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8 Ways to Earn Passive Income with Cryptocurrency

Find out how to earn passive income with cryptocurrency and make your crypto work for you.

Passive income usually covers income streams where an individual doesn’t actively participate. In the case of earning passive crypto income, all you typically need to do is invest your digital assets in a specific crypto investment platform or strategy. This way, you’ll be able to set up a new stream of passive income where you won’t need to put in too much ongoing effort while enjoying a steady stream of income.

In this article, we’ve also included ways to earn cryptocurrency online that require little to no investment on your part as well. While these are usually one-off rewards or giveaways and may require more effort on your part to meet the requirements, they are great options to start earning crypto and to test the waters.

In this article, we’ve also included ways to earn cryptocurrency online that require little to no investment on your part as well. While these are usually one-off rewards or giveaways and may require more effort on your part to meet the requirements, they are great options to start earning crypto and to test the waters.

We’ll be covering the following 8 ways to earn passive income with cryptocurrency:

1. Crypto Interest Accounts

2. Earn Crypto by Staking

3. Lending Platforms

4. Mining

5. Liquidity Pools

6. Airdrops

7. Hard Forks

8. Affiliates and Referrals

Summary of passive income strategies crypto
Table: Summary of crypto passive income strategies


1. Crypto Interest Accounts

You can earn passive income by holding your cryptocurrency in a crypto savings account. These accounts are similar to regular savings accounts. This is a sustainable and low-risk method to earn passive income in crypto since crypto interest accounts offer fixed interest on your idle crypto assets.

Instead of keeping your digital assets in a wallet,  you can put them to work by depositing them in interest-bearing accounts. Based on your needs, you can choose between different interest rates. These can range from flexible savings plans, where you can withdraw your assets whenever you want, to fixed savings plans, where you deposit your assets for a set amount of time. Generally, interest rates are higher for fixed savings accounts, although, unlike traditional bank accounts, you’ll be able to get up to 6% APY for a USDT 30-Day Fixed Savings plan.

If you’re just getting started investing in cryptocurrency and want to test out the water before committing to it, you might want to consider Cabital Earn. There is no minimum deposit requirement, which means you can deposit any amount of any supported cryptocurrency, like USDT, and start earning passive income on your holdings. You’ll also be able to easily implement investment strategies like dollar-cost averaging (DCA), where you top up your savings account with a certain amount of cryptocurrency at regular intervals. 

When you’re ready to start allocating part of your investment to cryptocurrency, you can either invest the digital assets you’re already holding or buy crypto through the platform or another exchange. The advantages of buying crypto through the platform are that you’ll save on transfer fees, and purchasing crypto through Cabital helps you get more crypto for your investment by offering low conversion spreads. 

To help you save even more on fees, consider purchasing your cryptocurrency through bank transfer options like SEPAFaster Payments and Plaid, instead of credit cards.

2. Earn Crypto by Staking

Staking involves keeping your digital assets in a specific wallet. You can earn staking rewards by performing different network-related functions, i.e. validating the transactions.

The term ‘Stake’ refers to holding the crypto, which incentivises the user to help maintain the security of a network via ownership. For this purpose, staking networks rely on Proof-of-Stake (PoS), a consensus algorithm. There are different types of PoS, including Leased Proof of Stake and Delegated Proof of Stake.

Generally, staking requires creating a staking wallet and holding a specific number of crypto assets in it. This process also includes delegating or adding funds to a larger platform known as a staking pool. It is simple, as you just have to keep your crypto assets with the exchange.

Staking is referred to as the easiest way to earn cryptocurrency. It allows you to increase your crypto assets with little effort. When choosing a platform, select one that is reliable and offers good return rates to ensure you maximise your staking rewards.

3. Lending Platforms

The popularity of crypto lending services is surging with each passing day. Trusted lending platforms offer these services in both the decentralised and centralised segments. Hence, you can earn passive income in the form of interest from lending your digital assets to the borrowers.

