Crypto Passive Income: 8 Ways to Earn (2024)
%20(1).png)
Key Takeaways
- You can start earning passive income from cryptocurrency — even if you’re a beginner!
- Interest rewards are one of the easiest ways to start earning passive income — with exchanges like Coinbase offering rewards over 5% on USDC!
Looking for an easy way to earn passive income from cryptocurrency? In this article, we’ll break down 8 methods for investors like you — ranging from easy to hard!
| Passive Income Method | Description | Difficulty |
|---|---|---|
| Cryptocurrency Interest Rewards | Hold cryptocurrency on a platform like Coinbase and earn rewards! | Very Easy |
| Dividend Earning Tokens | Get a cryptocurrency that pays automatic dividends! | Very Easy |
| Crypto Staking | Stake your cryptocurrency to earn rewards. | Easy |
| Crypto Lending | Lend out your cryptocurrency on platforms like Compound! | Medium |
| Play-to-Earn Games | Play play-to-earn games like Axie Infinity. | Medium |
| Crypto Affiliate Programs | Earn money through your audience via affiliate links. | Medium to Hard |
| Yield Farming | Use DeFi protocols to maximize yield. | Medium to Hard |
| Cryptocurrency Mining | Mine cryptocurrencies like Bitcoin using a specialized mining rig. | Hard |
Cryptocurrency interest rewards
Difficulty: Easy
Many cryptocurrency exchanges offer interest rewards on cryptocurrency. Currently, platforms like Coinbase offer rewards over 5% on USDC!
How to get started:
- Buy USDC on a platform like Coinbase or Kraken.
- Hold your USDC on the platform — and let the rewards start pouring in! Platforms like Kraken may require you to opt-in to start earning rewards.
Pros
Easy to get started: Earning interest rewards is low effort! All you need to do to get started is to open up an account with an exchange and deposit the relevant cryptocurrency. You’ll get started earning rewards automatically!
Low technical barrier: Unlike some of the other items in this article, earning cryptocurrency interest requires a very low technical barrier to entry!
Easy liquidity: Most exchanges allow you to easily withdraw your cryptocurrency — meaning that you’ll have access to your crypto when you need it!
Cons
High investment for reliable income: To earn a reliable monthly income from interest rewards, you’ll need to have a large amount of cryptocurrency deposited in your exchange. Remember, your interest rewards are calculated based on how much crypto you deposit.
Bankruptcy risk: Before you choose a cryptocurrency platform, you should do your research. In the past, cryptocurrency exchanges like BlockFi and Celsius that offered high interest rewards went bankrupt.
Dividend earning tokens
Difficulty: Easy
Dividend-earning tokens are a type of cryptocurrency that provides holders with a share of the project's earnings or profits. Unlike traditional stocks, where dividends are paid out in fiat currency, dividend-earning tokens give holders additional units of the same cryptocurrency.
How to get started
- Find a cryptocurrency that offers dividends — such as KuCoin’s KCS, AscendEX’s ASD, and NEO.
- Hold the cryptocurrency and start earning rewards!
Pros
Low effort: Since dividend earning tokens pay out dividends automatically, earning passive income is relatively low effort!
Compound interest: Typically, dividend earning tokens offer compound interest — which could lead to large rewards!
Cons
Limited adoption: Dividend earning tokens are relatively uncommon. It’s much easier to find cryptocurrencies that offer staking rewards.
High risk: Many dividend earning tokens are not as established as cryptocurrencies like Bitcoin and Ethereum. As a result, dividend earning tokens may have a higher risk of failure. Do research before you invest!
Staking
Difficulty: Easy
Cryptocurrency staking involves locking up a certain amount of a particular cryptocurrency to support the underlying blockchain network's operations. In return for staking their coins and helping to maintain the blockchain's security and consensus, participants receive staking rewards!
How to get started
- Use MetaMask (or another wallet that offers cryptocurrency staking).
- Go to the cryptocurrency you wish to stake, then click ‘Stake’.
- Choose a staking validator, then follow the instructions to complete the process.
Alternatively, you can use an exchange like Coinbase to stake your cryptocurrency. However, the SEC has been cracking down on staking services offered by centralized exchanges, claiming that this is an ‘unregistered security’.
Pros
Easy to get started: Compared to mining, staking is generally less resource-intensive and requires minimal technical expertise. Many platforms and wallets support staking services!
Stable earnings: Staking earnings are typically more stable and reliable than other forms of passive income!
