Earning a steady stream of passive income has always been a dream for many. While unrealistic, it is actually quite possible to develop multiple streams of passive income. You could invest in dividend-paying stocks, have a share in a profitable business, or collect rental income from properties.
Alternatively, you could take the road less walked and turn to cryptocurrencies. Cryptocurrencies are basically a digital form of money that do not exist in a physical form. They are fully decentralized and exist in a deregulated marketplace. By now, you’d probably have heard about Bitcoin (BTC), Ethereum (ETH), XRP, and Litecoin (LTC) to name a few.
So how is it that digital money can allow you to earn an income? Read on to find out:
Unlike traditional mining, you won’t need to head underground with a pickaxe when mining for cryptocurrency. What you will need however would be powerful computers with supreme amounts of processing power. For simplicity’s sake, we’ll be using the Bitcoin mining process as an example. During the cryptocurrency mining process, transactions on the blockchain are processed and validated. Upon successful completion, miners are then rewarded with Bitcoins.
Mining ensures that transactions stored on the blockchain are up-to-date and accurate. It also prevents double-spending from occurring on the blockchain. So if you’ve got the capital and access to cheap electricity, cryptocurrency mining is a great way to earn passive income. It should be noted that most mining operations are run on an industrial scale and you’ll need extreme amounts of money to get started.
Alternatively, you could also invest in a mining pool for a share of cryptocurrencies earned. Mining pools are a group of people who have gathered their resources together to more effectively mine for cryptos.
Being entirely decentralized, cryptocurrencies are reliant upon their users to constantly validate and update transactions on the blockchain. Without it, it would be impossible to keep track of movements, transfers, and ownership. a mechanism is known as Proof of Work or PoW. PoW allows miners to validate and verify transactions and values on the blockchain thus keeping it healthy.
Unfortunately, this is extremely time and resource-intensive which is why Proof of Staking or PoS is gradually rising in popularity.
In a nutshell, staking involves holding or locking in coins for a certain period of time. These coins can then be used to validate transactions on the blockchain. As staking is considered to be a service, you will be offered a payment (usually in crypto) for staking your cryptocurrencies. Being much less resource-intensive, staking is a great way for an investor to earn passive income
This riskiest but most lucrative method of earning passive income with cryptocurrencies is via trading. Cryptocurrency traders operate on the concept of buying low and selling high. They earn money by speculating on a rise/fall and acting in accordance.
For example, you predict that with the launch of Coinbase’s IPO, prices of cryptocurrencies are set to rise in the days to come. Hence you begin buying up Bitcoin, Litecoin, and Ethereum in anticipation. True enough 3 days later, prices of all 3 cryptocurrencies have appreciated by more than 25%. This allows you to liquidate your investments in the market at the new price – netting you a healthy profit.
On paper, this method sounds easy enough but is actually far from it. The extreme volatility of the crypto market means that you can easily double your initial investment or lose all of it in a matter of minutes. This is why crypto investors need to be well-read and up-to-date on current events. Missing a trade or misreading market conditions could lead to you wiping out your entire portfolio.
Besides trading, there are also people profiting from lending Bitcoin. We don’t have time to get into that topic now, but you can check the best crypto lending platforms here: https://blog.tezro.com/best-bitcoin-lending-sites/
So there you have it, the 3 most effective ways of earning passive income with cryptocurrencies. As always, remember to work with reputable partners and keep an eye on your investments at all times.