming allows liquidity providers to maximize their yield. The most common way to farm for yields is staking your liquidity provider (LP) tokens, in exchange for a share of the reward pool. Several decentralized exchanges, including VulcanDex, the world’s first decentralized exchange for gaming tokens, offer the yield farming option.
Again, the APY percentage differs from platform to platform, and you can maximize your existing APY by even 10 to 20x through yield farming.
Cloud Mining: Cloud Mining refers to the mining of cryptocurrencies through cloud computing. To simplify, you use someone else’s computer to mine popular cryptocurrencies. There are several cloud mining companies that allow users to participate in mining remotely. Most importantly, you do not need to download any software or invest in a sophisticated hardware system for cloud mining. To generate a yield from cloud mining, you have to become a member of a mining pool and purchase ‘hash power’. All the participants of the pool receive a share proportional to the amount of rented hashing power. The interest rate depends on a lot of factors, like daily costs.
Masternodes: Participating in masternodes is an increasingly popular way of making a passive income from crypto. Crypto networks set up masternodes to enhance trust and security in the network by setting up validator nodes to authenticate transactions. Moreover, Masternodes help blockchain networks counter network congestion and scale. You can participate in the masternodes program by setting up nodes, which requires an initial investment. An Ethereum Masternode runner must have 32 ETH. However, there are cheaper alternatives to ETH. Later, the node holders get a fraction of the network fee. However, setting up masternodes requires technical expertise.
If you have sound knowledge of blockchain networks, you can easily make money by participating in masternodes.
Airdrops: Imagine getting tokens like $SOL for free, way before their listing on popular exchanges. New crypto projects give away their tokens for free to the community for engagement and marketing. This process is known as Airdrop. If you are active on Crypto Twitter and follow leading influencers and experts closely, you’ll come across several Airdrop opportunities. Join the Discord, Twitter, and other social media channels of an emerging project, and you will find the instructions to get tokens through Airdrop.
The Best Way To Generate Passive Income From Crypto
As you can see, there are plenty of ways to generate a passive income from crypto. What method works best for you depends on your technical expertise and your mettle. Staking is one of the most popular ways of generating a steady APY, but it requires you to have a significant amount of crypto holding. On the other hand, you can get access to crypto assets for free through Airdrop. You can use more than one method to maximize your gains. However, you must be mindful of the fake websites and phishing pages floating on the internet to steal crypto assets for investors.