Articles, Cryptocurrency, Generating Passive Income

How to Earn Passive Income With Cryptocurrency

Written By: Trisha Reynolds
Reviewed by: Mike Reyes
Last Updated October 26, 2022

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is it possible to earn passive income from currency?

Cryptocurrency is an exciting investment option for savvy investors. As opposed to investing in stocks or bonds, cryptocurrency can provide a lucrative return on investments with its risks. Investors can use multiple strategies when it comes to earning passive income with top cryptocurrencies. Read on to learn more about the ways to generate passive income with crypto.

What is a cryptocurrency, and how does it work?

Cryptography is a process that uses mathematics to encrypt transactions, and it’s the basis of how cryptocurrencies get created. These digital coins operate independently of central banks. Also, they allow users who own them to remain anonymous. And each transaction is recorded publicly for monitoring purposes.

The first cryptocurrency created was Bitcoin, back in 2009 by the pseudonym Satoshi Nakamoto. Bitcoin is now one of the most popular as it offers privacy and security because there is no central authority to monitor transactions and seize funds. 

Bitcoin transactions happen through a peer-to-peer network where all individuals connect to verify and validate transactions. It also keeps the users and miners (those who process and confirm transactions) honest since they stand to lose money if they attempt fraud or other deceitful practices.

The blockchain is the underlying technology that makes bitcoin work. And no one can erase anything recorded on this public ledger once registered. So, not only does the blockchain validate transactions between two parties, it also creates new blocks of data. 

Timestamps and cryptographic signatures keep the system safe and secure—, and its records are tamper-proof (authentic). While there are other cryptocurrencies out there right now (Litecoin, DOGEcoin), Bitcoin remains by far the most popular because it was the first and has seen immense market acceptance. 

Most importantly, crypto investors must not turn away from new coins like The People’s Reserve. These coins have the potential to rise above, and you can leverage the opportunity through proper research. Additionally, you can check some of the most underrated cryptos here.

How to start investing in cryptocurrencies?

The first step to earning passive income with cryptocurrency is to purchase some. The exact method to start investing in cryptocurrencies will vary depending on the currency being purchased. However, the basic steps are similar across most platforms.

Before purchasing any currencies, potential investors must read up on the different methods they can use to invest in them. There are a variety of tools to use and helpful information from current investors concerning their preferred currencies. The most popular currency for passive income is probably Bitcoin. 

Bitcoin ATMs are a popular choice to transact with Bitcoin and other cryptocurrencies. In a Bitcoin ATM, instead of connecting to a bank account, they connect the customer to a Bitcoin wallet or trade immediately. There are likely Bitcoin ATMs Near You that may help make your cryptocurrency transactions easier. 

A simple search will provide an investor with multiple resources on how to start buying and selling digital tokens. Investors will also quickly discover the different platforms at their disposal. Additionally, investors who join cryptocurrency communities on social media can learn even more.

There are also websites providing coin predictions. For instance, The Top Coins reviewed several factors affecting Bitcoin and released an article about Bitcoin Price Prediction 2040.  With this, you further enhance your investment plan. 

Once the investor purchases the cryptocurrency, they can start generating passive income.

How to use cryptocurrency for passive income?

A cryptocurrency is a new form of currency in the digital age. It is a decentralized, peer-to-peer system of money. It’s generated through mining or trading with others in the digital marketplace. An investor can use cryptocurrency as an investment vehicle by purchasing it and holding on to it for the long run. Also, an investor can trade it actively in pursuit of generating profits from short-term price fluctuations.

Recently there has been a lot of hype about how cryptocurrency will be the next big thing, but how should people opt for a passive income?

Earning Interest

Interest-bearing accounts that pay investors in cryptocurrency are becoming increasingly popular due to the rise of digital tokens. Platforms offer interest rates for different types of crypto. However, decentralized applications built on Ethereum also let users make money without making an account.

When someone invests their money, interest typically compounds annually. However, interest compounds weekly or even daily with a crypto savings account. It means that the amount of total growth will be much higher if invested for a more extended period. Thus, it is feasible to earn passive income with cryptocurrency through a digital wallet and lending platforms that provide profits.

