How to Make Passive Money from the Crypto Assets you Hold
How do you know if the global economy is growing or not? This question seems simple to answer but I will be showing you what you may likely don’t know or don’t think about.
When you consider growth in technology, which the economist called technology progress, you will come to understand that the global economy is growing.
But how does technology help the economy? It provides a lever which improves productivity or gains.
Imagine the difference between the personal computer and the typewriter. The personal computer made typing and doing other things very efficient.
This is why it replaced the typewriter without questions.
The block chain and crypto revolution is a new wave of innovations that will change the financial industry like the way PCs replaced computers.
One of the applications of cryptocurrency and blockchain technology is decentralized finance. With decentralized finance, all financial services such as lending, saving, insurance etc are innovated such that we don’t need middlemen for them to take place.
What we need is what is called a smart contract, making trust in a middleman not necessary anymore. In smart contracts trustlessness becomes trust and trust becomes trustnessness.
But beyond this, every crypto asset you hold could also generate additional income for you. Wow! This is not possible with traditional finance.
You can’t save your money in the bank account and you use it to make money again. But with crypto you can use your crypto assets to make more money.
This article will teach you exactly how you can make more money with the crypto assets you hold.
Let’s get started.
Ways to earn Passively while holding crypto Assets
Here are the two ways you earn from the crypto assets you hold in your portfolio.
Earning through Staking
Staking is a process some crypto projects that use proof of stake (POS) consensus algorithms use to maintain the crypto project network. This is the opposite of proof of work (POW) where you need computational power and high capital investment in mining equipment.
So, how does staking work? It is designed such that validators who stake their tokens or coins are allowed to validate the network. They earn a transaction for helping to add blocks to the blockchain.
But because it is very expensive for an individual to have enough coins to stake in order to earn, staking pools are created created.
With the staking pools, you simply contribute your coin or token to a body then this body will use it to participate on the network. They earn network maintenance fees and new tokens.
The reward is distributed to those that contributed to the pool based on how much you contributed.
So, you can stake the BNB, ETH, SOL you have in your crypto portfolio to earn passive return. Exchanges such as Binance and others have a staking pool.
Earning through Yield Farming.
Yield farming is a concept used to describe another way to earn money from Defi protocol. The idea is simply giving your crypto in order to earn additional crypto.
In this case, you can decide to lend your token to a lender network like Compound, Synthesix etc and they pay back yield calculated as Annual percentage yield (APY) or Annual percentage rate (APR).
The other way to earn in yield farming is called liquidity providing (LP) , this is simply providing your coins or token to the protocol which helps them to be able to provide services. The fee paid for transactions is distributed to the liquidity providers (LP).
Here are some Defi protocol that you can research and use for yield farming;
- Compound Finance
- Curve Finance
While yield farming and staking could be very enticing due to the returns, there is risk involved. We have risks such as impermanent loss; this is loss as a result of volatility of the crypto assets.
We have hacking of the network or code errors of the smart contract. Ensure you do your research about the security of the protocol before participating in any yield farming or staking program.
This article was originally published at Trenndify.