5 Best Strategies to Earn Crypto Passive Income And Guides

9 min read
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Earning crypto passive income has become an exciting opportunity for many enthusiasts looking to grow their digital assets without constant trading.

As the crypto market evolves, various methods have emerged that allow you to earn regular rewards by simply holding or lending your crypto. Whether you’re new to the world of crypto or a seasoned investor, understanding these strategies can help you maximize your holdings and generate steady returns.

In this article, we’ll explore 5 of the best strategies to earn passive income from crypto, providing you with practical insights on how to execute each strategy.

5 Ways To Earn Crypto Passive Income

  1. Staking
  2. Yield Farming
  3. Crypto Lending
  4. DePIN
  5. Crypto Affiliate Marketing
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1. Staking

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Staking is a process where you lock up your crypto in a wallet to support the operations of a blockchain network. This is typically done in a proof-of-stake (PoS) blockchain, where stakers help validate transactions and maintain the network’s security. In return for your participation, you earn rewards, usually in the form of additional cryptocurrency.

How Does Staking Work? 

When you stake your coins, they are used to participate in the network’s consensus mechanism. Your staked coins act as a form of collateral, ensuring that you have a vested interest in the network’s success. The more coins you stake, the higher the chances you have of being selected to validate transactions and earn rewards.

Why Stake?

Staking provides a relatively low-risk way to earn passive income compared to active trading. It’s particularly appealing because it doesn’t require constant attention; once your coins are staked, you can sit back and watch your rewards accumulate. Additionally, staking helps secure the network, contributing to its stability and efficiency.

Pros:

  • Predictable Returns: Staking rewards are often predictable and paid out regularly, providing a steady stream of income.
  • Low Entry Barrier: Many platforms allow you to start staking with a relatively small amount of crypto.
  • Network Security: By staking, you contribute to the security and efficiency of the blockchain network.

Cons:

  • Lock-Up Period: Staked coins are typically locked up for a certain period, during which they cannot be moved or sold.
  • Market Risks: The value of your staked coins can fluctuate with the market, potentially impacting your overall returns.
  • Network Saturation: If too many participants join the staking process, rewards can become diluted.

Popular Staking Platforms

  • Ethereum Staking: As Ethereum has now transformed to a PoS consensus mechanism, staking ETH can yield up to 4% APY on your staked assets. Since Ethereum stakers need at least 31 ETH to become validators, it can be a barrier for retailers. However, you can try to liquid stake your ETH on some trusted liquid staking protocols like Lido, Frax, and Rocket Pool without any threshold. By liquid-staking ETH into those protocols, you’ll receive liquid-staking derivatives (LSDs) at 1:1 ratio, these tokens can be utilized in other LSDFi protocols to earn yields, trade, or lend.
  • Solana Staking: Solana blockchain offers high staking rewards and is known for its fast and efficient network. Just like Ethereum, you can also choose to liquid-stake SOL on LSDs, such as Sanctum, Jito, Marinade, and Jupiter Exchange at a maximum of 9% APY. Especially, you can unstake your assets anytime on LSDs without cooldown periods. 

Below is an overview of Sanctum, an emerging LSD on Solana, and how to earn yields, plus potential token airdrops from it.

  • Ethereum Restaking: Restaking means staking your ETH to strengthen the security of Ethereum, thus helping to secure other dApps. Eigen Layer is the biggest Restaking protocol with $19 Billion in total value locked. However, due to the minimum cap of Eigen restaking, directly restaking to Eigen Layer is not always feasible for retails. This is where, liquid restaking protocols emerge as alternatives. Giving users not only Eigen Layer restaking yields and Ethereum staking yields at 3-5% APY, but also potential crypto airdrops.

Let’s check out some notable Ethereum liquid restaking protocols to consider.

2. Yield Farming

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Yield farming, also known as liquidity mining, is a way to earn rewards by depositing your crypto assets to DeFi platforms. In return for providing liquidity to these platforms, you receive interest, fees, or additional tokens as rewards.

How Does Yield Farming Work? 

In yield farming, you deposit your crypto assets into a liquidity pool on a DeFi protocol. These pools are used to facilitate trading, lending, and other financial services. As a liquidity provider, you earn a portion of the transaction fees or interest generated by the pool. Additionally, some platforms offer extra rewards in the form of their native tokens.

Why Participate in Yield Farming? 

Yield farming offers the potential for high returns compared to traditional savings or staking. It’s particularly appealing for those looking to maximize their crypto assets’ earning potential without selling them.

