Cryptos frequently make headlines as they experience massive boom and bust cycles, attracting many new users to invest in crypto to get high returns. But many users do not want to expose their money to the volatility of the crypto market. There are other stable investment opportunities to earn using crypto.
How to make money in crypto?
Users who gain massive returns through crypto trading and investing get the most attention. But there are other ways to earn crypto with more stability compared to the buying and selling investment method. This article will explore some of the easiest ways to earn crypto passively.
Crypto mining
All transaction blocks are validated before they are finalized in a blockchain. This process is known as achieving consensus. There are different mechanisms to achieve consensus on blockchains. Crypto coins like Bitcoin and Litecoin use the proof-of-work consensus mechanism.
In this system, miners use powerful computers to solve complex cryptographic puzzles. The first to solve this puzzle is rewarded with crypto; as the block reward for mining.
Users can start earning passively through mining. You can simply choose a blockchain network to mine on and install the required tools. Users can also join mining pools, which group devices together and use their combined power to increase their chances of earning crypto rewards.
Staking
The proof-of-stake consensus mechanism is the most popular alternative to the proof-of-work method. You do not need to invest in expensive hardware for this system. Instead, you stake the native token of the blockchain. This acts as proof of investment to create a node.
You can begin validating transactions once you have enough tokens staked to create a node. However, this process can prove to be very expensive. Some networks use a delegated proof-of-stake mechanism where you can assign your crypto token to an active validator to earn a share of the block rewards.
Staking can be a simple method to earn more crypto for users who have already invested in the crypto market. They simply need to open a crypto wallet to purchase the required number of tokens and select their preferred staking option.
Yield farming
Yield farming involves providing liquidity for lending services to earn interest. Users deposit their tokens into a decentralized finance app’s smart contract. Borrowers are connected to fund pools via the app and pay interest on the funds they use.
Usually, the borrowers are other DeFi applications that need access to liquidity; this makes the risk of repayment low. It is a popular choice to earn passively through crypto, but do your due diligence to find the right pool to lock in your tokens.
Liquidity mining
Decentralized exchanges enable peer-to-peer transactions in a fast and secure way. However, transaction volumes are lower in a purely P2P system. Liquidity mining helps solve this issue.
Liquidity pools can provide coin swap pools to achieve the required level of liquidity for the smooth functioning of these exchanges. The swap pool contains a pair of tokens that can be swapped for each other. For example, a BTC/LTC pool allows you to exchange BTC for LTC and vice versa.
You can become an LP (liquidity provider) by providing your tokens to a liquidity pool. Based on the liquidity provided, LPs earn a portion of the network fees. Rewards can be in the form of a liquidity token that can be staked further to earn more.
Cloud mining
Crypto mining can take place on devices like laptops and computers. But with more miners entering the process, it gets more difficult and expensive to stay competitive. You could have easily mined Bitcoins on your device ten years ago. However, you will need to spend thousands of dollars on specialized hardware to be successful today.
Cloud mining helps solve this issue. Cloud mining involves users paying a service provider to use their hardware for crypto mining. Users make monthly payments to access the specialized hardware.
This way, users have no hardware to maintain and do not need to invest in new hardware. Users do not need to worry about their hardware becoming obsolete. This method can be profitable if the return from mining is greater than the subscription cost.
Airdrops
Airdrops are marketing strategies used by new projects to boost their popularity and circulation ahead of an initial coin offering (ICO). Airdrops involve distributing the native token of the new project to users for free. This process draws much-needed attention to the token and increases its circulation before it is available for trading.
There are different types of airdrops. Some airdrops give away tokens by linking your wallet. Others may require you to complete simple tasks, such as following a social media account. While airdrops do not give you high returns, they are an option to expand your crypto portfolio.
Crypto lending
Crypto lending has other possibilities apart from yield farming. Crypto lenders can use decentralized or centralized platforms to find borrowers. There are also peer-to-peer lending platforms that enable you to lend directly to an individual.
These platforms usually include users’ history and credit scores to reduce the risk of non-repayment.
Savings Accounts
Some crypto platforms offer accounts where your tokens can earn you interest. Similar to savings accounts in a bank, the platform uses these funds for lending and other investments. You are entitled to a portion of the returns made using your funds.
Crypto passive income advantages
- Once the investment is made, earning passively is a simple process that requires little oversight.
- There are many platforms to choose from to find the best solution that works for you.
- Your investment is exposed to less volatility, as wild market swings do not severely impact it.
- You can diversify your crypto investment using several investment methods to ensure the risk is spread out.
Crypto passive income disadvantages
- While stability is good, passive investors cannot take advantage of a rapid increase in a token’s price.
- Many scam projects are solely created to steal from their users. Do your due diligence before investing in a crypto project.
- Decentralized projects depend on their protocols to automate processes like yield generation. Any vulnerabilities can lead to scammers exploiting the system to steal sensitive data or funds. Users have to ensure the project they invest in undergoes security checks regularly.
Conclusion
Earning crypto passively is a great avenue to invest in and is only set to grow in the future. There are many crypto platforms to choose from, but it is vital to do your due diligence and research before investing in a crypto platform. You can earn good returns if you diversify your investment and ensure the validity of the crypto projects.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.
