10 Best Ways to Earn Passive Income from Cryptocurrency

hat are the best ways to earn passive income from cryptocurrency? Typically, trading crypto coins and investing in different projects are the most common ways that people follow to make money in the crypto market.

However, there are also several other ways that you may follow in the blockchain industry to earn passive income.

This, mind you, is not a walk in the park. You will need to research extensively and in detail to know about the best ways to earn passive income from cryptocurrencies without experiencing any loss for a prolonged period.

Earning passive income involves a significant investment of time and still it may not guarantee you to provide the best returns or prove to be a reliable source of income.

You will need to play cautiously for that, even if you consider yourself to be one of the best and most experienced investors in the crypto space.

In addition to knowing the best ways to earn passive income from crypto, you will therefore need to put in some effort to set things up properly so that it can maintain a steady flow of income.

10 Best Ways to Earn Passive Income from Cryptocurrency

Best Ways to Earn Passive Income from Cryptocurrency

Here in this article you will come to know some of the best ways to earn passive income from cryptocurrency.

This will save you from the trouble and time to conduct an extensive research all by yourself.

All these varied streams will ensure that a significant amount is added to your income. However, remember that, all these ways are not created equal and will provide varied results.

Therefore, make your choice according to your needs and consider a few important characteristics such as its ease in implementation, upfront and ongoing costs, and the risks involved as well as time taken to set up.

Also, make sure that you are well aware of the characteristic pros and cons of each. Check out Best Crypto Hedge Funds.

Here you go.

1. Staking Proof of Stake Coins

PoS or Proof of Stake cryptocurrencies can generate a substantial amount of passive income if used properly.

The good thing about these coins is that they have the ability to secure the blockchains when the users stake them.

This is the process where you hold or lock your coins in a crypto wallet. This means that these coins will not contribute to the computing ability of the network.

In lieu of staking the PoS coins which secure the network and transaction processes, you will be offered newly minted crypto coins.

This means that you can earn interest, a substantial amount of it, through your crypto holdings very easily.

This is a very popular and most widely used process to earn passive income with crypto coins, especially by the long-term ‘Hodlers.’

You can earn prospective returns to your investment portfolios when you stake different types of coins such as:

  • NEO
  • Reddcoin or
  • Komodo.

These coins will provide you with a return of as high as 5% per annum as interest on your holdings.

However, there is a catch here. In spite of being an outstanding way to make some extra income, staking cryptocurrencies need quite a bit of technical expertise.

You will be much better off if you first get acquainted with the staking process itself for the particular coin you want to get involved with. This will save you a considerable amount of time and help you to create the best and most steady opportunity for passive income.

2. Operating a Masternode

This process is pretty similar to PoS crypto staking. A masternode in a blockchain is known to perform specific functions and are usually created by committed community members.

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You will however need to make an investment of the staked coin initially to set up. There are also several other requirements to follow in order to execute this process.

Talking about masternodes, the first masternode was launched by DASH, the digital currency known for its focus on privacy. It facilitated its PrivateSend feature.

If you want to set up a DASH masternode, you will need to lock 1,000 DASH. This will cost you about $230,000 considering current market value. In exchange, you will have:

  • An annual return of 6.45% on your investments and
  • A say in the management and governance decision of the project.

Cool as it may sound, it is quite expensive to run a DASH masternode, especially if you are a beginner or an average crypto investor.

Therefore, choose one of the other masternode coins to set up. Currently there are as many as 250 coins that will allow you to run a masternode which includes leading altcoins such as:

  • Zcoin
  • PIVX
  • Horizen and more.

These coins will enable you to earn a respectable return on your investment by operating a masternode, which can be as high as 10% depending on the type of coin you use. And, all these will not need you to make a hefty initial investment of six figures.

For example, if you wish to run a PIVX masternode you will need to invest only 10,000 coins, currently valued at $15,000 and get a return of more than 10% per annum.

3. Cryptocurrency Accounts With Interests

This is the newest way to earn passive income from crypto. There are several interest bearing crypto accounts that will allow you to earn a lot  such as BlockFi.

They allow their asset holders to earn as much as 6.2% annually as return on their holdings when they store their coins in BlockFi Interest Account.

Usually, the coins that are accepted in such crypto accounts include bitcoin and ether.

There is however a minimum deposit requirement for this and the deposited amount is used to lend to corporate or institutional borrowers.

This is just like giving a traditional loan but here it is done on an overcollateralized basis to guarantee a better loan performance.

Most of these interest bearing crypto accounts and Decentralized Finance platforms share a major portion of their deposits with their respective community. The interests on such transactions are usually weekly.

Depending on the platform or account you choose, you can earn an APY of up to 13.30% on the coins deposited in it by you.

The best part is that you earn your interest and still ‘HODL’ the coins.

4. Peer-to-Peer Lending

This is a more hands-on move of making passive income from cryptocurrency, especially bitcoin. The good thing about this approach is that it has the potential to offer much higher rates of interest while you engage in lending.

You can lend cryptocoins on these P2P platforms to individual and professional crypto traders or to a crypto business that needs funding. You earn interest in return.

Several P2P lending platforms will also allow you to lend crypto assets on this basis to the participants of other marketplaces as well. You just need to research.

The good thing is that, loans are made not on the basis of the credit score, Most platforms use their own reputation system for that matter which makes this one of the most popular ways.

However, there is a good amount of risk involved in such lending. One of the most significant risks is the borrower failing to repay the loan amount.

