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Many investors like cryptocurrencies for their speculative nature and volatility. With good reason too, as very few other assets can make as many gains as cryptos can.
However, trading crypto is far from being the only way to make serious money with them. Cryptocurrencies are incredibly versatile when it comes to passive income and speculation.
In this article, we explore three less conventional ways to make a profit with crypto. Each of them will fit a different risk profile and provide different results. This should allow you to have a good view of the income options offered by the digital assets at your disposal and pick one that suits you the most.
Staking
Staking is probably the most beginner-friendly method of making passive income on this list. It involves locking your tokens into a blockchain and getting tokens in return for this service. That said, staking is actually an essential mechanism for proof-of-stake (PoS) blockchains like Cardano, Tezos and other emerging projects.
When users stake their tokens on a PoS network, they ensure the security of the transactions on the blockchain. The more users stake their tokens, the less likely it is that hackers and malicious actors will be able to carry out a 51% attack.
To incentivize users to stake their coins and provide higher security, blockchains offer variable staking rewards. These come in the form of newly created coins or fees from the transactions that were conducted on the network.
There are quite a few benefits to staking your coins. First of all, in most cases, it’s an extremely simple process. Usually, all you need to do is download a compatible wallet and lock your coins for the rewards to start accumulating automatically. While this will slightly differ from one blockchain to another, it’s generally very easy to do, even for the utmost beginner.
There’s also the fact that you are actively participating in the network’s development. In some cases, staking coins will grant you governance tokens that will allow you to vote on further development directions of the platform.
However, there are two major caveats. The first drawback to staking is that your tokens will be locked, which leaves them vulnerable to volatility. If the value of your crypto drops sharply, you won’t be able to sell it to limit the damage.
And finally, it’s worth noting that staking rewards are not particularly high. They provide an average of between 5% and 10% annual percentage yield, which means that you will have to lock up some substantial capital to see returns of any note.
NFTs
Next on our list are non-fungible tokens, or NFTs. These digital assets have been all the rage in the past year, and the NFT market has grown into a multi-billion dollar industry . Some of the most popular NFTs, like the Bored Ape Yacht Club and CryptoPunks, have been sold for thousands of ETH, equating to millions of dollars for a single digital artwork.
But what makes NFTs so appealing? Well, NFTs are digital assets that encompass unique characteristics and are recorded on the blockchain. In addition to their metadata, they can be linked to a rare artwork, piece of music or video, which increases their collectible status. Moreover, they conserve the benefits of blockchain tech, which means they:
- Are easily transferable
- Provide proof of origin
- Cannot be duplicated.
Consequently, these characteristics have contributed to NFTs becoming incredibly popular with collectors.
As an investor, you can start hunting for NFTs and speculate on their value on marketplaces such as OpenSea or SuperRare. The main idea is to follow the market and celebrity endorsements to be able to find the rare gem that can make 10 times your initial investment.
Keep in mind that NFTs remain highly speculative. Just like with cryptocurrencies, there’s no guarantee they will increase in value, so make sure you do your research before investing.
Rewards
Finally, you can sign up for various rewards to generate some passive income with your crypto. We can single out a few reward systems that can be quite lucrative in the long run:
- Airdrops. These marketing instruments represent free money for the participant. Blockchain projects will require that you complete a set of social tasks (Twitter follow, share, etc) to become eligible for these rewards. At a predetermined date, the protocol will send you free tokens directly into your wallet.
- Liquidity mining. This method requires that you lock up a token pair into a decentralized exchange. By providing liquidity, you will enable the exchange to carry out its most basic functions. For this service, the DEX will reward you with liquidity pool tokens and a portion of the transaction fees that occur on the exchange.
As you can see, there are multiple ways to generate a stream of passive income with your crypto.
Conclusion
More than just speculative assets, cryptocurrencies are incredibly useful for creating revenue. While trading remains the most lucrative method for making profits, it remains risky, time-consuming, and requires a fair share of market knowledge.
The methods we depicted in this article present smaller reward opportunities but are much safer and require very little of your time to be conducted successfully.
