How to generate sustainable passive income using Crypto!
An introduction to the ways of passive crypto wealth.
Introduction
The world is slowly changing. People are starting to move away from 9–5 jobs and pursue their dreams or find places that have more benefits or pay. It’s not weird that there are more and more jobs available; people quit because they start to realize that life and living are limited and that they deserve better or more than an office or factory job. The drawback, however, is that it is not easy to achieve a life where working is optional.
“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
That is where passive income comes in! As Warren Buffet once wrote, it is essential to find a way to make money while you sleep to provide you with a life where you can work and do whatever you want. I have found this way in Crypto, and I will teach you how to achieve the same! Crypto is a new and ever-expanding space where opportunities lay on every corner. If you know where to look, you might be in for rewards that will last you the rest of your life! If you want to read about my passive income streams click here!
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Ways to make passive income with crypto!
These options include some of the most common passive income investing options. There do exist other possibilities, and I thoroughly recommend you to explore the space yourself! I have not included any rebase/Ponzi/pyramid options as I don't count those as sustainable, and they are too high risk to recommend. anyway, enjoy!
1 — Staking native blockchain coins!
Risk level: Low — 3 to 20%. Many chains and tokens have their own way of validating transactions. Most proof-of-stake chains use validators that “mine” new blocks, and delegators that put their coins and thus trust in these validators to mine the right transactions. these often have the least risk involved, and therefore also offer the lowest possible yields. Ive made an overview of some of the most popular coins that offer staking rewards!
As you can see blockchains like Polkadot and Elrond offer double digits staking yields, but all the mentioned options are worth exploring. Do keep in mind that some chains (like DOT) experience inflation, lowering the actual yields. Chains like Ethereum actually will experience negative inflation close to -1 to -2%! meaning that the actual yields will actually be higher than mentioned. But, as always, do your own research on all of the options!
2 — yield farming with USD stable coins!
Risk level: Low — 1 to 20%. Many DeFi protocols, CEX’s and DEX’s offer nice yield generating options for your stablecoins by lending them out to other investors or by using your funds in contract interactions like Flash-loans. The rewards on these options usually differ per volume or use of your funds, and if you are getting any yield rewards in the form of the platform's native token. These investment options are the least risky of all mentioned options as there is no risk of price movement of the stablecoins. If you are using DeFi, however, you have increased smart-contract risk you need to keep into account. Take a look at the sheet below to see some of your options and their yields!
Most protocols offer nice yields on your static dollars, some platforms offering even higher yields when paired with their native token rewards and yield aggregators. Anchor protocol is by far the winner, but be cautious as this is a subsidised platform! when the subside stops rewards are expected to drop to single digits again. Consider using my referral if you want to trade on kucoin!
3 — Providing liquidity!
Risk level: Low/Medium/High — 5 to 500%. The world of DeFi and decentralised exchanges would not exist without liquidity pools and Liquidity Providers (LPs). Liquidity providers provide their assets on both sides of the pool eq. 50% in USDT and 50% in ETH. When traders come around and trade in that pool, you will get a portion of the generated fees. These liquidity pools generate higher yields but are also exposed to more risk, eg. Impermanent Loss (IL). When the prices of the assets start to rise or fall it might (not) have been smarter to hold the asset instead of providing liquidity. Take a look at some of the different options here!
As you can see the yields are a lot higher when providing liquidity, but so is the risk! Do proper research before investing in these pools as rewards and losses are a lot higher. When providing liquidity you should consider the following risk levels. Low Risk and Low Reward are the liquidity pools that only require 1 asset or stablecoins, like bridge or USD pools. Medium Risk and Medium Reward are the liquidity pools that are bound to a stablecoin on one side, and assets on the other side, like USDT-FTM. High Risk and High Reward are the pools that require 2 assets on both sides of the pool, like MATIC-ETH. Stay followed to read about a more in-depth explanation of liquidity pools and their rewards!
4 — Staking DAO/Dapp/Reward tokens!
Risk level: Medium/High — 35 to 500%. The riskiest, and therefore also the most rewarding strategy would be to invest and stake native tokens coming from DApps. Most DeFi applications have their own native token that can be used to vote, get a portion of (trading)rewards or improve the yield of their offered products. These rewards are often the highest but are usually paired with either increased inflation, smart-contract risk or centralisation risks. The price of these tokens is often highly volatile, as more tokens are given out the price usually decreases, and they usually consist of a centralised dev team that might fuck up or leave the project. The upside, however, is higher yields, more rewards, voting power and more upside potential. Here are some of the projects that offer these tokens!
As you can see some of these rewards are entering the triple-digit yields. As this seems like the most profitable, a lot of caution and research have to be taken into account before investing in these projects. These are highly risky and there are often caveats that are not immediately obvious. If it is too good to be true, most of the time it is!
Conclusion
There are many opportunities in the DeFi and CeFi crypto space. One must only know where to look to start earning passive income. There are many different investing profiles, and the options mentioned above will give a good idea of the possible investing possibilities. I will always advise spreading your investment in multiple streams, that way you keep yourself from exposing yourself to too much risk and it will diversify your portfolio.
Take a look at my other articles to read more about sustainable passive income streams and investing options! You can always follow me for future articles about investing and passive income using crypto. If you have any questions feel free to comment or respond!
To keep my stories publicly available consider buying me a coffee: https://ko-fi.com/igormd!
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