Crypto industry isn’t just about trading and investing to make money. For those uninitiated, there are ways to make money in crypto through passive income as well. The best advantage of passive income is that you are getting an additional income stream without making any extra investment or trade. Crypto is always a risky business given its wild volatility. Your crypt journey might encounter losses at some point of the other given the erratic nature of the market. A passive income stream would serve as your backup here, offering you something substantial to hold on to when the market is not your favor. When it comes to passive income in crypto, you can make money staking crypto or lending crypto. Check out more at Multibank.io.
The post below offers a brief on how to add to your wealth through passive income in the crypto world.
Crypto staking is a process by which PoS blockchains verify new blocks. The crypto industry debuted with PoW blockchain that follows a process called “mining” to verify new blocks prior to adding them to the blockchain. Mining demands miners to solve complex equations to earn mining rewards or new coins. But, staking follows a different process of verification.
In PoS blockchains, whenever a user will propose a fresh block as well as cast vote for accepting a new proposed block, s/she has to deposit a certain amount of his/her cryptos to the blockchain. The PoS blockchain needs crypto power from crypto holders to verify every new block that is poised to be added to the existing blockchain. Remember, if you offer crypto holdings for staking, the coins would stay locked up into the blockchain till the staking period gets completed.
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So, how do you make money staking crypto? Well, as the PoS blockchain would take crypto from you and will keep them locked up, you will receive a staking reward as your incentive. The staking reward will come in the form of the native crypto of the blockchain where you have staked your cryptos. For example, if you have provided your ADA holdings to Cardano blockchain, the blockchain platform will reward you with new ADA tokens. In fact, this is how new PoS tokens are introduced for market circulation.
How to conduct crypto staking?
When you aim to make money staking crypto, there are multiple ways to perform the staking process. One, you can set up your own staking infrastructure. But it could be a pretty overwhelming and time-consuming affair. The most common option to make money staking crypto is through crypto exchanges. The same crypto exchanges from where you have bought crypto or you trade crypto, offers staking services. Then, you also have staking pools.
It’s to note here some coins like Ethereum demand a sizable deposit to enter the staking process. You will need to deposit at least 32 ETH to attain eligibility for ETH staking. However, 32 ETH is a huge lot of money for just any investor, unless you are probably a millionaire. But, if you can sign up with a staking pool you will have to provide a much lesser amount to enter the staking process.
How much do you get with staking rewards?
Well, when it comes to staking rewards, the payout might vary from crypto to another and from one exchange to another. For example, after the Merge upgrade, some exchanges are offering 10% APY while some others are extending up to even 18%. Polygon is another crypto that offers high staking rewards, say 14% APY.
Crypto lending platforms exist to support crypto exchanges with high liquidity.
Smart traders are always looking for exchanges that can support them with high liquidity as healthy liquidity will help to facilitate faster trade. In that case, crypto lending platforms lend crypto from holders. Just remember, akin to staking, the lending process too will have the crypto locked-up for a specific time period.
If you can spare some crypto from your idle crypto holdings, you can provide them to the lending platforms. These are DeFi platforms that offer both staking and lending services. If you lend your crypto to these platforms, these will reward you with interest rates. You can choose your preferred lending term as per your crypto activity goals. In most of the cases, you will be able to choose from either a 30-day or 60-day, or 90-day period. Longer you can keep your crypto locked up, higher will be your interest rate.
Tips for making money with crypto staking lending
First, be careful about the coin you choose when it comes to staking or lending, or both. This is to stress here that some of the altcoins might offer you up to 70% APY- way higher compared to legacy coins like Etherum. But what if the new coin tanks after a while? In that case, you might technically have higher staking rewards but that would be almost worthless when you would need them to convert into cash. Thus, always look for a comparatively more stable coin that has proven to recover and maintain consistency. It’s better to stay away from new altcoins because since these are new, they won’t be able to provide high liquidity.
Besides, look for coins/tokens that are not only stable but also allow a lower level of entry. Ethereum seems to be extremely demanding when it comes to entry in staking but some tokens permit participation with just 1 unit of their token.
Then, you need to be mindful about your staking or lending duration as well. Do not put crypto holdings for staking or lending if you have plans to trade off some of your crypto holdings in near future. Yes, some exchanges do offer flexible staking periods but the flexibility comes at the cost of rewards. You will always get a higher range of rewards if you opt for a completely locked-in staking period.
You should also take note of the staking exchange’s fees while putting your crypto for staking. Some of the leading exchanges today do not charge staking fees.