Listed below are the four major lending strategies for earning passive income from crypto:

I. Decentralised or DeFi Lending

II. Centralised Lending

III. Peer-to-Peer Lending (P2P)

IV. Margin Lending

I) DeFi Lending

Decentralised Finance lending, commonly referred to as “DeFi Lending” is an entirely automated approach. Through this method of crypto passive earning, you can directly use blockchain for executing lending services.

Unlike other lending options, no intermediaries are associated with decentralised platforms. On the contrary, both the borrowers and lenders rely on self-executing and programmable contracts known as “Smart Contracts”. These contracts finalise the interest rates autonomously and will execute once both conditions are met. If you’re planning to earn passive income through DeFi lending, choosing over-collateralised projects, where borrowers have to put up collateral that’s valued higher than the borrowed sum, adds an extra layer of security.

II) Centralised Lending

This strategy depends on a centralised third-party platform, which offers its independent lending infrastructure. To earn passive income through centralised lending, you’ll need to transfer your digital assets to the lending platform you’ve chosen, so make sure that you’ve chosen one with good platform security.

Centralised lending services offer fixed interest rates to borrowers (the annual percentage rate: APR) and share a portion of the proceeds with the lenders as APY (annual percentage yield). Unlike DeFi lending, borrowers and lenders will have to pass KYC processes to ensure compliance with financial regulations. 

III) Peer-to-Peer Lending (P2P)

Platforms like these allow users to define their individual terms and conditions. For instance, by using one of these peer-to-peer lending platforms, you can set the interest rate and the amount you want to lend.
P2P serves as a bridge between borrowers and lenders, where these platforms ensure a specific level of control. Just like centralised lending services, you must hand over your cryptocurrency to these platforms.

IV) Margin Lending

Margin lending is another way to earn crypto interest passively. With this lending strategy, you offer to lend your crypto assets to traders. Using borrowed cryptocurrencies, these traders can strengthen their trading position with added liquidity without selling their assets.

This is an easy way to earn passive income with cryptocurrency, as most of the work is done by crypto exchanges. You just need to ensure the availability of your digital assets on your chosen platform. 

4. Mining

Mining is the oldest way to earn passive income with crypto. This process allows you to receive a reward for securing a network using computing power. You don’t need to hold crypto to earn passive mining income. 

Initially, people used to mine Bitcoin on a regular PC or general-purpose mining rigs. However, with the increased hash rate, miners started to use more powerful computers. At present, mining equipment uses ‘Application-Specific Integrated Circuits’ (ASICs) with integrated chips tailor-made for mining.

Setting up and maintaining mining rigs also requires some investment and technical expertise, even more so with the current mining hardware. As a result, mining is becoming a corporate business and is becoming increasingly out of reach for a regular person to use as a source of crypto passive income. 

Nevertheless, there is an alternative to traditional mining — cloud mining. Cloud mining lets you rent the computing power of a specialised mining rig based anywhere globally. It usually requires paying a fixed amount to the third party for handling the technical aspects of mining on top of a daily maintenance fee for managing the mining rigs. However, since you’re renting part of a pool with plenty of computational power, you’ll have a higher chance of generating a winning hash than other miners with less powerful machines.

5. Liquidity Pools

This is a sustainable way to earn cryptocurrency online, as liquidity pools serve as a foundation of the DeFi ecosystem, although there are some risks involved. In addition, a wide range of crypto-related services relies on these pools.

Some of these include:

Automated Market Makers (AMMs): Being the key element of the DeFi ecosystem, AMMs allow the automated trading of cryptocurrencies through liquidity pools.

Borrow/Lend Protocols: Borrowers and lenders use these protocols to borrow or lend digital assets in a decentralised manner. This is made possible with the help of smart contracts, allowing individuals to lend their assets anytime.

Yield Farming: It is a crypto investing strategy which involves staking or lending digital assets and getting rewards in the shape of interest or transaction fees.

Synthetic Assets: These are tokenised derivatives, serving as the representation of digital assets that a person can’t buy. However, such a person can take advantage of price fluctuations of that assets through these derivatives or synthetic assets.

On-Chain Insurance: This type of insurance provides cover against the risks associated with the DeFi sector and crypto businesses, i.e. hacking or losses.

