From the time of its inception, the crypto market has become one of the fast-growing industries today. The growth of the DeFi sector and other innovations in the industry enabled users to earn passive income using their digital assets. When the market is in a dip, sentiments could be very high and oftentimes results in massive sell-offs. But instead of selling off or simply holding on to your crypto assets, you may try these investments that generate passive income. But before investing, consider the risks that come with these crypto investments and do your own research.
Proof-of-stake is a blockchain consensus mechanism and is more energy-efficient compared to proof-of-work or mining. Users can earn passive income by delegating a specific number of their digital assets to blockchain networks that utilize POS consensus algorithms. The leading staking platforms include Solana, Ethereum, Cosmos, Tezos, Neo, and Polkadot. Users can stake their virtual assets through exchanges, participate in pools or become a validator by committing their digital assets to staking platforms. By doing this, users can earn up to more than 10% APY as rewards.
Users can also invest their digital assets in lending protocols to earn interest paid by borrowers. By participating as lenders, users can earn from 10% up to more than 18% APY as rewards. Top lending protocols include Aave, MakerDAO, Sturdy.finance, Compound, Sushiswap, Curve Finance, and Anchor. The following are the different types of lending crypto investors may opt to participate in.
- Margin lending
- Centralized lending
- Decentralized lending
- Peer-to-peer lending
Although mining or proof-of-work of cryptocurrencies can be costly for investors, it remains one of the most profitable investments to generate passive income. Users can mine digital assets through individual mining, participating in collective pools mining, and cloud mining. Among these, cloud mining comes with less investment and does not require investors to buy crypto mining equipment to set up their own farms. They mine digital assets by using rented computing power from a service that mines itself on an industrial scale. Users just pay for someone else’s power crypto mine equipment and get compensated by receiving coins. Passive earning could depend on the subscribed plan that comes in different hash rates depending on the type of token you want to earn. Cloud mining subscriptions are usually sold on yearly contracts. For example, if you subscribe to a plan with an average hash rate of 100 GH/sec for bitcoin at 5 US dollars a pop, less the charges for maintenance fees, you will be receiving more or less $1,900 annually. If you would like to invest in cloud mining, you may consider the following cloud mining platforms.
- IQ Mining
- Crypto Universe
- Genesis Mining
But beware as some platforms could turn out to be a scam. Some investors have fallen into Ponzi schemes used by scammers in this type of investment.
One of the crypto investments that offer relatively high rewards but may also come with high risk and definitely not for newbie investors. But once investors could grasp the know-how, this type of investment could turn out one of the most lucrative investments in the DeFi space. To invest in yield farming, investors need tokens into liquidity pools of DeFi farming protocols. Farmers receive a portion of the trading fees from users accessing the pools and can earn from a conservative 10% up to more than 100% rewards. Leading DeFi yield farming platforms include PancakeSwap, UniSwap, Aave, Curve, and Venus.
But just like any other crypto investment, yield farming also comes with risks like impermanent loss, failure in smart contracts, and even exploits.
Crypto Savings Account
This type of investment is similar to traditional banking, some crypto service providers allow users to deposit their crypto assets to earn interest. Although similar to a traditional savings account, investors in these platforms earn a higher yield. Users just need to open an account and deposit their virtual assets or stablecoins. Crypto savings accounts come with fixed or flexible lock-up periods and receive interest up to 36% APY depending on the platform. This type of investment is almost hassle-free as investors do not have to get involved with any activity. The leading platforms for this type of investment include Nexo, AQRU, CoinLoan, YouHodler, and Celsius Network.
Holding Revenue-earning Tokens
Holders of tokenized stocks or cryptocurrencies backed by shares of equity in a company receive a fraction of the company’s revenue as rewards. In order to be eligible for the revenue, users need to hold these tokens or stake a specific amount of tokens. The number of tokens determines the user’s dividend payout. The following are the dividend-earning tokens that you might want to consider buying to receive a fraction of the company’s revenue.
- Kucoin (KCS)
- Komodo (KMD)
That wraps up our list of different crypto investments that generate passive income. As an investor, it is always best to “do your own research” as these investments always come with risk.