A person gets financial freedom when the income that he or she receives without active participation exceeds the cost of maintaining the desired lifestyle. Passive income is the receipt of funds that does not depend on daily activities. This means that a person receives money not only on a certain date when he is entitled to a well-deserved salary, but even when he is sleeping or taking a shower. And while a person is busy with his own business, his investments are working for him.
But for passive income to be profitable, you first need to work yourself. At a minimum, you need to study the market and know which passive income options are now profitable, and which ones are at risk of losing investments. Until recently, mostly traditional instruments, such as bank deposits, stocks, or renting out real estate brought us passive income. But with the advent of cryptocurrencies, effective ways of passive income have emerged.
Passive earnings on cryptocurrency are gaining momentum. Today we can receive money even simply by owning crypto. After over 12 years of the appearance of the first cryptocurrency, there are many options for earning money. Among them are different in terms of profitability and risks. Since we are determined to make money, the ones that bring more income are of greater interest to us.
Cryptocurrency stakingNow in the crypto industry, there is a tendency to move from the Proof-of-Work algorithm, on the basis of which Bitcoin is built, to the Proof-of-Stake algorithm, which allows you to receive passive income for storing coins. This method of passive earnings is called staking. Its essence lies in the fact that the user purchases crypto coins and just keeps them in his account, receiving a reward for this.
Staking is an integral element of the Proof-of-Stake mechanism, that is, the confirmation of the share of ownership. Proof-of-Stake blockchains allow you to generate income by storing existing coins. When a new block is created, a wallet is randomly selected to verify this action. The more funds in the wallet, the more chances it has to be selected, and therefore receive a reward. To do this, you just need to keep your wallet activated.
The advantage of staking is that crypto coins can be sold at any time, and they do not lose value due to the stake. Also, the user can delegate his share of ownership to another user, and in return receive a percentage of the mining reward. Among other things, PoS is more energy-efficient and more resistant to attacks.
Staking cryptocurrencies, which generate passive income for storing them, are taking over the market, and PoS could become the industry standard. The introduction of staking by projects will increase the value of their tokens. For example, this happened with the Tezos, which went up in price by 55% within an hour, after the announcement of the transition to the PoS algorithm. After the addition of staking, its cost increased by several hundred percent.
When choosing a coin for staking, pay attention to the project capitalization, rating on Coinmarketcap, whether the token is traded on major exchanges, White paper, as well as to the roadmap reflecting further plans for the development of the project.
Staking on exchangesStaking is available on many cryptocurrency exchanges such as Binance. Binance staking appeared in October 2019. It assumes deposits with an even higher level of profitability. Here the average annual yield can be 12%. Binance supports staking for over 20 coins, including Stellar (XLM), NEO, Algorand (ALGO), Komodo (KMD), Ontology (ONG), VeChain (VTHO) and others. Overall, Binance is committed to supporting Proof of Stake blockchains. The exchange allows users to participate in validation by purchasing the required share of coins and then receiving rewards directly on Binance.com. All you need to do is just store tokens on your account and receive rewards.
Crypto exchange OKEx also offers staking opportunities. In March 2020, she announced the launch of the Earn service, which combined all the possibilities of passive earnings on the exchange. One of Earn's features is to transfer assets at once from multiple user accounts to one account for staking or landing. For staking, the platform offers over 30 popular cryptocurrencies, including Bitcoin, Ethereum, Litecoin, Monero, DASH, etc.
To do this, you just need to buy coins, transfer them to a savings account and get a daily profit. For staking DAI on OKEx, there is an additional 1% reward. Also, a new user receives a welcome bonus upon the first purchase of a crypt for a certain minimum amount.
Compound interest in stakingLong-term investment-minded crypto holders can increase the profitability of their investments in several ways. Staking is considered to be one of the most famous, safe and reliable methods.
An effective way to increase passive income through staking is interest capitalization or compound interest. When you receive a return on investment, you can add it to the stake so that the percentage is accrued on a larger amount. The use of compound interest can increase the investor's profit by hundreds of percent in the long run.
Bottom lineWhen considering any methods of passive income, it is worth starting with the fact that there is always a risk of losing your investment. The main thing is to choose a method that is relevant now and is right for you. It is unambiguous that staking by its nature refers to more profitable ways to make money on cryptocurrencies, at least due to the abandonment of computing power. This significantly reduces the initial costs of crypto assets users.
You need to find a reliable service that will help you implement your passive income plan. Select and partner with the best platforms, that have been on the market for a long time, are reliable, respected and flawless performance. Understand the topic and have excellent passive earnings.