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Earning passive income through crypto

Passive income through crypto

Imagine having a stream of revenue flowing into your wallet – and having to do nothing to make it happen. Though it might sound like an impossible task to earn passive income through crypto, there are some options.

Note that this is not a get rich quick scheme or a ‘retire with passive income in 3 weeks’ thing – it’s a long term plan that you can execute as part of a well-diversified portfolio.

How does passive income work?

Imagine doing absolutely nothing and getting money for it? Well, passive income refers to exactly this – recurring income that you earn through sources other than your employer or clients where you have active participation to get the money. Passive income streams include:

  • Property rental income
  • Dividends/Annuities
  • Business

Passive and active income streams work on a sliding scale. Some income is more passive than others. For example:

  • As an employee, unless you are at work (virtually or physically), you don’t get paid – this is a very active income
  • As a property owner, you might self manage, meaning you will get called if the geyser bursts (semi-passive income)
  • If you invest in share ETFs, you receive dividends at regular intervals (passive income)

Ways to Earn Passive Income with Cryptocurrency

Though cryptocurrencies is not the best example of earning passive income, there are many opportunities for making money passively. Let’s explore these options.

Crypto Mining

Cryptomining is the process of validating a cryptocurrency transaction. This is known as proof of work – proof that the transaction is valid.

For example, when I pay someone with Bitcoin for a service or buy Etherium (ETH) with my Bitcoin from an exchange, someone needs to confirm that it is a valid transaction. Different cryptocurrencies have different ways of mining. For example:

  • You can add a WordPress plugin (or script) that mines crypto in your browser (e.g. Monero here) – but please make sure you declare this in your T’s and C’s on your website!
  • You can buy hardware that mine crypto – make sure of profitability, as power is expensive and the hardware gets outdated very quickly

Cloud mining and scams

The core concept is that you hand over your crypto/money to a company that will manage the hardware for you at a remote data centre. Many Ponzi and pyramid schemes offer services of cloud mining. For example, it became apparent that GainBitcoin didn’t have any mining equipment and that it was indeed a huge Ponzi scheme. 8000 investors were defrauded of $300 million!

There has been a rise in scams from crypto mining that require recruitment as a prerequisite to make more money. These include Lifestyle Galaxy and Dragon Mining. Please be careful when handing over your money! 

Staking Tokens

Some cryptocurrencies don’t do mining as above. They work on a proof of stake process (POS). As explained in the video, the validators require to deposit crypto into the network to secure the chance to validate a transaction. If an invalid validation is done, the validator will be punished through a fine.

The following cryptocurrencies (and platforms/exchanges/wallets) allow you to stake tokens:

Crypto Lending

Imagine living in a country where you have runaway inflation and no access to foreign currency – but you need stock for your business. Crypto lending is the answer – and quite a few companies allow you to pimp out your crypto with interest.

More information can be found here on crowdfunding-platforms.com about crypto lending and different platforms

Affiliate Programs

Affiliate programs allow you to earn a commission if someone buys a product using your affilliate link. For example, you might share your unique link with a friend, who signs up to the exchange. Once they deposit money into the exchange, you will get a fee for your hard work.

Crypto affiliate programs include mining,  exchanges, bots and even offline wallets. For example, I quite like using Luno – a local South African exchange offering R 25 for both you and the person joining through the link above.

If oyu’re looking for other affiliate programs, check the table below (taken from the BusinessOfApps site here):

Platform/CompanyAffiliate OfferPayout Date
Binance20% commissionPayments made monthly
PrimeXBT20% commissionMonthly payments
BitMEXCommissions between 10% to 20%Monthly payments
BitpandaUp to 20% revenue share modelMonthly payments
Bybit30% on trading fees30-day payments
Trezor12% to 15% on each saleMonthly payments

Cryptocurrency forks​

Cryptocurrencies are decentralised, and the code is generally open-source. Many developers tend to work on an open-source solution, and code approaches are voted on. When some people don’t agree with a decision, they could decide to ‘fork’ the cryptocurrency to create a new coin. When this happens, all code up to the fork is both the original and the new coin. Here are some examples:

  • Bitcoin Cash forked from Bitcoin in August 2017
  • Etherium and Etherium Classic forked on 20 July 2016

Think of it as free coins!

Crypto Arbitrage

The pricing of crypto isn’t as regulated as forex and commodities. This opens up opportunities where the pricing differs between exchanges – and with each trade, you can make a small percentage profit.

Did you know that crypto is extra expensive in South Africa? The reason for this is due to local exchange controls that stop you from taking money out of the country – and creating interesting opportunities for arbitrage.

Many suppliers sell bots or code to arbitrage between exchanges and providers.   

Currency Hub and Future Forex arbitrages between South Africa and overseas crypto prices. Also check out OVEX and KOIN Expert.

Conclusion

There are many ways to create passive income streams through cryptocurrencies – and arbitrage, crypto lending, mining and forks are just a few examples. 

As the crypto industry is not fully regulated yet, it is recommended that you practice caution when handing over your money.

Happy investing!

Sources consulted

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