Pros:

  • High Returns: Yield farming can offer significantly higher returns than traditional financial products and other crypto-earning methods.
  • Flexible Options: There are various pools and platforms to choose from, allowing you to diversify your investments.
  • Additional Rewards: Besides earning interest, you often receive governance tokens or other incentives, which can further increase your earnings.

Cons:

  • High Risk: Yield farming involves higher risks, including potential impermanent loss, platform security vulnerabilities, and market volatility.
  • Complexity: It can be complex and requires an understanding of DeFi platforms, smart contracts, and yield optimization strategies.
  • Changing Rewards: Rewards can fluctuate based on market conditions and the number of participants in the pool.

Popular Yield Farming Platforms

  • Uniswap: A decentralized exchange (DEX) that allows users to provide liquidity to various trading pairs and earn fees. Other similar DEXs also provide yields for LPs, so it’s crucial to choose reliable and well-designed DEXs to earn income.
  • Pendle: Pendle is a yield trading platform that allows you to trade on future yields of yield-bearing assets. You can either choose to deposit crypto assets for fixed yields (PT-tokens) at the maturity date or buy YT-tokens (you expect the yields on the maturity date to go higher).

You can read our strategy to trade Renzo Finance yields on Pendle as a reference. You can probably earn up to 40% APY on liquid-restaked ETH, instead of 3-5% original restaking yields.

  • Convex Finance: A yield aggregator that optimizes yield farming by automatically moving your assets between different DeFi protocols to maximize returns up to 3-digit APRs. Convex is one of the leading yield farming platforms, boasting about $1.5 billion in total deposits on 3 blockchains. 

3. Crypto Lending

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Crypto lending involves lending your cryptocurrency to borrowers in exchange for regular interest payments. This can be done through centralized lending platforms or decentralized finance (DeFi) protocols. Essentially, you act as a lender and earn passive income from the interest paid by borrowers.

How Does Crypto Lending Work? 

When you lend your crypto assets, they are pooled together with other lenders’ assets on a platform. Borrowers can then take out loans from this pool by providing collateral, usually in the form of other cryptocurrencies. The interest paid by borrowers is distributed among the lenders, allowing you to earn a steady return on your investment.

Why Participate in Crypto Lending? 

Crypto lending offers a reliable way to generate passive income, especially if you’re holding onto assets for the long term. It allows you to earn interest on your idle crypto, making your assets work for you without needing to sell them. Moreover, it’s a straightforward process that doesn’t require deep technical knowledge.

Pros:

  • Regular Interest Payments: Earn consistent returns from the interest paid by borrowers.
  • Passive Income: Once your assets are lent, you earn income without active management.
  • Variety of Platforms: Numerous platforms cater to different needs and risk appetites, offering flexible lending terms.

Cons:

  • Credit Risk: There’s a risk that borrowers may default on their loans, though this is mitigated by requiring collateral.
  • Platform Risk: Security breaches or mismanagement by the platform can lead to loss of funds.
  • Market Volatility: The value of the lent crypto can fluctuate, affecting the overall return.

Popular Crypto Lending Platforms

  • MakerDAO: A decentralized platform where users can lend some crypto assets like ETH, DAI, sDAI, and USDC on Sparkfi for nearly 8% APY, and borrow stablecoins DAI to finance your other DeFi strategies. 
  • Kamino Finance: a lending protocol built on the Solana blockchain. USDC supply rate on Kamino is around 12% APY.
  • Fluid: a liquidity layer on Ethereum (and soon Arbitrum), that allows you to lend stablecoins, ETH and staked ETH with net APR at 10-17%, and borrow other assets. You can also execute looping strategies automatically on Fluid to leverage the earnings, although it comes with different levels of liquidation risks.

An example of how to earn passive yields from lending on Fluid with stablecoins by Ignas.

4. DePIN (Decentralized Physical Infrastructure Networks)

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DePIN refers to networks where physical infrastructure is managed and operated in a decentralized manner using blockchain technology. Participants can contribute to and invest in these networks, earning rewards for their contributions. Examples include decentralized wireless networks, shared storage networks, and decentralized energy grids.

How Does DePIN Work? 

In a DePIN, participants provide physical infrastructure, such as hardware or connectivity, to support the network’s operations. This infrastructure is often tokenized, and participants earn rewards in the form of cryptocurrency or tokens. The network is governed by smart contracts and decentralized protocols, ensuring transparency and security.

