Content

  • What is passive income?

  • Ways to earn passive income in cryptocurrency

    • Mining

    • Staking

    • Landing

    • Running a node on the Lightning Network

    • Partnership programs

    • Masternodes

    • Forks and airdrops

    • Platforms for creating content on the blockchain

  • Risks of receiving passive income in cryptocurrency

  • Conclusion


What is passive income?

Trading or investing in projects is one of the ways to make money in the blockchain industry. But first, you will need to study the subject of your investment in detail and spend a significant amount of time on this, which in turn still does not guarantee a reliable source of income.

Even the best investors can experience long periods of continuous losses, and the only way to stay afloat is to have alternative sources of income.

There are many other ways besides trading and investing that can help you grow your crypto holdings. You can earn regular income, similar to earning interest, but this requires you to meet certain conditions to set up and maintain the process.

Thus, you get the opportunity to develop several options for the influx of funds at once, which, in combination with each other, can represent a significant amount.

In this article we will look at several ways to earn passive income in cryptocurrency.


Ways to earn passive income in cryptocurrency

Mining

Essentially, mining involves using the computing power of the hardware to secure the network and allow miners to be rewarded for their work. This is the oldest method of generating passive income in the world of cryptocurrencies, without the need to hold the currency itself.

In its early days, mining Bitcoin on a central processing unit (CPU) was a relatively viable solution. As network hashrate has increased, most miners have moved to using more powerful graphics processing units (GPUs). Due to the fact that competition has increased more and more, it has practically forced out small players, and has become a playing field exclusively for integrated circuits for special purposes (from the English Application-Specific Integrated Circuits, abbreviated ASIC), this is mining equipment in the form of chips, specifically designed to achieve a single purpose.

The ASIC industry has a very competitive environment, which is dominated by several corporations with large amounts of resources for research and development. By the time this type of chip appeared on the retail market, it had already become obsolete and required a significant amount of time to reach the break-even point.

Thus, Bitcoin mining has become a corporate business rather than a viable source of passive income for the average person.

On the other hand, mining coins based on the Proof of Work algorithm with a still low hashrate may seem profitable to some. In such networks, the use of GPUs may still be relevant. Mining lesser-known coins brings higher potential rewards, but such activities will always involve greater risks. Mined coins may immediately depreciate in value, have poor liquidity, various errors and many other negative factors.

It is worth noting that setting up and maintaining mining equipment requires you to make an initial investment and have some technical knowledge.


Staking

In turn, staking is a less resource-intensive alternative to mining. Basically, this method involves holding a control amount of cryptocurrency in a specific wallet and performing various network functions (such as verifying transactions) to receive rewards. A stake or share (holding a certain number of tokens) encourages maintaining the security of the network through long-term ownership of assets.

Staking networks use Proof of Stake as a consensus algorithm. There are other versions of the algorithm, such as Delegated Proof of Stake or Leased Proof of Stake.

As a rule, they create a separate wallet for staking and simply store their coins on it. In some cases, this process involves adding your funds to the total amount or delegating them to a staking pool. Some exchanges will do this for you. All that is required of you is to hold your tokens on the exchange, while all aspects of this process will already be taken into account.

Staking can be a great way to increase your cryptocurrency holdings with minimal effort on your part. However, some projects use staking tactics that artificially inflate your revenue projections. For this reason, it is recommended to take a closer look at the economic model of tokens, as it can effectively understate your projected reward amount.

Staking on Binance supports a wide variety of coins that you can earn rewards for. Simply deposit such tokens on Binance and follow the instructions to start earning.


Landing

Landing is a passive way to earn a percentage of your cryptocurrency assets. There are many peer-to-peer (P2P) landing platforms that allow you to lock a portion of your funds from moving for a certain period of time for later profit. The interest rate can be fixed (determined by the platform) or set by you based on the current market rate.

On some exchanges with a margin trading option, this function is natively implemented on their platform.

This method is ideal for long-term holders who want to increase their funds without much effort. It is worth noting that blocking funds in a smart contract always implies the possibility of possible errors and bugs.

