Passive Income Opportunities in Cryptocurrency
Passive Income is money received from investments that do not require the earner to actively participate.
What is passive income?
Passive Income is money earned from investments that do not require the earner’s active participation. Passive income is earning a steady income without the demands expected of a full-time job. A passive income system can include many investments, but traditionally it is often found in dividend stocks, peer-to-peer lending, real estate leases and royalties, to name a few industries. Through these methods, investors can increase their income and achieve their financial goals.
As the cryptocurrency and decentralized finance (DeFi) industry grows, doors are opening for investors looking to earn passive income in a variety of ways. For newcomers and veterans in the field, DeFi provides an opportunity for crypto investors to earn an annual percentage yield (APY) that puts most bank savings at a standstill. Since DeFi’s launch in the summer of 2020, aided by the sale of the COMP token to Compound, investors have had many ways to generate passive income.
Credit platforms are a simple concept. Users lend their idle crypto-assets to the platform, which are fixed in a smart contract. In turn, the lending platforms pay the cryptocurrency holders APYs. Access to the locked assets is provided to borrowers in the form of loans, the interest on which is paid to the platform. With smart contracts governing the entire process, the cryptocurrency lender has no risk if the borrower defaults on the loan. Thus, those wishing to collect their crypto-assets can do so at any time.
Stacking, which originated in proof-of-stake (PoS) networks, is the process by which the cryptocurrency owner locks his or her assets into a smart contract. By storing the user’s assets long-term, he gets to earn more of the same token in return. If we are talking about the Ethereum blockchain, for example, it will be its native Ether token. Stacking is an opportunity for users to earn additional funds through rewards as they contribute to the security and decentralization of the network. By distributing revenue to the network, network validators can ensure that the PoS blockchain complies with the rules and that the system is not being cheated.
Revenue Mining, also called liquidity mining, helps cryptocurrency holders earn additional rewards by providing liquidity to pools. For providing liquidity to a pool, liquidity providers (LPs) receive an LP token, which denotes their share of the pool. As a reward for participating in the pool, the LP typically receives a commission for trading when trades occur in the pool. LP tokens can then be put on a protocol or project for additional rewards. Usually these rewards take the form of the project/protocol’s own tokens. Such tokens can then be placed for even more rewards, making revenue farming very lucrative and a good source of passive income. Generally, income farming is considered riskier compared to betting/credit, but also rewards the farmer with higher APYs.