Why Participate in DePIN? 

DePIN offers a unique way to earn passive income by contributing to the development and maintenance of decentralized infrastructure. Users are rewarded for their contributions in the form of tokens.

Pros:

  • Innovative Investment: DePIN provides exposure to cutting-edge technologies and new economic models.
  • Decentralized Control: The network’s decentralized nature reduces the risk of central authority misuse or failure.
  • Passive Income: Participants can earn rewards without active management once their infrastructure is set up.

Cons:

  • Technical and Operational Challenges: Setting up and maintaining physical infrastructure can require significant technical knowledge and resources.
  • Regulatory Uncertainty: The legal and regulatory environment for DePINs is still evolving, which can pose risks.
  • Market Risks: The value of rewards can fluctuate with market conditions and the success of the network.

Popular DePIN Projects

  • Helium Network: A decentralized wireless network where participants provide wireless coverage using low-power hotspots and earn HNT tokens.
  • Filecoin: A decentralized storage network where users provide storage space and earn FIL tokens.

The DePIN ecosystem is vast in terms of categories, specializations, and projects. Therefore, we recommend you have an overview of this new landscape before considering which is the best-fit platform for you.

5. Crypto Affiliate Marketing 

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If you’re familiar with affiliate marketing in traditional business, you might be interested in crypto affiliate marketing. Just like normal affiliate marketing, you partner with crypto services, share their offerings with your audience, and earn a commission for every successful referral made through your unique affiliate link.

How Does Affiliate Marketing in Crypto Work? 

When you join a crypto affiliate program, you get a special link or code that tracks your referrals. You promote this link through your blog, social media, YouTube channel, or any other platform. When someone clicks on your link and completes a purchase or signs up for a service, you earn a commission, which is often paid in cryptocurrency.

You can find and participate in referral programs of any crypto service, from crypto exchanges, DeFi protocols, to Web3 games. This strategy would be much easier to grow if you knew how to build your social accounts as a crypto influencer. However, the door is open for everyone with their own network.

Why Get Into Crypto Affiliate Marketing? 

Crypto affiliate marketing is a great way to earn passive income, especially if you’re already interested in crypto and content creation. It allows you to share your passion with others while earning rewards. Plus, with the growing popularity of crypto, there’s a huge potential audience.

Pros:

  • Low Cost to Start: You don’t need to invest a lot of money upfront. Just share your affiliate link and start earning.
  • Passive Income: Once you’ve set up your content and links, you can earn money passively as people click and sign up.
  • High Earning Potential: Crypto companies often offer generous commissions, sometimes up to 50% or more.
  • Exciting Market: The crypto space is dynamic and fast-growing, offering lots of opportunities to promote new and innovative products.

Cons:

  • Market Volatility: The value of your earnings can fluctuate with the crypto market.
  • Competition: The popularity of crypto means there’s a lot of competition among affiliate marketers. Your content and distribution funnels should be optimized to reach as many audiences as possible to increase your income.
  • Compliance and Regulations: You need to stay updated on legal and regulatory requirements related to crypto promotions.

Popular Crypto Affiliate Programs:

  • Binance: Offers up to 50% commission on trading fees generated by your referrals.
  • Coinbase: Provides a $10 reward for each new customer you refer who buys or sells $100 or more.
  • Unibot: a top-notch Telegram Trading bot that simplifies your DEX trading on Uniswap providers referrers to earn 30% of all fees from referred users.

Conclusions

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The blockchain market offers many crypto passive income opportunities, whether you’re a beginner or an experienced investor. Here’s a quick recap of the best strategies for most crypto users.

  • Staking: Earn rewards by locking up your crypto to support blockchain networks. It’s simple and low-risk.
  • Yield Farming: Provide liquidity to DeFi platforms and earn high returns. It’s riskier, but it can be very rewarding.
  • Crypto Lending: Lend your crypto to borrowers and earn interest. This method offers regular, predictable returns.
  • DePIN (Decentralized Physical Infrastructure Networks): Earn by contributing to physical infrastructure like decentralized wireless or storage networks. It’s a blend of digital and real-world involvement.
  • Crypto Affiliate Marketing: Promote crypto products and earn commissions. It’s a low-cost way to make money by sharing your passion for crypto.

By exploring these strategies, you can diversify your income and make the most of your crypto holdings. Start earning and make your crypto journey rewarding!

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Disclaimer: This article serves informational purposes only and does not constitute financial advice. Conduct your own research before making investmendecisions.