Beginner's Guide to Earning Passive Income with Digital Currency

What is passive income? In the blockchain industry, people can earn profits through trading or investing in projects. However, this approach usually requires detailed research and a significant time investment, and it may not necessarily become a stable and reliable source of income.

Even seasoned top investors can suffer long-term losses. To survive extended periods of loss, exploring other income sources is a good strategy.

In addition to trading or investing, you can also increase your digital currency holdings through other methods. These methods can generate continuous income similar to interest but require minimal setup effort, can be maintenance-free, and allow you to sit back and enjoy the benefits.

This way, you can diversify your income streams, and the total of these various incomes can be quite substantial.

This article will introduce some methods to earn passive income through digital currencies.

What are the ways to earn passive income with digital currencies? Mining Mining essentially involves using computational power to maintain the network and earn rewards. Although mining does not require owning digital currencies, it is one of the most traditional ways to earn passive income in the digital currency space.

In the early stages of Bitcoin development, mining with central processing units (CPU) was an effective solution. As the network’s hash rate increased, most miners switched to more powerful graphics processing units (GPU). As competition intensified, it eventually evolved into an arena dominated by application-specific integrated circuits (ASIC)—electronic devices with chips specifically designed for mining.

The ASIC industry is highly competitive, with companies holding substantial R&D resources dominating the market. These chips may already be outdated when they reach retail markets and often require a long mining period to break even.

Therefore, most Bitcoin mining operations are now handled by professional companies, making it difficult for ordinary individuals to generate passive income through mining.

However, for some people, mining tokens that use low hash rate proof-of-work mechanisms can still be profitable. In these networks, using GPUs remains feasible. Mining less popular tokens can potentially yield higher returns, but the risks also increase. Mined tokens may become worthless instantly, lack liquidity, have vulnerabilities, or be hindered by other factors.

It is important to note that installing and maintaining mining equipment requires initial investment and certain technical expertise.

Staking Essentially, staking is an alternative to mining that consumes fewer resources. It usually involves depositing funds into a suitable wallet and performing various network functions (such as validating transactions) to earn staking rewards. Staking (holding tokens) incentivizes ownership to maintain network security.

Staking networks use proof-of-stake as their consensus algorithm. There are also other variants, such as delegated proof-of-stake or leasing proof-of-stake.

Staking generally requires setting up a corresponding wallet and directly depositing tokens. In some cases, this process involves adding funds to or delegating to a staking pool. Some trading platforms can handle this for you. You only need to deposit tokens into the platform, and it will take care of all technical requirements.

Staking can be an excellent way to increase your digital currency holdings effortlessly. However, some staking projects adopt distorted strategies to artificially inflate expected staking yields. In such cases, studying the tokenomics model is crucial to effectively temper the predicted staking reward outcomes.

The crypto space supports staking for various tokens. These tokens can generate staking rewards. Simply deposit tokens into the platform and follow the instructions to earn rewards.

Lending Lending is a completely passive income method where you can earn interest on your held digital currencies. Many peer-to-peer (P2P) lending platforms support users locking funds for a period and earning interest. The interest rate can be fixed (set by the platform) or determined by the lender based on current market rates.

Some platforms that offer margin trading services have already launched this feature on their dedicated platforms.

This method is very suitable for long-term holders who want to increase their digital currency holdings without much effort. It is important to note that locking funds in smart contracts always carries the risk of vulnerabilities.

Crypto lending offers multiple options, allowing you to earn interest simply by holding assets.

Running Lightning Nodes The Lightning Network is a second-layer protocol built on blockchains like Bitcoin. It is a off-chain small payment network used for fast transactions that are not immediately transferred to the underlying blockchain.

Transactions on the Bitcoin network are usually unidirectional. That is, if Alice sends Bitcoin to Bob, Bob cannot return it through the same payment channel. The Lightning Network uses bidirectional channels, requiring both parties to agree on the transaction terms in advance.

Lightning nodes provide liquidity by locking Bitcoin in payment channels, expanding the capacity of the Lightning Network. Operators then earn fees from payments completed through their channels.

Running a Lightning node may be challenging for Bitcoin holders with limited technical skills, but the earnings largely depend on the overall adoption rate of the Lightning Network.

Alliance Programs To encourage users to help promote the platform and refer new users, some digital currency companies have established reward programs. These include sharing referral links, friend recommendations, or offering discounts to new users you refer.

If you have a high social media following, an alliance program is an ideal way to earn marginal income. However, to avoid spreading low-quality projects, it is essential to conduct thorough research on the services beforehand.

If you’re interested in earning passive income in the crypto space, join the crypto alliance program and earn rewards by promoting the crypto community worldwide!

Master Nodes In simple terms, master nodes are similar to servers but operate within decentralized networks, possessing special functions different from regular nodes in the network.

Token projects often grant certain privileges only to participants who make significant contributions to maintaining network stability. Setting up a master node usually requires substantial upfront investment and technical knowledge.

However, some master nodes require a very high amount of token holdings, which can lead to illiquidity of the staked assets. Projects using master nodes often promote high expected returns, so it is crucial to conduct your own research (DYOR) before investing.

Forks and Airdrops For investors, utilizing hard forks is a relatively simple strategy. The only requirement is holding the forked tokens at the time of the hard fork (usually determined by block height). If multiple competing chains emerge after the fork, holders will have balances on each chain.

Airdrops are similar to forks; users only need to own a wallet address to receive airdrops. Some exchanges offer airdrop services for users. Note that receiving airdrops never requires sharing private keys. If such a request occurs, it is usually a scam.

Blockchain-based Content Creation Platforms The advent of distributed ledger technology has enabled many new content platforms. This technology supports content creators to produce content in various unique ways and monetize it without intrusive ads.

In such systems, content creators always retain ownership of their works and often find ways to monetize their attention. Initially, creators need to invest significant effort. Once they accumulate a large amount of high-quality content and successfully launch, this can become a stable source of income.

What are the risks of earning passive income with digital currencies? Buying low-quality assets: Artificially inflated or misleading return rates can tempt investors to purchase assets of very low value. Some staking networks use multi-token systems, paying rewards in a second token, which can create ongoing selling pressure on the reward tokens. User errors: The blockchain industry is still in its early stages. Building and maintaining these income sources require technical knowledge and critical thinking. We recommend some holders patiently wait until these services become more convenient and only use those with low technical requirements. Lock-up periods: Some loans or staking require funds to be locked for a period, making assets illiquid during that time and preventing timely responses to negative price movements. Vulnerability risks: Locking tokens in certain staking wallets or smart contracts always carries the risk of vulnerabilities. Generally, the quality of options varies. Therefore, thorough investigation and research are necessary before making a choice. Open-source software can be a good starting point, as these options have at least undergone community review.

Summary Methods to earn passive income in the blockchain industry are increasing and becoming more popular. Blockchain companies are also adopting some of these methods, offering broad mining services.

As blockchain products become safer and more reliable, they may soon become dependable options for generating stable income.