When leading investors around the world write about ‘making your money work for you’ in their books, what they mean is that your money can make money for you. It’s also called capitalism: it’s the capital that works - not you.
A quick search on Google for the top ways to earn money while you sleep will result in a plethora of ways that could help you generate passive income streams. Cryptocurrency has ushered in a new digital economy whereby traditional financial models are being replicated on decentralized infrastructures using the blockchain. In addition, the industry has given rise to new models which are helping investors and traders build multiple sources of cryptocurrency income which in turn, results in the gradual growth of their portfolios.
With the ongoing extension of DeFi over the last 2 years, the crypto industry has become one of the most attractive industries for anyone looking to earn passive income.
In this article, we will explore some of the most widely used ways to generate passive income through cryptocurrencies.
1. OSOM’s DeFi Earn
OSOM has created a cutting-edge product that allows you to grow your Euro investments with a steady passive income - all without a fee. All you need to do is deposit your Euros using their platform. OSOM's platform acts as a lending aggregator of both decentralized and centralized crypto lending services.
OSOM's proprietary aggregation model diversifies your investments across multiple stablecoins and altcoins on their partnered platforms. This allows the platform to yield the highest possible interest rate on your investments. OSOM is safe and secure as it is licensed by the EU. You will also have access to a personalized dashboard with ROI insights to keep track of your deposits.
Staking is the most popular method of earning passive income and the best part is you can earn this income with less drainage of your energy, time, and money.
In short, staking involves holding your coins in your stake wallet and enjoying rewards just for holding them. You can stake your coins by either hosting a staking node or participating in staking pools offered by many service providers or cryptocurrency exchanges.
In the case of staking nodes, your funds will be locked for a duration in the wallet, whereas with service providers, you get the options of both locked and unlocked staking.
Once you stake your coins by depositing the PoS coins like Polkadot (DOT), Cosmos (ATOM), NEO (NEO), or Tezos (XTZ) in your wallets, you can start receiving rewards at certain intervals.
Behind the scenes, the staking nodes and staking pools are validating transactions and adding blocks in the PoS blockchains, and earning rewards or transaction fees for their efforts. If you want to increase your chance of being chosen as the next validator, you need to increase the number of coins you carry in your wallet.
It is extremely crucial to research the fundamentals, staking rates, and authenticity of projects.
Crypto lending is the easiest method to earn money through cryptocurrency. If you are a lender and willing to earn high-interest payments for your existing crypto holdings, all you need to do is lend your cryptocurrency to the borrowers by depositing them into a wallet.
In the case of P2P lending, these borrowers can be other borrowers whereas they can also be exchanges that provide borrowed funds to their traders for margin and leveraged trading. The interest rates you earn are far higher than banks will give you and this is why more and more people are opting for crypto lending as their primary source of earning crypto passively.
Contrary to banks, crypto lending is automated, safer, faster, more transparent, and more profitable.
4. Crypto Dividends
Having a similar profit-sharing model as in stock markets, there are few projects which share their crypto profits with their token holders. Mostly, crypto exchanges build the utilities of their exchange tokens by offering discounts on trading fees or sharing their revenues with the token holders.
For example, Kucoin, Bibox, and Ascendex pay their token holders up to 50% of their revenues as dividends. To earn these dividends, all you need to do is hold their tokens on their native platform. The more you HODL the more you earn.
5. Yield Farming & Liquidity Pools
Yield farming, as the name suggests, means to farm or generate yields from cryptocurrencies. Similar to the relationship built with financial institutions where depositors deposit funds to provide liquidity to the institutions, and in return, the depositors receive a fixed income, yield farming works on a similar principle in DeFi markets.
DeFi markets have two parties - Liquidity Providers and DeFi Protocols. Yield Farmers or Liquidity Providers provide liquidity by depositing funds into a liquidity pool. This pool of funds provides users a marketplace to borrow, exchange, or use funds for a variety of services.
Users have to pay for these services and these payments are used to reward the liquidity providers for their participation in the pool. This entire network is built on a decentralized protocol where all the payments are automated with almost zero fees to the middlemen.
Henceforth, these liquidity pools are captivating more and more traders because these protocols allow users to generate higher and safer returns without the need for any technical knowledge. Just connect your Metamask wallets, provide liquidity, and the returns start coming in.
