The passive income they are the holy grail of financial freedom and there is more than one way to generate them. From affiliate programs to create online courses and also through investments in cryptocurrencies.
cryptocurrencies too allow you to generate passive incomealthough as explains Carlos Barrera, author of the blog and Youtube channel Invest to achieve“andThis formula works best for long-term investors. with a buy and hold strategy their crypto assets.
The reason is that to generate these income, you will need to maintain your investment in cryptocurrencies and in some cases block them. During that time the price of the cryptocurrency will continue to rise or fall and that is why this modality is optimal for those who trust in the future of cryptocurrencies and in their long-term value.
Barrier identifies tThree ways to generate income with cryptocurrencies, each with its advantages, disadvantages and level of difficulty. They are the following:
Staking with cryptocurrencies
The crypto staking is the most widespread model. Many of the exchanges most well-known offer it. This is the case of Binance, Crypto.com, Coinbase or Kraken.
The staking “es how to open a remunerated account or a savings account in cryptocurrencies”, summarizes Barrera, who also warns of the importance of understanding how it actually works. From a technical point of view, staking is a way to validate transactions and changes within a chain of blocks or blockchain. It is the alternative system to traditional mining that more and more cryptocurrencies use.
In other words, by doing stake support for the growth of cryptocurrencies.
From a practical point of view, what you do is block your cryptocurrencies for a certain time to get a reward. In other words, something like a deposit traditional, although with slight and important differences.
The first is that with a deposit the value of your money remains the same not counting inflation. when doing stakethe value of your cryptocurrency will continue to fluctuate as long as it is deposited.
As a solution, they are increasingly emerging more options to do stake with stablecoinswhich are cryptocurrencies linked to fiat money, such as dollars, and their volatility is lower.
The second is that the reward will depend on the cryptocurrency with which you do stake. “Among the most used cryptocurrencies are Binance Coin, Cardano, Polkadot and Ethereum 2.0”Barera specifies.
For this very reason, Barrera advises look at both the interest offered by the operation and the cryptocurrency with which it is paid. In the end, a 40% return on an asset that is worth nothing is useless.
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This alternative to generate passive income with cryptocurrencies supposes lend your cryptocurrencies to third parties. Actually, who makes the loan is the platform on which you deposit your crypto assets and share with you the benefits you get.
as in with him stakeandThe value of the cryptocurrencies you lend will continue to rise or fall as long as you keep them on the platform. Again, profitability depends on the crypto asset you deposit and, again, if you want to avoid volatility, the expert recommends using stablecoins.
barrier explains that the biggest risk of this system is that you are lending your money to a third party to all effects. One of the keys to avoiding problems is to choose the platform with which it is done well. In addition to the best known, there are specialized services such as Celsius or Blockfi.
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This is the most complex passive income model with cryptocurrencies and less accessible. Liquidity mining or liquidity mining It goes through providing liquidity to decentralized exchanges so that cryptocurrency exchange operations can be carried out in the different pairs.
what you do is block your cryptocurrencies and receive a commission every time the two cryptocurrencies (a pair) that you have blocked are exchanged. For example, if a person has Ethereum and wants to exchange it for USDC (a stablecoin), someone has to provide them with the stablecoin. That will be your role as a liquidity provider. This does not mean that you are going to run out of your cryptocurrencies, since the only thing you do is help the transaction to be executed, summarizes Barreda.
Passive income with cryptocurrencies is “a way to obtain additional profitability for a part of your cryptocurrencies that you invest in the long term”, concludes the author of Invest to Get.