6 Ideas to Generate Passive Income With Crypto Currencies

Generate Passive Income With Crypto Currencies
Generate Passive Income With Crypto Currencies

The general public frequently compares individuals making money with digital currencies with traders who conduct numerous transactions each day while closely monitoring impending initial coin offerings (ICOs). Fact is, some cryptocurrency enthusiasts engage in this type of frenetic investing in virtual currencies. However, there are less time-consuming and dangerous ways to make money in the world of cryptocurrencies.

One method is to simply purchase a stake in a cryptocurrency and then sit on it until its value increases. While this may seem like common sense, it’s actually a strategy that many investors overlook. A lot of people get caught up in the excitement of buying into the latest and greatest digital currency, without stopping to think about whether or not they’re actually going to use it.

But of course there are ways that are bit more active and can help your waiting. We present you the post about 6 ways to use cryptocurrencies to generate passive or semi-passive income. Additionally, you’ll discover that certain approaches will be more appropriate than others based on your own preferences and your first investment budget.

Staking

By using some of your tokens to validate transactions on blockchains that use Proof of Stake (PoS), you can earn more tokens. The term “minters” refers to those who stake their tokens on blockchains based on Proof of Stake.

Miners receive a set number of tokens in exchange for locking up token capital and assisting with network security. There are numerous Blockchains that use this mechanism, and for each of them, the underlying operating principles and the size of the rewards may differ slightly.

The Delegated Proof of Stake (DPoS) mechanism is a version of the PoS Consensus Algorithm. The DPoS’s minters, also known as delegates, are chosen by the other community members. They are the ones who are in charge of staking tokens to support network transactions. The rewards for staking on this type of Blockchain are generally higher than can be seen on Ark or Lisk for example.

From one Blockchain to another, certain steps must be taken to be able to engage in networks using this system. While some Blockchains demand you to join the network as a full-fledged node, others, like Ark, merely call for straightforward installation via wallet. However, it is important to note that staking carried out as a node is frequently significantly more profitable than that done via the simpler ways, but they demand more work, whether in terms of time or token investment.

Payment of tokens collected by the exchange platform

KuCoin Logo

Some exchange platforms, such Kucoin and COSS, have built up a structure allowing token owners to receive a portion of the transaction fees collected by the platform. Naturally, the amount you receive is inversely correlated with the number of tokens you now have on the relevant Blockchain.

This strategy, which generates passive revenue, is not always particularly successful because it strongly depends on the volume of trading done on a Blockchain over the course of owning the tokens. However, if you have a clear head and understand how to invest in high-potential cryptocurrencies before they start to take off, it can rapidly get exciting. The amount obtained in this situation might be really fascinating. Additionally, keep in mind that you lose if the value of a cryptocurrency drops.

The dividends paid in this case are often full exchange tokens rather than fractions of the exchanged tokens. This implies that if you possess too few tokens from the exchange platform, your dividend payments will be too small to later be resold.

The dividends paid in this case are often full exchange tokens rather than tokens of the project being traded on the platform. For example, KuCoin pays its users in KuCoin Shares (KCS), while COSS pays in COSS tokens.

The main advantage of this type of payment is that it does not require any action on your part: you simply hold the tokens and watch the payments automatically hit your wallet. Of course, you can also sell your tokens at any time to cash out immediately.

There are also some disadvantages to this type of payment structure. For one, it can be difficult to track how much you are actually making as the payouts are often in a different token than the one you originally invested in. Additionally, if the exchange platform goes out of business or shuts down for any reason, you will likely lose all of the money you have invested.

Finally, it is important to remember that you are essentially trusting the exchange platform with your money. Make sure to do your research and only invest in reputable platforms.

Tokens paid out as Dividends

Neo Gas Logo

Some cryptocurrencies reward their investors by paying dividends, which encourages them to keep onto their positions. Thus, holding these Blockchains’ tokens over an extended period of time becomes very intriguing. This is the case, for instance, with NEO, the blockchain for the “Smart Economy,” which distributes rewards in the form of particular tokens called Gas. Dividends are formed by Blockchain Vechain in the form of THOR tokens.

THOR tokens are used to pay for transactions on the Vechain network and can also be staked to earn rewards. NEO’s GAS tokens, on the other hand, are used to pay for transaction fees on the NEO network.

While both of these blockchains offer their investors rewards in the form of tokens, they each have different use cases for those tokens. You should also be aware that some blockchains may not offer dividends at all. In these cases, you will need to rely on the appreciation of the token’s price to earn a return on your investment. Typically, a specified number of new tokens will be created for each unit of the original token. While the original token can be seen as an action of the network in question, these tokens are frequently used to pay transaction fees on the network.

