What is passive income?
Trading or investing in projects is one way to make money in the blockchain industry. However, this usually requires detailed research and a significant investment of time, and it does not guarantee a reliable income source.
Even the best investors can experience long periods of loss, and one way to survive is to obtain alternative income sources.
There are other methods beyond trading or investing that can help you increase your cryptocurrency holdings. These can provide ongoing income similar to earning interest, but they only require some effort to set up and little to no effort to maintain.
In this way, you can have multiple income sources that, together, can add up to a significant amount.
This article will address some ways you can earn passive income using cryptocurrencies.
What are the ways you can earn passive income through cryptocurrencies?
Mining $BTC
Mining essentially means using computing power to secure the network in exchange for a reward. Although it does not require you to own cryptocurrencies, it is the oldest way to earn passive income in the cryptocurrency space.
In the early days of Bitcoin, mining with everyday CPU (Central Processing Unit) was a viable solution. As the network's hash rate increased, most miners shifted to using more powerful GPUs (Graphics Processing Units). With increasing competition, it has almost exclusively become a playground for ASICs (Application-Specific Integrated Circuits) - electronic devices using mining chips designed specifically for that particular purpose.
The ASIC industry is highly competitive and dominated by companies that have significant resources available to deploy in research and development. By the time these chips reach the retail market, they are likely already outdated and will require a substantial amount of mining time to break even.
As such, Bitcoin mining has largely become a business for companies rather than a viable source of passive income for the average individual.
On the other hand, mining low-hash rate proof-of-work coins is still a profitable venture for some. On these networks, it is still possible to use graphics processing units. Mining lesser-known coins carries a higher potential reward but comes with higher risks. Mined coins may become worthless overnight, or carry little liquidity, or face bugs, or find themselves hindered by many other factors.
It is worth noting that creating and maintaining mining equipment requires an initial investment and some technical expertise.
Survey Signature
Survey signature is essentially a less resource-intensive alternative to mining. It typically involves holding funds in a suitable wallet and performing various network functions (such as validating transactions) to receive survey signature rewards. The stake (i.e., holding the token) incentivizes maintaining network security through ownership.
Storage networks use proof of stake as their consensus algorithm. Other versions of it exist, such as delegated proof of stake or rented proof of stake.
Survey signature usually involves creating a survey signature wallet and simply holding the coins. In some cases, the process involves adding funds or delegating them to a staking pool. Some exchanges will do this on your behalf. All you need to do is keep your tokens on the exchange, and all technical requirements will be taken care of.
Staking can be an excellent way to increase your cryptocurrency holdings with minimal effort. However, some staking projects use tactics that artificially inflate the expected staking return rates. It is crucial to study the token economic models as they can effectively mitigate the promising expectations of survey signature rewards.
Binance Staking supports a wide range of coins that will earn you survey signature rewards. Just deposit the coins on Binance and follow the guide to get started.
Lending #loan
Lending is a completely passive way to earn interest on your cryptocurrency holdings. There are many peer-to-peer (P2P) lending platforms that allow you to lock your funds for a period to collect interest payments later. The interest rate can be fixed (set by the platform) or determined by you based on the current market rate.
Some exchanges with margin trading have this feature implemented locally on their platform.
This method is ideal for long-term holders who wish to increase their holdings with minimal effort. It is worth noting that securing funds in a smart contract always carries the risk of errors.
Binance Earn offers a variety of options that allow you to earn interest on your holdings.
Running a Lightning Node
The Lightning Network is a second-layer protocol running on top of a blockchain, like Bitcoin. It is a small off-chain payment network, meaning it can be used for quick transactions that are not immediately transferred to the underlying blockchain.
Typical transactions on the Bitcoin network are one-way, meaning that if Alice sends Bitcoin to Bob, Bob cannot use the same payment channel to send that Bitcoin back to Alice. However, the accelerated network utilizes bidirectional channels that require participants to agree on the transaction terms beforehand.
Lightning nodes provide liquidity and increase the capacity of the accelerated network by locking Bitcoin in payment channels. They then charge fees for payments made through their channels.
Running a Lightning node can be a challenge for a non-technical Bitcoin owner, and the rewards depend heavily on the overall adoption of the accelerated network.
Affiliate Programs
Some cryptocurrency companies will reward you for bringing more users to their platform. This includes affiliate links or referrals or other discounts offered to new users that are brought to the platform by you.
If you have a large number of followers on social media, affiliate programs can be an excellent way to earn some side income. However, to avoid spreading the word about low-quality projects, it is always beneficial to do some research on services beforehand.
If you're interested in earning passive income with Binance, join the Binance Affiliate Program and get rewarded when you introduce Binance to the world!
Masternodes
In simple terms, a masternode is like a server but operates in a decentralized network and has functions that other nodes on the network do not have.
Token projects tend to grant special privileges only to actors who have a significant incentive to maintain network stability. Masternodes usually require a large upfront investment and a significant amount of technical expertise to set up.
However, for some masternodes, the requirements to hold the token can be very high, making the stake effectively illiquid. Projects with masternodes also tend to inflate expected return rates, so it is always essential to do your own research (DYOR) before investing in one.
Forks and Airdrops #AirdropFinderGuide
Taking advantage of a hard fork is a relatively straightforward tactic for investors. It only requires holding the forked coins at the time of the hard fork (which is usually determined by block height). If there are two or more competing chains after the fork, the holder will have a token balance in each one.
Air drops resemble splits, as they only require ownership of the wallet address at the time of the air drop. Some exchanges will conduct airdrops for their users. Note that receiving an airdrop will never require sharing private keys - a situation that represents a clear sign of fraud.
Blockchain-Based Content Creation Platforms
The emergence of distributed ledger technologies has enabled many new types of content platforms. These allow content creators to monetize their content in several unique ways without including intrusive advertisements.
In such a system, content creators retain ownership of their creations and usually invest interest in some way. This may require a lot of work initially, but it can provide a steady source of income once the accumulated content grows large enough.
What are the risks of earning passive income through cryptocurrencies?
Buying low-quality assets: Inflated or misleading return rates can lure investors into purchasing assets that hold very little value. Some survey signature networks adopt a multi-token system where rewards are paid in a second token, creating ongoing selling pressure for the reward token.
User Error: As the blockchain industry is still in its infancy, creating and maintaining these income sources requires technical expertise and an investigative mindset. For some owners, it may be better to wait until these services become more user-friendly, or to use services that require minimal technical proficiency.
Lock-up periods: Some lending or mortgage methods require locking your funds for a specified period. This effectively makes your holdings illiquid during that time, exposing you to any event that may negatively impact the price of your assets.
Risk of Errors: Locking your tokens in a survey signature wallet or smart contract always carries the risk of errors. Typically, there are multiple options available with varying degrees of quality. It is essential to research these options before committing to one. Open-source software may be a good starting point, as these options are at least subject to community audits.
Closing Thoughts
Methods for generating passive income in the blockchain industry are growing and gaining popularity. Blockchain companies are also adopting some of these methods, offering services commonly referred to as generalized mining.
As products become more reliable and secure, they may soon become a viable option for a steady income source.