Landing on Binance provides a wide range of options that allow you to earn interest on your asset holding.

 

Running a node on the Lightning Network

The Lightning Network is a layer 2 protocol that runs on top of a blockchain such as Bitcoin. It is an off-chain micropayment network, which means it can be used to make fast transactions that are not immediately broadcast to the main blockchain.

Normal transactions on the Bitcoin network are unidirectional, meaning that if Alice sends a Bitcoin to Bob, Bob will not be able to use the same payment channel to send that coin back to Alice. In turn, the Lightning Network uses bidirectional channels that require prior agreement on the terms of the transaction.

Lightning nodes provide liquidity and increase throughput on the Lightning Network by temporarily locking Bitcoins within these channels. After completing transactions, nodes receive payment in the form of a commission.

Running a Lightning node can be a challenge for an uninformed Bitcoin holder, for this reason it is necessary to take into account all the nuances, in particular, that the reward for the work as a whole depends on the general definition of the amount of payments in the Lightning Network.


Partnership programs

Some cryptocurrency companies may pay you a reward for referring new users to their platform. This includes affiliate links, referrals and many other incentives provided to new users you refer.

If you have a large following on social media, affiliate programs can be a great way for you to earn extra income. However, in order not to spread information about low-quality projects, it is always worth familiarizing yourself with the services that you are going to recommend for use in advance.

If you are interested in earning passive income, join our affiliate program and get rewarded for recommending Binance to the world!


Masternodes

In simple terms, a masternode is more like a server operating within a decentralized network, which has greater functionality than other nodes.

Projects that issue their tokens tend to provide special privileges only to those participants who have a high incentive to maintain the stability of the network. Masternodes require a large initial investment and technical knowledge to install and run.

However, for some masternodes the need to hold tokens can be so high that it effectively makes your stake illiquid. Projects that offer masternode opportunities also tend to overstate their projected returns, so always do your own research (DYOR) before investing.


Forks and airdrops

Taking advantage of a hard fork is a relatively simple strategy for investors. To do this, you simply need to hold coins in your wallet that already have a published hard fork date (usually determined by the block height). If after the fork there are two or more competing chains, the holder's balance is duplicated in each new blockchain.

Airdrops are similar to forks in that you only need to have a wallet. Some exchanges periodically conduct airdrops for their users. Please note that during this promotion, you will never be asked to provide your private key, otherwise this is a clear sign of financial fraud (scam).


Platforms for creating content on the blockchain

With the advent of distributed ledger technologies, many new types of content platforms have begun to emerge. Thanks to this, content makers are given the opportunity to monetize their material in new and unique ways, thereby avoiding intrusive advertising.

In such a system, content creators retain ownership of their creativity and monetize attention in various ways. This may require a lot of work on your part initially, but will then provide you with a steady source of income once your content backlog is rich enough.


Risks of receiving passive income in cryptocurrency

  • Buying Low-Quality Assets: Artificially inflated or misleading yield ratings can encourage investors to buy a given asset that is actually of very low value. Some staking networks use a multi-token system where rewards are paid out in the form of a side token to create constant selling pressure.

  • User Error: Since the blockchain industry is still in its early stages, creating and maintaining such income streams requires you to have technical knowledge and a research mindset. For some holders, it is better to wait until these services become more convenient, or to use only those that require minimal technical knowledge.

  • Blocking periods: To start some types of landing or staking, you are required to block the required part of the funds for a certain period. This makes your assets effectively illiquid during this time, leaving you vulnerable to any event that could negatively impact the price.

  • Possibility of bugs and errors: Locking your tokens on a staking wallet or through a smart contract always involves the risk of various bugs. Typically, there are several options for locking tokens, with varying levels of quality, for this reason, it is extremely important to consider each option in detail before making a choice. Open source software can be a good starting point because it at least has some community validation.


Conclusion

Various ways to earn passive income from the blockchain industry are growing and gaining popularity. Blockchain-based business solutions use some of these methods, also providing a type of service that is usually referred to as generalized mining.

Since this category of services is becoming more reliable and secure every day, there is a possibility that in the near future they may become a viable option for a permanent source of income.