In crypto, good planning can bring you long-term financial stability. But tracking charts, trading, and constantly researching projects may prove difficult and time consuming.
There are alternatives though, such as earning passive income by making your money work for you while you lounge in the sun, sipping a delicious cocktail and enjoying life.
Through the banking system, even if you want to earn money, the annual return you get on a deposit in USD will be lower than the annual inflation rate and the amount you earn will depreciate over time.
To be on top in crypto, your strategie matters. In this field, the returns are much higher and there are various ways to protect your capital from inflation.
Staking
Staking is the easiest and most affordable way of earning passive income in crypto.You have to deposit and lock your crypto assets into a protocol, and receive rewards in return.
Here are the next steps:
Buy coins that use the proof of stake mechanism
First and foremost, you need to check if the project has a Proof of Stake consensus mechanism. You can find out through a simple Google search with the project’s name plus consensus mechanism. For example, type in Cardano Consensus Mechanism, and the first result will tell you that this project meets your needs.
So always keep this in mind together with what you need to be eligible. Don’t forget to check the returns and determine your possible payout in advance.
Find a suitable staking provider
You can use a platform like stakingrewards.com to track the returns of various projects and other useful information.
If you acquired crypto from a CEX, you can also stake it through it.
However, in most cases, the returns offered by centralized exchanges are lower than staking directly from your wallet and selecting a blockchain validator (which is responsible for verifying and sending transactions to the network).
It is really important to choose a reliable and secure provider. For example, if you want to stake the CAKE token, you can use the PancakeSwap platform and get an APY (annual percentage yield) of 63%.
If you want to stake the STANDARD token of the Romanian project StakeborgDAO, you can do it on their platform and you will have an APY of 76.9%.
But if you are not a huge risk taker, you can stake the UST stablecoin on Anchor Protocol, with an APY of 19.48% at the time of this article.
Yield Farming
Another way to earn passive income is Yield Farming. As an analogy, imagine it’s similar to depositing money in a bank.
Depositing cryptocurrencies is done by using a lending protocol, via a Dapp.
You must own a compatible crypto wallet. Then, choose a platform that has the farm you want to contribute to. For example, PancakeSwap has the option to take part in a multitude of yield farms, receiving rewards in CAKE with an APY of up to 375%.
StakeborgDAO offers the possibility to go into the USDC – STANDARD or ETH – ILSI farms, with APY of 185% and 44.2% respectively.
Curve Finance is a decentralised exchange that offers trading services between stablecoins and offers rewards for depositing with liquidity providers of up to 14% APY.
Although there are generally higher rewards than staking, you need to consider certain risks such as impermanent loss, liquidation and other vulnerability risks of smart-contracts.
Lending
The third alternative that can bring you passive income is Lending, i.e. lending your cryptocurrencies to others. If you opt for a decentralized platform, you will still need a wallet plus sufficient funds to use its services.
The Aave protocol is one of the most popular crypto lend and borrowing services. It offers returns of up to 8% APY, depending on the currency offered as a loan.
Other protocols such as Compound or Anchor Protocol offer the same services and similar yields.
Even though Lending yields lower returns, it is preferred by investors who like to take fewer risks than Yield Farming.