6. Crypto Cashbacks
Cryptocurrency adoption is on the rise and the number of merchants accepting Bitcoin and other altcoins is increasingly growing too. One of the most influential consequences of this adoption is the invention of crypto debit cards and these debit cards can be used to shop with crypto.
Crypto cashback is a rewarding mechanism that allows you to earn crypto when you shop using crypto exactly how you earn cashbacks or reward points on your debit and credit cards. A host of platforms using debit cards, credit cards (BlockFi), mobile apps (Pei), and browser extensions (Lolli) are now available for you to help you earn Bitcoin passively by giving you Bitcoin cashback when you shop in their partnered organizations.
There are also startups like Earn.com and StormX which help you generate Bitcoin income for performing microtasks like answering questions, providing feedback on an app, or taking part in study groups.
7. Running Nodes
Another way you can earn passive income in crypto is by running nodes, although this method requires significant expertise with the technology including hardware, software, and algorithms. There are various types of nodes as per different consensus mechanisms like staking nodes and masternodes in the case of PoS blockchains, or running nodes for layer 2 solutions like Lightning Network.
You can become a validator if you become a staking node or a masternode in the PoS blockchain or host Lightning payment channels to process transactions over the Lightning Network. In both cases, your passive income is generated by directly participating in the governance of a distributed ledger technology and you receive the transaction fee charged by the transactors of the network.
Like staking nodes, projects with masternodes also require you to hold a minimum value of cryptocurrencies to be eligible to host one.
We all know what Bitcoin mining is. To simplify it, Bitcoin miners receive newly mined Bitcoins as rewards for validating transactions and adding blocks to Bitcoin’s Blockchain. There are only two downsides to this process - initial costs and technical expertise. These costs include buying expensive hardware and providing a massive amount of computational power in your hardware.
There was a time before 2013 when Bitcoin could be mined using a CPU. But as the blockchain is growing and the network hash rate has increased, miners have now deployed Graphics Processing Units (GPUs) and Application-Specific Integrated Circuits (ASICs).
Alternatively, cloud mining gained popularity. With cloud mining, you don’t need to buy expensive hardware, although you can still share your computational power. Simply sign up on platforms and sign mining contracts with these companies. It is advised to only cloud mine using trusted sources and conducts intensive research on the service providers.
9. Affiliate and Referral Programs
If you are an influencer, a blogger, YouTuber, and enjoy a large number of web traffic on your website, then earning passive income via affiliated programs is just the thing for you. Crypto projects and exchanges provide as high as 50% of their revenues from their customers to their affiliates.
Even if you are not any of these things, you can participate in referral programs where you can earn passive income for inviting the people you know to crypto platforms. In both cases, you only need to make sure that your followers, friends, and family are registering on these projects’ platforms using your referral code.
10. Hard forks and Airdrops
Just like free samples of products you receive at the mall, airdrops of new cryptocurrencies are distributed to current crypto holders for free and sometimes in exchange for minor social activities like retweeting and tagging 3 friends.
A hard fork basically means splitting a blockchain into two - the original blockchain and a new one. The splitting also results in the splitting of the token into an old and a new one. When a hard fork occurs, you have to hold forked coins in your wallet during the date of a hard fork, and thereafter, you'll be rewarded additional crypto based on the amount of crypto you held originally.
This allows you to easily accumulate fresh cryptocurrencies for minimal effort. What’s common between both methods is all you need to do is have the project’s wallet and hold tokens at the time of the event.
Beware that there will never be a situation where a project will ask for your private keys at the time of an airdrop or hard fork. Beware of scams and never share your private keys with anyone.
These are all very lucrative opportunities to grow your crypto earnings and with the advent of DeFi, a few of them are gaining tremendous popularity. But, as with anything, there are no free rides in Crypto. It is pivotal that you make yourself aware of the legitimacy, risks, and technicalities like lock-in periods of each of these methods.
All of these crypto income-generating practices are becoming safer and more reliable with increasing automation.
The DeFi space will continue to bring more passive income generation opportunities which are simpler and trustworthy, which in consequence will lure more people into its ecosystem.