The importance of investing can never be overstated. The right kind of investments are a sure-shot way to financial independence and security. And sure enough, there are a ton of ways to invest your money. From gold bonds and mutual funds to direct stocks and real estate, there is something for everybody. However, all of these investments come with risks of their own, and investors find themselves in the red quite often. This is especially true with the stock market. So, what do you do? Well, the emergent crypto and DeFi industries might have a solution.
By successfully re-creating the global financial system on the blockchain, DeFi now has a plethora of ways in which users can earn passive income. And the best part is that some of these don’t require any investment up front.
Crypto Cloud Mining
Mining is the process through which transactions are verified and blocks are added to the blockchain on proof-of-work networks like Bitcoin and Ethereum. Miners are rewarded in crypto for their contributions to the network. Depending on the network you choose to mine for, the mining process typically needs an understanding of technology and some pretty advanced computers capable of solving complex puzzles. If you are tech-savvy then this is probably one of the best ways to earn passive income with cryptocurrencies. Bitcoin miners currently make 6.25 BTC for every block mined.
Yield Farming on DeFi Protocols
The emergence of decentralized finance (DeFi) gave rise to various decentralized lending and borrowing protocols on blockchain networks like AAVE and MakerDAO. These protocols, however, need a huge amount of crypto assets to function and are willing to reward users who can provide this liquidity. If you have some crypto to spare, instead of just HODLing, you can use them to provide liquidity to these protocols. This very process is called yield farming. It is just like lending out money for interest.
To provide liquidity you are required to lock your crypto assets in a liquidity pool. Doing this will earn you interest and LP (liquidity provider). These tokens can further be staked in other decentralized lending protocols to earn additional interest.
Staking
Blockchain networks are still in their early stages of development and need to be constantly updated to suit the current market scenario. And because the networks are decentralized, the power of decision-making is given to the community of users through a proof-of-stake (PoS) consensus. Users can stake their crypto-assets on the platform and earn the right to vote on decisions that drive the future of the protocol. The network rewards them with additional crypto for doing this. Another sure-shot way of earning passive income.
Airdrop Campaigns
If you don’t have any investments to spare upfront, then airdrop campaigns are the one for you. New crypto projects and protocols often conduct airdrop campaigns to give away free tokens as a part of their marketing strategy. This is an excellent way for users to get early access to high-potential tokens for free and add them to their portfolios. As the project and its value continue to grow the token price soars, bringing in passive income. The downside, however, is that not all new crypto projects take off.
Play/Engage to Earn
The potential use-cases of cryptocurrencies and blockchain networks extend way beyond finance. As a result of this, the novel —– to Earn models started surfacing recently. This means that users can now earn passive income by doing the things they love. Gamers have the play-to-earn model where they can create a sustainable income source by playing games they love. Axie Infinity and Decentraland are examples of this.
On the other hand, there’s also a rise in the engage-to-earn model, led by the SocialFi platform Crypter. All users have to do is engage with their friends and communities on the Crypter platform to earn real monetary benefits. As the use-cases of cryptocurrencies continue to grow, there could be a surge in more such earning models.
The DeFi Opportunity
With prices surging and the cost of living sky-rocketing these days, a source of additional income is always welcome. Most of us turn to investments for this additional income. But now, with the rise of blockchain technology, there are a whole host of opportunities to earn passive income. Users can create not just one but multiple streams of additional income in DeFi, eventually improving their quality of life.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
