10 Ways to Earn Passive Income With Cryptocurrency

Cryptocurrency has captured the attention of the world over the last decade, transforming from a relatively small market into a massive international ecosystem that now offers a wide variety of opportunities to generate passive income.

While cryptocurrency trading has traditionally been the most popular method of capitalizing on the surge of interest in blockchain technology, there are now many ways to generate crypto passive income. The blockchain revolution has made it possible to earn money through cryptocurrency with varying levels of risk and return.

This article will break down the top 10 most effective methods of generating cryptocurrency income, assessing initial outlay, risk, reliability, and security, in order to help you understand the best way to make money through blockchain in 2021.

1. Cryptocurrency Mining

Cryptocurrency mining is the foundation of the cryptocurrency industry — without miners, the Bitcoin network and, by extension, the entire cryptocurrency market, wouldn’t exist. Crypto miners generate some of the highest crypto earnings and profits in the crypto ecosystem.

Cryptocurrency mining is relatively straightforward. Cryptocurrency miners use dedicated crypto mining hardware called application-specific integrated circuits, or ASICs, to solve extremely complex math in order to secure a blockchain network. This process, called Proof of Work consensus, requires significant amounts of power. Not every blockchain network uses this technique to secure the decentralized ledger that keeps track of balances and transactions — some use stake-based consensus — but the Bitcoin network, for example, operates on Proof of Stake.

Cryptocurrency mining can provide users with significant passive income, but requires an equally-significant initial investment in order to generate returns. The average cost of ASIC hardware ranges between $500 and $3,000, with profit generally calculated in under 10 dollars per day. Passive Bitcoin earning through mining isn’t impossible — but requires large power resources.

Generating passive income from Bitcoin mining requires access to cheap electricity, large storage and warehousing space for hardware, and significant capital investment. Some miners choose to mine less-popular cryptocurrencies or “altcoins” which can, in some cases, yield higher profits — should the coin they mine increase in value.

Smaller-scale mining hardware operators often combine resources into “mining pools,” which collectivize the mining process and share mining rewards.

2. Staking

Cryptocurrency miners help to secure proof of work cryptocurrency blockchains — but there are many blockchains that use different consensus methods, such as proof of stake. Unlike proof of work, the proof of stake consensus method doesn't rely on computing power to track and secure transactions.

Instead, proof of stake blockchains are secured by node operators that “stake” a specific amount of cryptocurrency, which functions as a guarantee that the node will help secure the network. In return, node operators receive a portion of the transaction fees associated with the transactions they process, or for creating new blocks.

Generating passive income from staking cryptocurrency doesn’t have the high initial setup cost associated with mining proof of work cryptocurrencies, and doesn’t require extremely specialized hardware.

The amount of cryptocurrency a node operator stakes is closely related to the earning potential of a node, as nodes with higher stakes are typically more likely to be selected to create new blocks of transactions.

The amount of crypto passive income that can be earned from staking varies from blockchain to blockchain — some networks, such as Tezos, deliver between 5-6 percent, while others, such as IOST or Harmony, deliver between 10 and 11 percent return on average.

4. Crypto Lending

Crypto lending has rapidly become a massive market in the cryptocurrency industry, and represents a massive $10 billion segment of the overall blockchain ecosystem. In simple terms, crypto lending allows market participants to either borrow or lend either cryptocurrency or fiat currency using blockchain technology.

Using crypto lending to generate passive income generally involves lending fiat currency to crypto holders in return for interest. Cryptocurrency loans in return for fiat collateral are also possible, but are not as common as crypto loans.

Crypto lending passive income yields relatively high loan-to-value and APR when compared to traditional debt markets, and is far more accessible. Yields on crypto lending typically provide between 4 and 8 percent, which is significantly higher than traditional savings accounts.

5. Yield Farming and Liquidity Pools

Yield farming and liquidity pools are similar in operation to crypto lending, but are part of a more complex ecosystem focused on providing crypto liquidity in order to support the rapidly-growing decentralized finance ecosystem.

Yield farming involves providing capital to liquidity pools such as Curve, Uniswap, or Balancer. These pools provide participants with returns in the form of tokens, which are themselves fungible cryptocurrency tokens.

Yield farming passive income operates in the same manner as staking or lending, providing investors with stable long-term returns that scale according to the amount of crypto provided to a liquidity pool. Returns on yield farming can range up to 100% depending on bonuses and incentives, making it one of the most popular methods of generating passive income through crypto.

6. Affiliate Marketing

Affiliate marketing has remained a highly popular method of generating “passive” income online for decades, but is more hands-on than the other passive income methods outlined in this article.

In most cases, affiliate marketing involves capturing the attention of an audience and directing them to purchase or sign up for various products or services. Crypto affiliate marketing typically involves advertising and directing new uses to various exchanges, cryptocurrency brokers, or platforms.

In order to generate passive income from crypto affiliate marketing, it’s necessary to establish a content platform through blogging, news websites, email marketing, video content, or social media. Coinbase, for example, offers users up to 50 percent of the trading fees of referred users through the Coinbase Affiliate program.

8. Masternode Operation

Masternode operation is similar to participating in proof of stake blockchains, but can be more complex. Masternodes are servers on decentralized networks that perform more complex functions than the average node.

Running a masternode often means staking cryptocurrency in the blockchain network the node operates on, but can provide node operators with between 5 and 20 percent of any given block reward — which quickly adds up.

If you’re considering getting technical in the process of finding the best crypto to earn passive income, masternode operation is a highly reliable option.

9. Blockchain Content Creation Platforms

It’s not necessary to become an affiliate marketer in order to earn Bitcoin passively. There are many blockchain and crypto content creation platforms that allow users to earn Bitcoin income, or generate other kinds of cryptocurrency by creating interesting articles or videos. These platforms typically provide users with cryptocurrency rewards that scale on the amount of interest the content they create receives. Crypto content creation platforms include:

10. Crypto Savings Accounts

Crypto savings accounts are a relatively new addition to the world of decentralized finance, and are designed to provide cryptocurrency users with a reliable, secure long-term value storage method that delivers higher interest rates than traditional banks.

While crypto savings accounts don’t benefit from traditional finance features such as FDIC insurance, they can provide users with far higher returns — typically ranging between 4 to 8 percent.

Key Takeaways

Learning how to make money through blockchain technology or establishing reliable Bitcoin income can be a difficult process. The cryptocurrency ecosystem is now a highly dynamic, varied marketplace that allows anybody to earn Bitcoin passively through a broad range of different passive income options, from mining, to staking, to decentralized finance.

With so many different options, It’s essential to perform intense due diligence to ensure that the platforms or methods you invest in are legitimate and secure — always carefully research any cryptocurrency platform or opportunity before getting involved.