There is little that you can do about it and therefore you must make sure that:

  • You do not lend more than you can afford to lose and
  • You diversify your portfolio to a number of small crypto loans.

Also, do not rush while checking the details of each borrower before you hand over the coins.

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5. Lending Cryptocurrency to Margin Traders

This is a much better option to earn passive income from cryptocurrency as compared to P2P lending. It is less risky because you will do so through reliable and reputed digital asset exchanges.

Depending on the particular lending platform you choose, you can lend both fiat and cryptocurrencies to the margin traders. These traders usually borrow his money in order to leverage their trades.

You can earn daily interest as well when you lend crypto assets to the margin traders. Once again, this rate of daily interest will vary according to the exchange that you choose.

However, considering the average, these rates are quite good but may seem to be low apparently. If you look at the amount that you can accumulate over the weeks, the amount will be quite substantial.

However, at this juncture it is important to note that you will need to store your crypto assets on the exchange to lend them to the margin lenders.

This comes with the risks of its own because these wallets are the primary targets for the hackers.

6. Cloud Mining

Cloud mining is a process to earn passive income through cryptocurrencies that is common today and well known but is also one of the most controversial methods.

The process involves renting crypto mining hardware at dedicated mining farms.

This enables the individuals to receive mining income from their cryptocurrencies on a regular basis without needing to purchase and maintain any mining hardware.

All you have to do is pay a specific fee daily as maintenance charges to the cloud mining operators according to the contract.

Once again, rosy as it may seem, there is one thing that you should keep in mind. The payback period in this process can be as long as a year, if not more.

Add to that, risk of price fluctuations and mining difficulties also exist.

Moreover, there is also a risk of the value of the coins falling below the mark during that time rendering it useless to mine anymore. At this point of time the operator may cancel the mining contract.

Also, there are lots of scams happening in the cloud mining market. Therefore, conduct an extensive research to find the best service provider for cloud mining before investing.

7. Lightning Network Node

You can even run a Lightning Network Node to earn passive income with your crypto coins.

This is actually a specific type of technology that will allow you to increase the number of transactions. At the same time it will also keep the transaction fees considerably low.

Technically speaking, this is an off-chain payment network. This means you can independently handle all the transactions.

Your transactions therefore will not be subject to blockchain processing and nothing except the opening and closing balances will be recorded on the chain. This is therefore called the second-layer technology.

When you create a Lightning Node, you will create different payment channels. These lightning channels can be used by other users as well to process their payments.

This will enable you to charge transaction fees from the users who use your Lightning Node to process their payments.

However, if you are not very tech savvy, this may not be a suitable option for you to earn passive income from the crypto assets you hold.

Also, the rewards you may receive will largely depend on the adoption. Therefore, if you intend to become wealthy in no time, this is certainly not an option for you.

8. DeFi Lending

DeFi or Decentralized Finance lending is another comparatively new form of earning passive income from cryptocurrency.

The DeFi ecosystem will allow you to generate quite a substantial amount of income by making the best use of the blockchain technology and other financial applications that are based on it.

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This is much different from the P2P platforms since there is no intervention from a third-party or any central authority to regulate your dealings.

Typically, DeFi lending performs on an independent protocol and it is operated by smart contracts.

This platform is gradually gaining popularity and according to DeFi Pulse, the Total Value Locked today in its protocols amounts to $45.01 billion.

The most significant reasons for its ever-rising popularity include:

  • It is autonomous
  • It is transparent and
  • It is open-source.

This platform allows the borrowers to take loans directly and the borrowers to earn interest on their lent amount.

There are a few DeFi lending platforms that even provide voting rights to the token holders. You as a lender can vote on different aspects such as:

  • Protocol upgrades
  • Technical upgrades and
  • New assets while integrating them.

By depositing money in a lending pool you can earn high income in the form of APY which is much higher than that offered by an account in a traditional bank or even any other fund in the money market.

However, make sure that you choose an established DeFi platform because the less established ones are vulnerable to protocol hacks.

9. Dividend-Paying Tokens

Using the dividend paying tokens is perhaps the easiest way to make passive money from your crypto assets.

This process involves buying and holding dividend paying tokens. These are typically those tokens that are issued by an exchange.

There are lots of crypto asset exchanges that issue such tokens of their own. These tokens allow the users to enjoy some specific discounts on the trading fees.

The rate of discounts offered may vary from one exchange to another.

Depending on the type of token and the exchange you choose, you may also be allowed to earn some added income from the profit share of the platform.

In order to earn dividends on the dividend-paying tokens, you will need to hold these coins on the exchange that has issued them.

You may also need to stake the coins by using an external digital wallet. The catch here is that the more such tokens you hold in the wallet you will be able to earn more passive income from the coins.

10. Special Events

Last but not least, there are also a  few special events that you can consider to enhance your opportunities to earn passive income from crypto.

  • Airdrops – Here a small amount of a new cryptocurrency to the current crypto investors in exchange of a mention is the social media.
  • Forks – Here the regulatory body updates the software which results in new currency.
  • Burns – Here the company sends some coins to an unusable account which consequently increases its value and scarcity rendering it obsolete.
  • Buybacks – This is when the company buys back the crypto coins which limits its supply and increases the overall value.
  • Rewards – You can earn additional crypto coins when you use them in compatible shops and retail outlets.

All these are easy and effortless ways to earn some extra income from your crypto coins.

Conclusion

If you only know how exactly you can make a passive income with crypto, you can increase your income by a significant margin.

The above list will help you to find the best ways but you will need to implement them and play cautiously.