Compound interest: Staking rewards automatically compound — which can lead to a large growth in your assets over time!
Cons
Percentage of investment: Your staking rewards are typically a percentage of the cryptocurrency you staked. This means that you’ll need a large stake to earn a reliable passive income.
Regulatory risk: In recent years, the SEC has claimed that exchanges offering staking as a service should be considered an ‘unregistered security’. As a result, exchanges are not able to provide cryptocurrency staking services in some jurisdictions.
Liquidity: Cryptocurrency staking sometimes requires you to ‘lock up’ your holdings for a set period of time, which means that you may run into issues if you need access to your holdings immediately!
Crypto lending
Difficulty: Medium
You can earn rewards by lending your crypto to businesses and traders! Lending platforms and DeFi protocols manage the process, allowing you to easily earn rewards!
How to get started
- Get a wallet — such as MetaMask — that can interact with decentralized applications. Make sure this wallet is funded with the cryptocurrency you want to lend.
- Go to the Compound Finance app and click ‘Connect Wallet’.
- Add the cryptocurrency you wish to supply. Then click ‘Approve & Add’.
Pros
Low barrier to entry: Getting started with lending out your cryptocurrency through a platform is relatively easy and low effort.
Compound interest: DeFi protocols like Compound offer the ability to earn compound interest on DeFi lending!
Cons
Platform risk: It’s important to do research on your cryptocurrency loan platform before getting started. In the past, cryptocurrency loan platforms like Celsius and BlockFi have gone bankrupt — which means customers lost access to holdings.
Low protections: Most crypto lending platforms are unregulated and offer limited protections to borrowers and lenders.
Illiquid: It’s often difficult to withdraw your holdings from a crypto lending platform. It’s likely that you’ll need to go through a long waiting period to get access to your funds.
Play-to-earn games
Difficulty: Medium
Play-to-earn games like Axie Infinity allows users to earn cryptocurrency rewards while playing games!
How to get started:
- Most play-to-earn games require you to buy NFT items to get started. For example, Axie Infinity requires you to purchase three Axies (Pokemon-like creatures) to start the game.
- Once you have the items you need, download the game on your device!
- Start playing the game and earning rewards!
Pros
Fun: Play-to-earn games combine the potential for passive income with entertainment. You’ll have the opportunity to earn rewards while playing engaging video games!
Inclusive: Play-to-earn games are inclusive! Earning money through play-to-earn can be a great option for investors who don’t have the technical skills necessary for methods like cryptocurrency mining.
Globally accessible: Play-to-earn games are accessible all over the world! Some investors even choose to set up ‘scholarship programs’. In these programs, gamers give funds to investors in low cost-of-living countries to help them get started with the game, and in exchange, receive a portion of rewards!
Cons
Upfront investment required: Games like Axie Infinity require you to buy NFTs to get started playing.
Time commitment: Earning a reliable income from play-to-earn games typically requires a significant time commitment. You’ll likely need to play the game for multiple hours a day to earn meaningful rewards!
Dependent on game success: Your earnings from play-to-earn games are dependent on the game’s success. Often, the tokens you earn from playing a play-to-earn game increase or decrease in value based on the game’s popularity.
Crypto affiliate programs
Difficulty: Medium to hard
Crypto affiliate programs allow you to earn passive income by promoting cryptocurrency-related products or services. You can sign up for an affiliate program, receive unique referral links, and share them with their audience. When someone uses the affiliate link to make a purchase or sign up, you’ll earn a commission!
How to get started
- Sign up for an affiliate program — such as programs offered by CoinLedger, Coinbase, and/or HaasOnline. Depending on the platform you are using, your application may require approval.
- Once your application is approved, attach your affiliate link in your videos, blogs, podcasts, or other relevant forms of media and promote the product to your audience.
- Once your audience signs up for the product, you will earn a commission.
Low barrier to entry: Getting started with an affiliate program is usually quick and easy and requires no upfront investment — which makes it a low-risk way to get started earning passive income.
Recurring income: Some crypto affiliate programs offer recurring rewards! For example, CoinLedger’s affiliate program offers a 25% recurring commission every time a customer buys a tax report!
Diverse offerings: Crypto affiliate programs cover a wide range of products and services, including exchanges, wallets, trading tools, and educational resources, enabling affiliates to choose programs that align with their audience's interests.
Cons
Designed for large audiences: Cryptocurrency affiliate programs are typically designed for investors who have a large audience through mediums like YouTube, podcasting, or a blog! If you don’t have a large following, affiliate programs may not be a reliable source of passive income.
