How to earn passive income with cryptocurrency

The ability to earn passive income is one of several attractive features of the crypto market. Investors can earn with their crypto assets in different ways, depending on the level of risk acceptable, technical skills possessed and investment size. At the moment, there are various options that are profitable to crypto investors in 2022.

What is passive income?

Passive income is income earned without the active participation of investors.

In traditional finance, these types of profits include the accrual of interest for placing a bank deposit and for bond dividends. Cryptocurrencies, which are already a significant part of the global economy, also allow you to make a profit without active participation.

Methods for earning passive income

An investor can earn passive income with cryptocurrencies by mining new coins, airdrops or by joining affiliate programs. Various platforms also offer opportunities to earn passive income.

Crypto mining

One of the most popular ways to earn money in the cryptocurrency market is to earn new coins through mining and staking.

Mining ensures the performance of blockchains based on the Proof of Work (PoW) algorithm. Staking supports networks powered by the Proof of Stake (PoS) technology.

Mining is the extraction of new coins on the Bitcoin and Ethereum networks. Using the computing power of their equipment, miners maintain the performance of blockchains and the execution of transactions there, for which they receive a reward.

The disadvantage of mining is that the extraction of new coins requires large investments to purchase the necessary equipment and special technical skills. Besides, miners have to spend a large amount of electricity to support the process of mining coins. Because of this reason, mining is criticised for harming the environment.

Another disadvantage is that every year the reward for mining coins decreases, the process complexity increases. After the last bitcoin halving in May 2020, the reward for successfully adding a block to the blockchain decreased by twice the number and now stands at 6.25 BTC. Meanwhile, its complexity increased by more than 4% at the end of March 2022.

As an alternative to Proof of Work, the Proof of Stake algorithm was first implemented in 2012. This mechanism leverages staking to extract new coins – storing crypto to generate new blocks and confirm transactions on the network.

The more coins involved in this process, the higher the probability that their holder will become the creator of a new blockchain block, and the larger their reward will be.

Staking does not require expensive equipment, special knowledge and high computing power. You simply store coins in a crypto wallet for a certain period, thus ensuring the network’s performance. Thanks to the simplicity of the process, staking is referred not only as an alternative to mining, but also as the future of the digital asset market, because eventually most crypto projects plan to switch to PoS. The second largest Ethereum altcoin, in terms of capitalisation, is among them.

A high-yield crypto savings account

A savings account is an alternative to a bank deposit in the digital asset market. A number of major cryptocurrency exchanges provide this service. Just like traditional finance, crypto platforms offer perpetual and fixed savings options.

The first type involves depositing funds at a variable rate with the possibility of early withdrawal, while the second one – for a specific period, at a fixed percentage.

The advantage of such accounts is that the average annual return can be as high as 45%. Although, you should keep in mind that high interest rates are mostly offered for crypto assets with high volatility and low capitalisation. This way, your earnings are dependent on the rate of these coins. Also, in case of opening an account with a variable rate, the yield from the placement may even turn out to be negative.

Setting up a Lightning Network node

Another option for passive income earning is to set up and run your own node on the Lightning Network. It is a payment protocol that carries out instant transactions, thereby solving the problem of the scalability of the Bitcoin network.

This type of earning is especially relevant during periods of the main cryptocurrency’s active price rise or drop, during which the number of transactions on the blockchain is growing rapidly. As a result, the network fees also increase, while the transaction processing speed remains low. This is one of the main obstacles to the mass acceptance of bitcoin.

By creating and configuring your own Lightning Network node, you will not only solve the scalability problem, but you will also be able to earn with transaction fees, which you can set after configuring your node to carry out payments through it.

It is important to remember that the fees must be optimal: if they are too high, no one will want to make payments through your node. However, you should not expect to earn a large income from the Lightning Network. According to various sources, the average income can range between $25 to $80 per month, depending on your fees and the number of transactions.

Setting up a Masternode

Masternodes are the nodes responsible for verifying and approving transactions on the main network. They allow you to increase blockchain speed and security, and the principle of their work is similar to staking.

Servers or computers with static IP addresses provide this functionality. They also require a running wallet, full synchronisation with the main network and 24/7 activity.

To prevent the emergence of an excessive number of masternodes, there is a mandatory requirement in the form of a security deposit. For instance, you need 1,000 coins to connect a node to the Dash network. According to CryptoRank, as of 16th April 2022, it is around $108,000. At the same time, the yield will be only 5.97%.

Nevertheless, it is possible to find better investment options. For example, Phore (PHR) cryptocurrency. You will need 10,000 collateral coins to deploy a masternode on its network. As of 16th April 2022, it is only around $104.4. At the same time, the yield will be 54.82% per year.

If you possess adequate knowledge, then you can set up a masternode by yourself. Another option is to use the special hosting services that help with setting up and maintaining the node.

Forks and airdrops

Numerous crypto projects organise airdrops – marketing campaigns for the free distribution of coins. Usually, such rewards can be received for completing simple tasks related to the promotion of cryptocurrency. This can include registration on the website, conducting several trading operations with coins, writing comments on social networks, etc. The amount of reward is different for each airdrop. You can track the upcoming distribution of coins on special platforms, such as Airdrops.io.

A hard fork is a significant change to the blockchain that results in forking. Consequently, an alternative blockchain is created, which functions in parallel with the main network.

The result of such hard forks is the emergence of a new crypto. For instance, the Bitcoin Cash asset emerged from disagreements within the Bitcoin community regarding the maximum block size of the original network.

There are several ways to make money with the fork. The first is receiving free coins. Their distribution is organised by developers to create activity on the new network. Another way is to speculate on the price of an asset. Usually, before the fork, the rate of the cryptocurrency for the original network goes up and reduces after the update. Experienced traders often use this feature to make money with price dynamics.

Partnership programs

A large number of crypto projects provide rewards for participating in their partnership programs. For instance, aStake platform allows you to earn up to 18% of the turnover of those users who have registered using your referral link. The bigger your staking community, the higher your income.

Learn about the benefits of aStake’s partnership program

Learn more

Blockchain-based content creation platforms

Blockchain technologies ensure complete safety and security of data, so it is no surprise they are used in different spheres.

One of these spheres is decentralised content platforms. Most of these platforms allow creators to monetise their creativity, and users to access unique works.

On the internet, you can find various services that allow you to earn money by posting videos (Flixxo), photos and designs (Pixsy), by streaming (Aioz Network), blogging (Steemit) or even just watching ads (Brave Browser).

Risks of earning passive income with cryptocurrency

Several possible risks are involved when earning passive income from crypto:

Inefficient investments

This can happen in several cases. For instance, if your profit does not cover the costs of obtaining it. This can include both the purchase of expensive mining equipment or a set up of a masternode, as well as investments in unpromising cryptocurrencies without a clear development plan.

User errors

Some of the passive income options described above require special, technical knowledge. If you can’t maintain the optimal performance of your masternode, Lightning Network, or mining new coins, then you won’t earn anything.

Specific risks

With each type of passive income, specific problems could emerge. For example, mining involves high competition and periodic decreases in rewards, while masternodes require an uninterrupted connection to a stable network.

Conclusions

The crypto market offers numerous options for earning not only active, but also passive income. In order to choose the right type of income, you need to adequately assess your capabilities and be ready to invest in a project that interests you. 

The optimal solution is to use several options to make a profit. For instance, with the aStake platform, you can receive an income of 17% per annum and a percentage of the rate of MetaHash Coin tokens in staking, as well as earn up to 18% with our partnership program.

Register on aStake right now to earn stable profits with minimal investment and maintain full control over your funds.