Passive income with cryptocurrencies is a way to increase profitability for the long-term investor. They serve to achieve financial freedom and there is more than one way to generate them.
Staking with cryptos is the most widespread way to generate passive income in the crypto world. Many of the most popular exchanges offer it. This is the case of Binance, Crypto.com, Coinbase or Kraken, among many others.
Staking is the process of delegating or blocking cryptocurrency holdings to earn rewards. Some of the rewards you can earn by staking are additional tokens and gaining some voting rights.
From a practical point of view, what you do is to block your cryptocurrencies for a certain period of time in order to get a reward. In other words, something similar to a traditional deposit, although with important differences.
The first is that with a deposit the value of your money remains the same without taking inflation into account. By staking, the value of your cryptocurrency will continue to fluctuate as long as it is deposited. As a solution, more and more staking options are emerging with stablecoins, which are cryptocurrencies linked to fiat money, such as dollars, and their volatility is lower.
The second difference is that the reward will depend on the cryptocurrency you are staking with.
Another way to generate passive income is through crypto lending. Crypto lending allows users to borrow and lend cryptocurrencies for a fee or interest. This method involves lending your cryptocurrencies to third parties. In reality, the one who makes the loan is the platform where you deposit your crypto assets and the platform shares the benefits it obtains with you.
As with staking, the value of the cryptocurrencies you lend will continue to rise or fall as long as you keep them on the platform. Again, the profitability depends on the cryptocurrency you deposit and, if you want to avoid volatility, it is recommended to use stablecoins. There are plenty of platforms that allow users to lend their cryptocurrencies, such as BlockFi, Celsius Network, CoinRabbit, and many others.