Variable: Affiliate income can vary significantly based on factors like market sentiment.
Competitive: Getting your audience to sign up for affiliate programs can be difficult. Many popular crypto influencers promote affiliate links — which means that competition is high!
Yield farming
Difficulty: Medium to Hard
Yield farming is the practice of using DeFi to earn high rewards! In contrast to staking and lending, the term ‘yield farming’ refers to a wide range of DeFi strategies — and often involves leveraging multiple DeFi protocols at a time.
How to get started
- Find a decentralized application that offers high yield (often new applications will offer artificially high rewards to attract new users).
- Deposit liquidity in the exchange.
Yield farming requires deep knowledge of the DeFi ecosystem. To be able to navigate trustworthy decentralized applications, you’ll need to be an experienced cryptocurrency investor.
Pros
High rewards: Yield farming can offer very high returns. Many DeFi protocols offer lucrative rewards to new users to incentivize usage!
Customization: Yield farmers can use various strategies and platforms to optimize their risk and reward preferences! You can tailor your approach to suit your unique financial goals.
Cons
Protocol risks: Unfortunately, the cryptocurrency space is filled with scams and fraud. It’s important to do due diligence on a protocol before you commit to locking up your funds!
Impermanent Loss: Yield farming can lead to impermanent loss — which happens when the value of your crypto declines while being locked in a DeFi protocol!
Technical Expertise: To get started with yield farming, you’ll need a solid understanding of DeFi protocols, smart contracts, and market dynamics. As a result, yield farming may not be the best option for beginner investors!
Cryptocurrency mining
Difficulty: Hard
Cryptocurrency mining is the process of validating transactions on a blockchain network using specialized hardware. In exchange for contributing processing power, you’ll earn cryptocurrency rewards.
How to get started
- Research electricity costs in your area and take a look at the best coins for mining to determine whether mining will be profitable for you.
- Set up a mining operation with mining hardware and software.
- Depending on your situation, you may need to set up an LLC. Also, you will need to keep careful records of your profits and expenses for tax purposes.
- Once you’ve completed these steps, you’re ready to get started mining crypto!
Pros
Reliable income stream: Successful cryptocurrency miners receive a steady stream of passive income!
Technical learning: If you’re interested in diving into the ins and outs of the blockchain, mining cryptocurrency can be a valuable learning experience.
Cons
High set up costs: Setting up a cryptocurrency mining operation can be expensive and time-consuming.
High energy consumption: Cryptocurrency mining requires significant amounts of electricity. Typically, miners will set up operations in regions where electricity is cheap.
High competition: Blockchains like Bitcoin have high competition when it comes to mining — which means it can be very difficult for at-home miners to successfully validate transactions and earn rewards.
How to pick a crypto passive income platform
If you’re looking to get started with a crypto passive income platform, you should take into account the following factors:
Reputation: Unfortunately, the crypto ecosystem is rife with scams. You make sure you choose a crypto passive income platform with a strong reputation.
Centralized or decentralized: Consider whether you want to use a centralized or decentralized platform to earn a passive income. While centralized platforms are easy to use, you may lose access to your crypto in the event of a bankruptcy. Decentralized applications are more difficult to use and are not recommended for beginners.
Knowledge of decentralized protocols: If you’re planning to use decentralized protocols to earn passive income, you should take time to understand how to navigate these applications. Consider watching YouTube videos that can show you how to navigate the decentralized ecosystem.
Can I realistically make a monthly income from cryptocurrency?
While it’s certainly possible to make income from cryptocurrency alone, it can be difficult and unreliable. The cryptocurrency market is volatile, and a market downturn can lead to a significant loss of income.
For most investors, it’s recommended that cryptocurrency should be treated as supplemental income rather than a main source of income.
Is crypto passive income taxable?
Cryptocurrency is subject to tax.
When you earn cryptocurrency, you’ll recognize ordinary income based on the fair market value of your crypto at the time of receipt.
When you dispose of your cryptocurrency, you’ll incur a capital gain or loss depending on how its price has changed since you originally received it.
Frequently asked questions
- What crypto generates passive income?
- Can you make passive income with crypto?
- What is the best crypto wallet for passive income?
- Are there crypto coins with automatic payouts?
- Can I make $100 a day in crypto passive income?
.png)
KNOWLEDGE BASE
Demystify Crypto Taxes
The Ultimate Crypto Tax Guide (2024)
This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.