What kind of return is feasible using this technique? Since we are generally hovering about 3% for NEO and its Gas dividend, for instance, it is pretty poor. However, this approach is completely risk-free and passive. Why therefore deny yourself it?

It is important to do your own research to see which blockchains offer rewards in the form of dividends and what the use case is for those tokens. In some cases, you may find that the dividend payout is not worth the risk of investing in a particular blockchain. However, if you believe in the long-term potential of the project, holding the tokens for an extended period of time could result in a significant return on investment.

Airdrops

Airdrop image

We can use the example of free samples being given out in stores to help us comprehend what an airdrop for crypto currency is and how it works. This will motivate you to make a purchase. Many cryptocurrency projects may first give away a small number of free tokens to reliable individuals in order to capitalize on a particular marketing effect among the fervent crypto community. An airdrop, in the cryptocurrency world, is a marketing stunt that involves sending free coins or tokens to wallet addresses in order to promote awareness of a new coin or project.

Airdrops are often used as a way to bootstrap a new cryptocurrency by distributing it to early adopters for free. By doing this, projects can build a community of interested users who are more likely to trade, hold, and use the new currency.

The distribution of these free tokens typically occurs in exchange for a small community commitment, such as signing up for the newly created cryptocurrency platform. Although the amount offered is small in comparison to fiat money, if you hold onto these tokens for the medium term, you could experience some very pleasant surprises, assuming you have chosen a reliable and trustworthy Blockchain.

There are a few different ways that a project can go about conducting an airdrop. The most common method is to simply give away tokens to anyone who holds a specific cryptocurrency, such as Bitcoin or Ethereum.

Another method is to airdrop tokens to everyone who has an account on a specific exchange. This is often done to promote a new listing, and it usually requires that the users complete some sort of KYC (Know Your Customer) verification.

Lastly, some projects will conduct an airdrop in which they randomly select wallet addresses and send a small amount of tokens to each one.

Airdrops can be an effective way to generate interest in a new cryptocurrency project. However, they can also be used to scam people out of their money. For this reason, it’s important to be careful when participating in an airdrop and to only do so with projects that you trust.

The good news is that because airdrops are frequently simple to receive, even beginners can benefit from them. As a result, increasing participation in Airdrops is simple. This approach of making revenue is considered as semi-passive because it necessitates some study and follow-up on viable products that are developed and launched.

The Earn​.com platform

The earn.com platform provides a very straightforward method for making money from your attention. You will have a profile on earn.com once you have registered on the platform. From that point on, you will be compensated for both receiving and replying to messages as well as completing other tasks that platform users may give you.

Currently, Bitcoin is used on the site for payments. Your dedication to the community and the reputation you build over time will determine how much profit you make using this semi-passive income production strategy. Earn also provides lists to which you can subscribe in order to receive messages delivered by users aimed specifically at particular individuals.

We can find lists of past university students or professionals in the same industry on some of Earn’s suggested lists. Additionally, there is a list of individuals interested in taking part in airdrops for new cryptocurrency initiatives.  It gives a chance to make method 4 a little more passive still.

Membership

Many well-known exchanges, like Coinbase or Binance or BlockFi, provide affiliate programs that reward you for assisting them in gaining new members. For the majority of people, taking part in these affiliate schemes will only bring in a modest amount of money, but if you already have a sizable social media or YouTube following, it may be extremely profitable.

Typically, these affiliate schemes pay in tokens that are listed on the site. Therefore, while Binance will offer the recruiter a portion of the revenue it receives from the new customer, Coinbase will pay a fixed amount in Bitcoin. As a result, this will match a particular token or the Binance platform’s BNB token.

BlockFi is a crypto-currency platform that allows you to earn passive income paid in crypto-currencies or even take crypto loans. BlockFi is centralised, which involves other risks, unlike protocols such as Compound but also sometimes more interesting and stable rates.

Of course, it’s not just the big exchanges that offer affiliate programs. Many smaller ones do as well, although the terms and conditions may be less favorable. For example, some exchanges may only pay out once a month, or they may have a minimum payout amount. Nonetheless, if you can bring in new users to an exchange, it’s definitely worth looking into.

Not everyone is cut out for recruiting new members to exchanges, however. Some people simply don’t have the necessary social media following or influence. Others may not be comfortable with constantly promoting a particular brand. If that’s the case, there are still other ways to make money in the cryptocurrency space.

You can use this links to open accounts on Binance or BlockFi today.

Conclusion

This article has covered 6 ways to earn passive income using cryptocurrencies. As you can see, certain techniques function more passively than others. However, there is still a measured amount of work required. Please let us know in the comments if you know of any more reliable ways to earn passive income using cryptocurrencies. Also check out how I earn up to 100$ in free cryptos each month.

  • Open an account on Binance today >> Click here
  • Open an account on BlockFi today >> Click here

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