Interest rates change with prevailing economic conditions, while dividends may vary unpredictably due to upcoming corporate decisions on management strategies or possible mergers or acquisitions.

The time effect

Along with compounding interest, time is in people’s favor. The longer investors keep their money invested, the faster it will grow. It isn’t true for simple interest. Indeed, previously earned crypto is not considered when calculating future earnings.

Blockchain networks are shifting traditional finance. On these platforms, they can lend and stake an investor’s money into different types of investments that yield returns to the user in some form or another. Banks typically determine rewards rates on loans. However, blockchain network participants control their financial destiny by choosing where they want to invest for higher yields with less risk attached than what banks offer.

Anyone can make money in a few different ways on Defi lending platforms. Someone can earn interest from your staked assets, take out loans and pay them back with the same token they are making, or both.

It allows investors to see 5-15% higher returns than they would typically receive. On top of that, there is no requirement for banks when investors take out loans through these platforms. That means lower fees than traditional rates. 

The value of this platform’s tokens rises due to increased demand, so it truly benefits everyone here: lenders and borrowers alike. Earning interest can also be similar to earning dividends. Dividends are a payment you will receive from an investment or company. 

Crypto lending

Crypto lending through digital lending platforms is an attractive way to generate passive income with your crypto assets without worrying about the volatility of digital tokens. BlockFi, for example, is a crypto lending platform that lets people deposit Bitcoin on their platform and will pay nearly 8% interest in return while they lend it elsewhere.

Although it is possible to invest in newer platforms, investors should avoid using untested ones. These have a higher likelihood of being hacked or having bugs that can lead to your investment getting lost. Remember that generating returns means taking risks, so be careful when investing and always do thorough research beforehand.


To earn passive income from the cryptocurrency platform, staking is a great option. In proof of stake consensus, validators validate blocks rather than miners through proof of work. To become one of these role players in the network environment, users must stake coins for an initial deposit and commit them as collateral on that blockchain’s ledger or decentralized application (DAPP) platform’s smart contract.

The blockchain’s foundation is built on the idea of decentralization. To become a validator, the user has to meet certain standards and earn his place in this decentralized world. Users are expected to keep their computer turned on at all times—and staking funds too.

All these actions come with one common goal: validation. Staking allows users to keep up with inflation and stay relevant by avoiding it. Constant connection is the most efficient way to earn passive cryptocurrency income because stakes are rewarded for having more tokens in their wallets, not how much they stake relative to others. 

Voting rights

Staking also provides other benefits like voting rights on essential network decisions and being eligible for rewards that require proof of stake rather than just proof of work or time-locked coins.

Other considerations

No matter the personal financial goals, anyone should consider the risks associated with staking. People must remember that while it is locked away from selling, there will be a period when its value fluctuates significantly and may not meet expectations.

If the stakes are not worried about the fluctuations in price and plan to hold crypto for a long time, staking is an option that can earn high-interest returns. It’s for those who use platforms trusted by many, like Binance.

Overall, this method risks trusting someone else with personal money while it’s being staked. However, these risks are relatively low if using trustworthy exchanges such as Binance.


Mining cryptocurrencies is one of the most popular ways to earn passive income. A computational expert earns digital coins for solving complex mathematical problems and verifying transactions in the mining process. Mining requires computing experts to solve math equations and verify transactions using cryptography. And in return, they get crypto tokens or coins as a reward.

Early Bitcoin enthusiasts could mine Bitcoin with a simple computer processor called an ASIC. As the crypto platform grew in popularity and price, people started to use more powerful hardware like GPUs (graphics processing units) to improve their odds of earning coins.

Mining has become very expensive and resource-intensive. Individuals no longer earn much on their mining efforts. Instead, most come from large mining farms using hundreds of ASICs and lots of electricity.

Cloud mining for earning passive cryptocurrency income

Cloud mining is an alternative to physical mining. When someone invests in cloud mining, it’s like investing in a company with its physical setup for crypto mining. Lenders receive some of the cryptocurrency they earn when giving incentives at specific periods.

