Over the last few years, decentralized finance has gained popularity, resulting in some ways to invest your assets. This guide will show you some of the most popular methods of earning cryptocurrency if you already possess it. But first, we will walk you through some of the most popular options.
This article does not intend to provide financial advice or endorse any particular digital asset, provider, or service. The performance of digital assets is volatile and risky, and past performance does not guarantee future success. In addition, their availability and services can be affected by potential regulations or policies. Before making a decision, you should consult with a financial professional. There is a possibility that the author may own the cryptocurrency discussed on this page.
How does crypto earning work?
Your digital assets can be put to work to grow your holdings through crypto earning passively.
An easy way to accomplish this is to deposit your assets in an eligible exchange account or to use a specialized lending service. For those with more experience with crypto, a personal wallet can also be used to gain access to blockchain-based services. However, the risk associated with this is higher.
Riskier options are known for offering rates north of 20% APY, with potential earnings varying widely depending on the method employed.
With low-interest rates and high inflation, crypto earnings offer an alternative to traditional savings accounts. However, there are some risks involved.
To earn cryptocurrency, there are seven main methods:
Crypto savings accounts
Crypto savings accounts work by holding or locking up your assets in exchange for a fixed or variable return. Sometimes, you can even deposit US dollars into an account to earn yield without owning any crypto. Most major cryptocurrency exchanges now offer this yield-bearing product, often marketed as an “earn account.”
The downside of crypto savings accounts is that they do not offer safety nets, unlike high-interest bank accounts. If your funds are compromised, very few account providers provide insurance coverage.
By staking cryptocurrency, you are locking up your assets within an intelligent contract to assist a network in verifying transactions.
By doing this, you will be able to become involved in the fundamental operation of a blockchain without requiring significant capital. In addition, since staking is more environmentally friendly than mining, most modern blockchains have replaced mining with staking.
In exchange for lending your crypto to the blockchain, you will receive freshly minted coins (known as block rewards) and a portion of the gas fees. As a result of the number of people staking, gas fees, and network congestion, potential earnings will be determined.
Exchanges and wallets that support staking and services can be used to stake.
Cryptocurrency debit cards
In terms of accessibility, crypto debit cards are one of the most accessible crossroads between traditional finance and cryptocurrencies. These cards operate similarly to Visa or MasterCard, except that crypto can be loaded on them and used at merchants worldwide that accept crypto.
It is common for crypto cards to offer unique rewards to encourage spending, typically in crypto cashback. For example, Crypto.com’s debit card offers a variable cashback rate in the form of a CRO on eligible purchases and rebates for Spotify and Netflix subscriptions.
It is a process whereby crypto or fiat currency is lent to borrowers on an eligible exchange or through a specialized lending service. It is the responsibility of lenders to deposit their cryptocurrency into a pool that is accessible to borrowers.
A lender earns a percentage of the interest repaid by the borrower, which varies according to the loan size, collateral present in the pool, and the asset being borrowed.
Lenders and borrowers face several unique risks, so it is a good idea to read further before making any decisions.
One of the most advanced ways to earn cryptocurrency is yield farming, which is unsuitable for everyone. This method involves locking your cryptocurrency in a protocol known as an automated market maker (AMM), which provides liquidity for users who need assets for other purposes.
In return, liquidity providers receive a portion of the transaction fee. As an additional incentive, the AMM may issue bonus tokens. Experienced liquidity providers often move liquidity between high-yield pools to maximize returns to take advantage of market movements. Yield aggregators are applications and algorithms that can perform this task automatically.
Despite the possibility of higher earnings, yield farming is also associated with increased risk.
The mining process involves high-powered computers solving complex mathematical problems to verify transactions on the blockchain. As compensation, miners receive a portion of the cryptocurrency, sometimes referred to as a block reward.
Mining popular coins such as Bitcoin requires a significant investment because the necessary computing power to earn a decent return cannot be achieved with a personal computer. As a result, it is no longer a viable method of making crypto for most people.
Blockchains such as Monero and Ravencoin have attempted to limit the use of mining farms and allow individuals with the proper hardware and expertise to earn crypto.
Earn free crypto
There are numerous ways to earn free crypto without using your existing assets. You have probably heard of popular options such as play-to-earn (P2E), using a browser extension, or performing microtasks, but there are many more options available.
It would be best if you kept in mind that most ways to earn free crypto are less profitable than the ones we have listed above, and the crypto space is particularly prone to fraud.
Be aware of the risks
Investing in your crypto to earn passive returns may sound appealing, but this is not without risk. Before investing in any crypto-earning product, ensure that you fully understand them.
There is no FDIC protection – The US government’s Financial Claims Scheme guarantees bank assets up to $250,000, but crypto savings accounts and other earning protocols are omitted. As a result, the loss or theft of your digital assets could result in your capital loss. Several popular crypto platforms have introduced insurance funds to mitigate against this risk, but this often does not apply to earning accounts, so read the fine print carefully.
The risk associated with third parties – No matter how reputable a third-party platform may be, entrusting your funds to it places you at risk of loss. You are unlikely to be able to recover assets held on an exchange or in an earning account in the event of theft or platform insolvency.
The volatility of the cryptocurrency market – Cryptocurrencies are volatile and unpredictable. It is typical for earning protocols to require you to lock up your cryptocurrency for a set period. Investing in cryptocurrency risks losing some or all of your capital if the price drops. Crypto-earning products often use stablecoins: digital currencies pegged to underlying assets such as the US dollar – to protect themselves from volatility.
Technology Advancements – Through staking, lending, and yield farming, smart contracts enable crypto investors to earn income. It should be noted, however, that they are still a relatively new piece of technology that is vulnerable to bugs and hacks. In the past, millions of locked-up tokens have been stolen due to insecure smart contracts.
You may be subject to tax – Several crypto investors are unaware that asset purchase, sale, and trading may be taxable. Unfortunately, this is also true for most crypto-earning methods. Please consult a professional for the most current information about cryptocurrency taxation in the United States. Also, don’t forget to refer to the Internal Revenue Service.
Scams – There has been a simultaneous rise in scams as legitimate ways to earn cryptocurrency have grown in popularity.
It is essential to be cautious when dealing with new platforms that promise “too good to be true” rates, such as 1,000x returns. Even though a few of these scams may be credible, many are known as “rug pull” scams, in which the developers abruptly shut down the platform to steal the deposited funds.
Be sure to perform due diligence on any platform you intend to utilize – especially those offering unbelievably high APYs – and adhere to protocols with a large user base and a reputable track record.
Holders of cryptocurrencies can now earn a return on their digital assets in many ways. However, although crypto-earning products have high-interest rates, they are not as well regulated as traditional bank accounts, nor are they insured by the Federal Deposit Insurance Corporation.
In the event that an investor understands the risks of crypto-earning products and is willing to overlook short-term market volatility, it may be a good passive income source for them.
During your research, you can determine whether earning a return on cryptocurrency is suitable for you. To learn more, please refer to one of our guides or leave your details below to consult us,