Blockchain Gaming: This approach refers to collecting non-fungible tokens (NFTs) stored as digital assets on the blockchain. These include various digital items used in popular video games, i.e. weapons, dresses, collectables, etc.

The idea behind liquidity pools is straightforward. It involves collectively contributing funds into a huge digital pile, where all these assets are secured through a smart contract. These pools facilitate lending, decentralised trading, and various other functions.

The platform’s liquidity providers or users create a market by adding the equal value of two crypto tokens to a pool. As a reward for offering their funds, the liquidity providers can earn passive income in trading fees, which comes from a percentage of a trading fee from the trading activity in a pool.

However, a liquidity provider is also subjected to the risk of impermanent loss, which happens when the value of a crypto asset deposited into a liquidity pool is different from the original value.

6. Airdrops

Airdrops are a great way to try out new altcoins, where fulfilling certain criteria entitles you to receive an airdrop. Airdrops are tied to various blockchain-based projects, where developers offer free tokens to the members of the crypto community to gain the public’s attention.

This is a marketing tactic, and you just need ownership of a specific wallet address to receive an airdrop. Some crypto exchanges also offer regular airdrops to their users.

Usually, airdrops are issued to users after completing a particular task. Some of these tasks include:

  • Holding a specific smart contract wallet
  • Signing up or creating an account for receiving regular updates
  • Re-tweeting or sharing a post
  • Receiving or sending crypto through a particular platform

The basic idea behind airdrops is to distribute newly minted coins or tokens to specific wallet addresses to keep the recipients engaged.

Here are some of the ways to offer airdrops:

  • Asking a user to perform different tasks on social media and receive airdrops.
  • Auto distribution of tokens to holders of a specific digital asset

7. Hard Forks

hard fork is a change in the network protocol that causes a split in the network. As the new update isn’t compatible with the prevailing blockchain protocol, this causes a permanent split, allowing two separate networks to run side by side. Usually, these happen to add functionality, correct security risks, resolve disagreements within a cryptocurrency’s community, or reverse transactions on the blockchain.

As a user who has invested in a blockchain before a hard fork, you will automatically receive the new blockchain’s token, which you can choose to hold or sell.

8. Affiliates and Referrals

Most crypto platforms offer rewards to partners for bringing new clients to their platforms, so if you have a large following on social media, you could earn a substantial amount of passive income through partnering with a platform as an affiliate.

If you have friends who are interested in cryptocurrency, referral programmes are another option to earn extra income from crypto. Cabital’s Invite a Friend programme is a way to earn extra income for your crypto investment. You’ll get a randomised reward of up to 500 USDT once your friend deposits at least 500 USDT into Cabital’s USDT 30-Day Fixed Savings product, while they’ll earn 6% APY and 20 USDT.

Conclusion

As seen above, there are many different ways to earn passive income with cryptocurrency, and each have different levels of technical knowledge, effort, and risk. Regardless if you're a new or experienced crypto investor, one of the simplest and most straightforward ways to generate a constant stream of passive income through crypto is to open a savings account with Cabital. You'll be able to choose between Fixed and Flexible savings, where the former offers higher APY for deposits of a specific duration, while the latter lets you withdraw your assets instantly.

Learn more about Cabital Earn here.

This article has been prepared by Cabital Fintech (LT) UAB  (the “Company”) and is general background information about some of the Company’s activities at the date of this presentation.

This article does not contain all the information that is or may be material to you and should not be considered as advice or a recommendation to you in respect of the holding, purchasing or selling of digital assets and does not take into account your particular objectives, financial situation or needs. This article has been made to you solely for information purposes. This presentation may be amended and supplemented as the Company sees fit, may not be relied upon for the purpose of entering into any transaction and should not be construed as, nor be relied on in connection with, any offer or invitation to purchase or subscribe for, underwrite or otherwise acquire, hold or dispose of any digital assets, and shall not be regarded as a recommendation in relation to any such transaction whatsoever. The contents of this presentation should not be considered to be legal, tax, investment or other advice, and you  should consult with your own counsel and advisers as to all legal, tax, regulatory, financial and related matters concerning an investment in or a disposal of such digital assets and as to their suitability for you.

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