Cloud mining is a straightforward procedure with a lower initial investment than traditional mining. However, it’s important to note that participants will not receive all the returns they would generally obtain if they were mining. There is also the risk that this may not be a good offer for some investors. Indeed, many cloud miners are scams.

Theoretically, cloud mining enables users to mine their tokens without hardware or technical knowledge. In practice, however, this is rarely true since statistical irregularities in these digital currencies make it exceedingly difficult to generate significant profit from them without access to expensive computing equipment. 

Most reputable cloud miners’ websites offer you a chance to buy into a “pool” that will then contribute your computing power towards generating blocks for all pool members rather than individually.

Play to Earn Crypto Games

Anyone can earn passive cryptocurrency income by playing games on the Ethereum blockchain network and other dApp support networks. There are many collectible-style online games in which investing money into a character increases its value later once sold.

Rather than simply releasing their games to the public, developers can release them alongside a play-to-earn business model. It allows gamers and gaming enthusiasts to earn an in-game asset by actively playing the game instead of purchasing it outright with real money. 

As they are given these assets for free, players have no reason not to participate. And it makes this strategy an effective way of increasing sales, especially if many users enjoy the product after trying it out before diving into its economy.

Blockchain games

Blockchain games are so effective due to the play-to-earn model of business. Players complete tasks or levels to earn rewards that they can use later on, like crypto or virtual items they can sell for profit. 

Because blockchain technology allows these assets to exist and remain immutable, it has been successful once paired with this game type, allowing the players to know the progress and fully own the digital goods within the game/platform itself.

The time and effort put into earning cryptocurrencies are self-sustaining. People do not need to invest additional money. All they have to do is make your first investment. In certain games, it doesn’t take any work for the asset to grow independently. 

Potential crypto players must research digital ledger apps that would be a good fit.  Maybe players could even earn crypto by doing something fun.

How much?

According to a source, Axie Infinity topped the list of top-earning games, with its total revenue closing towards $120 million in July. Regarding the remaining apps on Token Terminal’s list, Axie Infinity led by a significant margin. The app aggregated $215 million, while other competitors totaled around $41 million combined.

Splinterlands is a card trading game that combines blockchain technology and crypto principles to help players compete for limited editions. The Splinterlands’ native token, Dark Energy Crystals (DEC), makes it easier for users looking forward to acquiring rare NFTs. In 2020, this creation managed to have a strong following that will continue growing with each passing day as time goes by.

The private token sale that the company recently concluded successfully brought in about 3.6M USD as per the news, with some of the contributions coming from leading industry players like Enjin, Polygon, Alpha Sigma Capital, and Blockchain Founders Fund.

Yield Farming

Yield farming is a decentralized finance technique that uses liquidity mining to generate high returns for participants who stake or lend crypto assets. This risky and volatile method has increased in popularity due to its ability to provide the same value as traditional yield opportunities but with a greater risk-adjusted expected return.

Yield farming is a system that encourages investors to lock up their crypto in smart contract-based liquidity pools. The incentive for this is the percentage of transaction fees, interest from lenders, or governance tokens an investor will receive if they commit funds into the pool.

One could express the future value of this return as an annual percentage yield (APY). As more funds get added to the industry and demand increases, prices inflate because investing has no significant benefit.

COMP token

A new way of earning money has emerged and is popularized by the COMP token issued on Compound’s platform. It can be seen as another form of interest rate targeting, where yield farming participants earn additional tokens for lending their capital to compounds.

Various ways to earn tokens are available in a blockchain system. For example, some protocols allow users to be liquidity providers and get governance tokens through yield farming. Investors can trade these tokens on centralized exchanges like Binance or decentralized ones such as Uniswap after earning rewards for their efforts.

Yield farming is a complicated financial venture with a high level of risk. It’s only worthwhile when Ethereum gas fees are substantial sums of money in funds are available. Still, there’s always the risk of a sudden breakdown or market lapse during periods of instability.

