Passive income on the Internet can be organized in several ways. For example, you can create a website and earn income from advertising or services provided, as well as from royalties for content such as music, images, or courses.
There are also more modern methods, such as investing in cryptocurrency. The high volatility of cryptocurrency can lead to significant losses as well as substantial gains. A strategic approach is key.
- Basics of Passive Income on the Internet
- Popular Methods of Passive Income in Cryptocurrency
- Exchange-Based Passive Income Methods for Digital Assets
- Mining as a Passive Income Method
- Risks of Passive Income
Basics of Passive Income on the Internet
Active income is the traditional way of earning money by doing work. This means a person works, performs their duties, and gets paid. The type of employment doesn't matter: you can be a home-based baker, a jewelry store manager, or a cleaning service provider. The main difference with active income is that if a person stops working, the salary stops being paid.
Passive income is the complete opposite of active income. This method allows you to earn money without constant actions. It provides the opportunity to earn income without being tied to active work or time spent. The cash flow from passive income does not depend on a person's activity. That is, a person does the work once and then receives income regardless of their location or occupation. Gender, age, health status, and availability of free time do not affect the ability to earn passively.
The most common question related to passive income is: how much can you earn in this way? There is no clear answer, as there is no upper limit. The size of the profit depends on many factors: the type of activity, the effectiveness and thoughtfulness of decisions, the amount of initial capital, the time devoted to work, and other components.
Popular Methods of Passive Income in Cryptocurrency
Today, the cryptocurrency sphere attracts many who want to earn passively. Let's consider the main ways to get passive income in the blockchain industry:
AirDrop
Earning this way while just relaxing is not possible - effort is required. Participating in AirDrop allows you to receive rewards (free tokens) for helping to promote a new cryptocurrency project. First, you need to find a suitable AirDrop project and register. Then, subscribe to newsletters, social networks, and fulfill other project conditions to receive bonuses in the form of tokens.
NFT Drops
An alternative to AirDrop, where rewards for promoting projects are paid in the form of non-fungible tokens (NFT). This is digital proof of ownership of certain real assets (e.g., a song, video, photo). Participating in NFT drops does not guarantee receiving bonuses, as the number of participants is large, but if successful, you can earn from a few hundred to a thousand dollars.
Masternodes
Using blockchain nodes (masternodes) is a clear and accessible method of passive income. Masternodes store a complete copy of the blockchain and perform miner functions. They ensure the confidentiality of transactions, anonymity of participants, speed up operations, and verify and confirm new blocks. To earn this way, you need a computer and a wallet of the chosen cryptocurrency. Examples of tokens: DMD, PIVX, NTRN, NEM, BTA, XVC, and others.
Copytrading
Copytrading is a popular method of passive income in the cryptocurrency sphere, based on copying the trading operations of a professional trader. It can be used long-term or for short-term positions. The main trader receives a reward in the form of a percentage of the profits of beginners who copy his actions. This method is applied not only in the cryptocurrency market but also on Forex, stock markets, and other trading instruments.
Copytrading algorithm:
- Find the right trader and subscribe to them.
- Determine the size of the investment capital.
- Deposit assets into the account. The system will automatically start copying the trader's operations.
- Top up the account balance if necessary.
- Pay the trader a commission for profitable trades.
P2E
The abbreviation P2E (play to earn) means "play to earn." This method is popular among beginners and users with a small initial capital. In P2E games, developers create a token, linking it to a cryptocurrency, providing a liquidity pool. Players can exchange tokens for cryptocurrency. Players develop characters, sell or lease lands, and trade on the internal marketplace. Popular P2E projects: Gods Unchained, Alien Worlds, Axie Infinity. Applications like STEPN allow earning through an active lifestyle, rewarding users with bonuses for movement.
Exchange-Based Passive Income Methods for Digital Assets
Cryptocurrency exchanges today are used by traders not only for buying and selling digital currencies. Most such platforms offer their users extended functionality that can be used to generate passive income. Let's consider the main exchange tools that can be used for this purpose.
Crypto Deposits (Lending)
This method of passive income is suitable for users with enough capital that they are not planning to sell or use in the near future. The profit is realized in the form of interest on the amount provided for lending. Lending is renting out existing cryptocurrency assets, similar to lending: you give your digital assets to a borrower, who returns them with interest for using them.
Staking
Staking is the primary method of passive investment and a good alternative to mining. It is the process of holding cryptocurrency assets in your wallet to support blockchain operations. Simply put, it is freezing a certain amount of digital assets in your wallet to receive rewards.
Liquidity Pool Mining
This method of passive income involves adding your tokens to the liquidity pool to participate in exchange operations. The token holder receives a profit in the form of a percentage of each transaction within this pool.
Dual Investment
This investment method is based on selecting a digital coin and activating the "Buy High" or "Buy Low" mode. After a certain period, the investor either makes a profit, retains their initial capital, or incurs losses.
Polkadot Parachain Auctions
The Polkadot blockchain allows for the integration of additional chains called parachains. The number of these chains is limited, so a special auction is held among network participants to determine the most in-demand candidates who will receive the income.
Important Note
All centralized exchanges are vulnerable to fraud, hacking, and cyberattacks. Therefore, it is not recommended to store all your assets on the exchange. The best place to store the majority of your cryptocurrency assets is in non-custodial wallets. To enhance the security of transactions, choose exchanges that have passed Proof-of-Reserves audits.
Mining as a Passive Income Method
Solo mining of Bitcoin has lost its relevance due to the emergence of large farms mining this cryptocurrency on an industrial scale. Mining using graphics cards is no longer profitable: Bitcoin miners' earnings have not increased but rather decreased over the past three years since the halving on May 11, 2020.
Today, Bitcoin mining exclusively uses ASIC (Application-Specific Integrated Circuits) - specialized integrated circuits designed to perform a narrow range of tasks. However, these devices are expensive and not accessible to everyone.
Risks of Passive Income
Any entrepreneurial activity is associated with risks. The main threats when receiving passive income in cryptocurrency include:
| Risks | Description |
|---|---|
| Acquiring low-quality assets | Artificially inflated ratings can encourage traders to buy assets that do not have real value. Some staking networks use a system of multiple tokens, where rewards are paid out in secondary tokens. |
| User error | The cryptocurrency industry is still developing, and creating passive income sources in the blockchain space requires deep technical knowledge and analytical skills. |
| Mandatory lock-in periods | Starting work in staking and lending often requires freezing part of the assets for a certain period, making them illiquid. |
Methods of earning income in the cryptocurrency market are becoming increasingly popular among Internet users. The active development of the cryptocurrency sphere may soon turn passive income methods related to digital assets into a regular source of profit for many investors.
