Cryptocurrencies are here to stay. Besides the fact that they are speculative assets and afford you numerous opportunities to hold and earn more when their value appreciates, you can also earn passive income from these cryptocurrencies, a viable investment plan, especially for those late to the crypto party.
One of the foremost sources of passive income in the crypto space is staking. This is an ideal alternative for individuals holding coins on a proof-of-stake-based network. Here's how it works.
Individuals stake coins by lending them to networks to enable them to verify transactions initiated, allowing them to earn rewards. Similar to lending cash in a traditional financial system, staked coins are deposited into a pool, therefore available for spending daily.
On these networks, investors are only available to validate as many transactions as tokens staked. Most of the time, this is done in a pool where all of the network users pull funds together, thus, receiving a larger percentage of the transaction validating power. Getting started before this time only required a minimum investment of about 32 ETH but as the second-most valuable cryptocurrency continues to soar in price, investors would have to pay a whopping $88,700 to get started (value of 32 ETH at the time of writing).
Lending cryptocurrencies has also been identified as another perfect source of passive income in the crypto space. The introduction of decentralized finance (DeFi) protocols has eliminated the hitherto existing entry barrier.
The DeFi market worth over $121 billion according to CoinGecko has opened up a ton of opportunities for investors seeking to get in on the crypto hype. Similar to a traditional lending system, borrowers are required to pay interest in addition to the amount borrowed. Getting started on this is pretty simple, you need to register on any of the decentralized finance protocols, stake assets into a liquidity pool, and earn rewards each time someone in need borrows a portion of the staked assets.
Unlike the traditional lending system that is theft-ridden, the introduction of smart contracts ensures that all borrowed funds are repaid. Albeit a billion-dollar trend, it is nascent and due diligence is required before staking funds on any protocol.
Mining, a decade-long activity in the crypto space, is also an impressive way to earn passive income, although a tad bit expensive and time-consuming. With the use of expensive and advanced mining rigs to solve complex mathematical problems, the cost of starting is a major sticking point for this passive income source.
The advent of innovative projects into the budding crypto space is pioneering a needed shift in how passive income is earned. As hitherto mentioned, investors would need to either stake, lend or mine cryptocurrencies to earn passive income, the influx of scam DeFi projects and hacks on liquidity pools beg for a sustainable switch. Passive Income (PSI), a blockchain-based platform seeking, is keen on pioneering this move.
Through what it refers to as a "no contract interaction" feature, the embryonic platform guarantees a non-staking policy, investors would not have to stake assets to earn passive income.
Unfortunately, most passive income projects and DeFi platforms will require investors to pay for Ethereum gas for their claims or winnings. PSI, proposing a fundamental change offers a "no claiming fees" policy, meaning that investors do not have to pay gas fees to claim their rewards.
Additionally, the elimination of staking coins into a liquidity pool poses a big problem for users. PSI holders will only need to hold their tokens in a wallet to earn passive income. Switching to a frictionless and less expensive approach.
With a ton of problems facing the crypto passive income industry, the advent of a superior, cost-effective, and equally innovative project is requisite if the billion-dollar market is to grow at an exponential rate. The current sources; lending, staking, and mining although presently rewarding are problem-plagued and not financially viable to meet the dynamic demands of investors.