Competition between protocols creates vulnerabilities and coding bugs because time is of the essence. As a result, yield farming may be subject to hacks and fraud due to smart contract vulnerabilities in this fast-paced industry.

Mining VS Staking

Mining happens on blockchain networks to verify transactions and produce new blocks for the chain. However, investors can view staking as a way of achieving this goal without mining by simply locking up their tokens in return for rewards. 

Because mining gives people the ability to freeze their resources, it’s unlike a conventional bank. This allows users limitless power over their earnings at any time. Mining crypto can be profitable and requires modest assets. However, users may face difficulties when mining, such as poor health or limitations on where to mine.

Staking involves the purchase of crypto coins and holding them in a wallet for an allotted period. Stakers get rewarded for supporting the network. And their coins will increase in price depending on how long they hold them in that specific wallet.

Many decentralized finance projects allow users to stake their crypto and earn a fixed interest or yield farming rewards. There are also several decentralized currencies with the same concept but without requiring validation processes for earning an income from staking coins.

Why Should You Consider Cryptocurrency for Earning Passive Income?

Passive income is an easy way to maximize your returns on your initial investment. These decentralized currencies are a good instrument for investors who only want to choose and invest their money but do not actively manage it. The laziest way of investing in them is by using trading robots that automatically select the right cryptocurrency depending on market trends at any given time.

Diversifying the portfolio is essential, and investing in cryptocurrencies can help investors do that. Historically, Bitcoin has shown almost no correlation with the U.S stock exchange platform – meaning it doesn’t move up or down at exactly the same time as other resources like stocks – so adding some to their investment strategy could make a difference over time.

In the future, cryptocurrencies may become a more significant part of people’s investment portfolios. For that reason, it makes sense to invest in some cryptocurrencies as part of the portfolio today–but only if you have an investment thesis for why each currency will be valuable tomorrow.

For any cryptocurrency project to succeed long-term, it will need widespread adoption. While the goal of these projects is lofty and may not have been achieved over short time horizons, continued focus on reaching this objective could lead to rich rewards for early investors in the future.

Despite the controversies surrounding cryptocurrencies due to their volatility and immaturity, they have a huge growing community. The environment consists primarily of enthusiasts who know how to exploit the increasing demand from retail investors, many of whom lack a deep understanding of this field.

The Risks Of Investing In Cryptocurrency


Cryptocurrencies can be quite volatile due to changes in sentiment. In a few hours, the price of cryptocurrencies may drop by hundreds or thousands of dollars because of volatility. More often than not, investor emotions and expectations are in the driver’s seat rather than value-based analysis.

Cybersecurity Risks

Cryptocurrencies are decentralized, which means that they are not under the control of any individual or central agency. They come with inherent security breaches. It’s important to note that many cryptocurrencies do not have a centralized regulatory body dictating changes in the code. 

It leaves the code at risk for hacking and malicious attacks due to flaws in coding language or software programs. Given this relatively unregulated market, decentralized currencies are susceptible to various forms of fraud and abuse, including scam coins, pump-and-dump schemes, Ponzi schemes, and insider trading. 

Peer-to-Peer Transaction Scams

Investors trade digital currencies online through various platforms. These marketplaces bring together counterparties without providing any clearing or intermediary services. Most governments do not regulate cryptocurrency, leaving all risks to be taken care of between just two people who do business with each other directly.

The most common risk with Peer peer transactions is the risk of fraud. It occurs when someone takes your banking information, goes through your bank account pretending to be you, and steals money.

It’s difficult for banks to detect this type of financial crime until after it has occurred. Money securely stored in a bank account can’t simply disappear, but with cryptocurrencies like Bitcoin, there are no limitations on who can send or take funds with one caveat.

Final Thoughts

The future of cryptocurrency is unclear, but the potential for earning passive income remains. Cryptocurrency is a risky investment, and many things can go wrong. However, if people are willing to take on the risk of investing in cryptocurrency as part of their passive income strategy, then it’s worth considering.

In the end, I recommend conducting proper research and assessing the risk appetite before investing in anything, considering there is no risk-free investment.

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