When it comes to the ability to earn money with cryptocurrencies, we usually envision 24/7 trading on an exchange or the regular purchase of tokens at ICO. However, other ways do not require active participation and time: they can be semi-passive or completely passive income. In this case, you can choose a method for yourself depending on the available capital and willingness to try new things.
What is passive income?
Passive income is a way of earning money in which the investor receives a certain amount for the actions of other people. In the traditional fiat system, the bank pays a small interest rate for long-term storage of funds with the bank, which the client receives monthly; some network companies pay users a commission for every trade one of your partners participates in. In both examples, you don't do anything, but you still get paid, even if the bank (or sales rep) does all the work since your money and reputation are valuable.
Over the past several years, people have come up with new ways to make money with cryptocurrencies. Let's take a look at some of the proven methods of generating passive income in the cryptocurrency industry.
It is a process of conducting a transaction and receiving rewards from mining new coins. Mining is not for everyone; it requires expensive equipment, technical knowledge, and a huge amount of electric power. As a result, the industry has become very competitive, dominated by large corporations. Mining is no longer as profitable as it used to be, and is not very effective as a source of passive income for most people. While some of them can make a good profit by mining PoW coins with lower hash rates and higher potential rewards. However, a higher reward comes with a higher risk as little-known coins have low liquidity.
Regardless of market highs or lows, staking allows coin holders to generate passive income. This consensus algorithm is popular in many cryptocurrency projects. It is a way of rewarding Proof-of-Stake.
Staking is a less resource-intensive way of earning cryptocurrency. This method involves holding a certain number of coins on a specific wallet and performing various network functions (such as verifying transactions) to receive rewards. A stake or a share (holding a certain number of tokens) stimulates the maintenance of network security through long-term ownership of assets.
- The cryptocurrency staking system offers an alternative, simpler source of income compared to mining;
- It eliminates the need for expensive mining equipment that consumes huge amounts of electricity;
- Unlike ASICs and other mining equipment, the cost of resources used in staking does not change over time;
- Staking reduces the chance of a 51% attack more likely to occur when mining;
- The cryptocurrency staking process uses less energy and produces less heat.
This is an opportunity to get cryptocurrency for free because you are an existing or potential user, or because you use a specific wallet or fulfill certain conditions, for example, register on an exchange, or subscribe to a newsletter, etc. In such events, the main thing is to pay attention to all the details and be careful, as there may be fraudulent schemes. It is important to remember that under no circumstances should one give his private keys.
Some companies reward users for helping develop their platform (usually through links or referrals). If a user has a large following on social media, affiliate programs can be a good way to make some money. The company pays its client (referrer) for bringing new consumers (referrals) to the company. As a rule, both the referrer and the referral receive bonuses. Each organization chooses the method and amount of remuneration independently. One should first familiarize oneself with the conditions for receiving the award in detail.
Masternodes are servers that support the blockchain network; they have advanced features that other nodes on the network do not have. Running a masternode usually requires a significant initial investment, as well as a high level of technical literacy. It is a good passive income as it has the following advantages:
- Availability. To start earning there is no need to do large investments. It is mine with a masternode on the good old home computer. No extra space or rented accommodation. Electricity costs are also minimal;
- Profitability. At the moment, many masternodes have annual profitability of over 200%;
- Payback. There is none. The main expense for running a masternode is buying a guaranteed amount of coins that give person status on the network. For the duration of the masternode, these coins are frozen. But if a person decides to cancel this process, then he just needs to turn off the masternode and sell all the coins that he bought earlier and managed to mine.
Passive income is gaining popularity in the blockchain industry. Blockchain-based business solutions use some of the listed methods and thus attract more and more users. One just has to decide for oneself the most comfortable method of earning cryptocurrency and weigh all pros and cons.