Earning passive income with crypto (part 1) - What is passive income and how to earn it
Passive income is a great thing. Letting your money work for you while you sip from a glass with those small umbrellas lying on a beach somewhere in the tropics sounds good right?
It may sound obvious that passive income is probably the best way to retirement, regardless of age but, as strange as it may sound, I have some friends who just can't see this.
They keep speculating on how many years they are expected to live and, based on that, they try to figure out how much money they would need to save before they could stop working and just live the rest of their days spending all the money they managed to save.
While that strategy can work, these friends of mine are completely missing the fact that if they manage to create enough streams of passive income they could potentially achieve that goal much sooner and they also wouldn't have to worry so much about how many years they have left because, at least in theory, they would be able to sustain their lifestyle indefinitely.
Sure, there are risks associated with that strategy, but then again, when we talk money, there is always some kind of risk involved. We can't control every variable of the equation and there are many uncertainties involved, but I believe that with a bit of planning, diversification and monitoring, it's possible to dilute that risk to manageable levels. I can't really speak from experience because I'm not there yet but I know more than a few people who took this path and are now living very comfortable lives in their beach houses, lake houses or wherever they saw fit.
What I'm trying to say is: you can quit the old 9 to 5 without having to think about how much money you have saved if you can consistently generate income that can pay for your desired lifestyle.
But what exactly is this fabled passive income thing? And, more importantly, how to achieve it?
What is passive income?
The first thing you should know about passive income is that, even though it can free you from a formal job and a daily work routine, it doesn't mean you don't have to work at all. It also has nothing to do with get-rich-quick-schemes.
Passive income means having your assets work for you (or making money while you sleep, as some like to call it), which by definition, requires you to have assets in the first place and, therefore, in most cases you will need to put in the work upfront to build one or multiple sustainable streams of passive income before you can start thinking about a permanent vacation by the beach.
How to earn passive income
There are several ways of building passive income streams and you may choose to commit to one or multiple of those. Some will be easier than others depending on what kind of skills and resources you have at your disposal, so choose wisely.
Some common ways to generate passive income include renting properties, dividend stocks, digital influencer work, creating an online course and more. You can check a few more ideas on this list and I'm sure you won't have trouble finding even more ideas with a quick online search.
However, we are in the age of blockchain and crypto so there's got to be a better way to make this happen, right? Right! At least, in my opinion, crypto presents many new and more democratic ways of building passive income. Let's take a quick look at some of them.
Earning passive income with crypto
As I was saying, crypto presents a whole new world of opportunity for those in the quest for passive income. I'll try to present a few ways you can earn passive income with crypto below but I won't delve deep into the details of each one of them so treat this as a starting point and always do your own research to find out what works best for you.
Mining
Mining is the OG of crypto passive income and it can be very profitable but it is also very expensive to get into, as it requires powerful hardware and plenty of electric power so It's really not for everyone.
Staking
Staking essentially means that you can "lend" your tokens to the network to validate transactions on it in exchange for a reward. This can be a good alternative to mining because you don't need any special hardware to do so but it still requires some sort of investment, as you will need tokens to stake.
Decentralized Finance (DeFi)
The world of DeFi really changed the way we interact with crypto and created some very interesting possibilities to earn passive income.
Platforms like CubFinance allow you to lock your crypto in pools in return for rewards. Alternatively, you can also become a liquidity provider (LP) to earn a share of the platform fees and also stake the LP tokens you get from providing liquidity for even more rewards.
DeFi is really a game-changer in the crypto world and, I dare to say, in the global economy as a whole but there are many risks associated with it, such as impermanent loss and a variety of scams so make sure you know what you are doing and only use platforms you can trust.
Final thoughts
This article was more focused on explaining the basic concept of passive income and exploring a few options to earning it, especially in the realm of cryptocurrencies.
These are some, but not all, of the options available out there and on my next article, which will be a sequel to this one, I plan to explore a few options that are specific to the Hive blockchain so stay tuned for "Earning passive income with crypto (part 2)"
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