How Can You Earn Interest with Cryptocurrency?

In many ways, cryptocurrency is starting to replace the ways people increase their wealth, earn interest, and even earn a passive income! Even though interest payments on savings accounts can be relatively small when it comes to regular avenues, they can be pretty massive when it comes to cryptocurrencies.

In this article, I will be looking at a few ways you can earn interest or passive income through cryptocurrency.

Lending Tokens (DeFi)

One of the easiest ways you can earn interest on cryptocurrency is similar to how you would typically earn interest on fiat currencies. With DeFi, people now have access to financing in the world of cryptocurrencies as well. People can now borrow cryptocurrency from lenders and vice versa.

It’s all done through complicated smart contracts, but I won’t get too into that. The main point is that a lender can earn recurring interest payments by lending their cryptocurrency, and this gives many people an opportunity to earn interest without really doing anything.

Of course, there are certain risks to this. You can’t just take out your crypto whenever you want, so if the price of the crypto crashes, so do your chances of earning a profit from this. However, if you’ve lent crypto that is stable in price or, more conveniently, increasing in price, you could potentially earn a lot of profit.

Interest payments on crypto are much higher than they are at banks. You could earn an APY between 10% to 20% on average, and some methods are even more lucrative. Just like any other investment, there are many risks to it, so make sure you do the right amount of research.

Staking

Another simple way to earn a passive income through cryptocurrency is by staking. Staking is something you can only do on cryptocurrencies that use the proof of stake system, namely Cardano, Solana, Ethereum, and other cryptos like these.

These cryptos allow you to delegate as many tokens as you want into a “staking pool”, which is then automatically used to validate transactions and govern the token. Every time your token is randomly chosen to be used in this process, you will earn back small rewards in the form of cryptocurrency.

Since the whole process is randomized, you can increase your chance of having your token chosen by simply delegating more tokens into the staking pool. The more tokens you have, the higher your rewards will be.

You can take out the tokens you’ve donated at any point you want. There’s minimal risk to staking aside from the volatility of the crypto’s price itself. If you’re holding on to crypto for an extended period of time, it’s generally a good idea to stake it so you can earn a passive income on the side while also benefiting from the increase in value.

Mining

Mining is very similar to staking, but it’s a lot older and a bit more complicated. You can mine tokens that use the proof of work system instead of the proof of stake system. Mining basically consists of you buying a mining set-up, consisting of a somewhat powerful computer that works towards creating new “nodes” in the blockchain.

Every time your setup is used to create a new node, you will earn a small reward in the form of cryptocurrency. To get the most out of mining, you’d probably need to buy an expensive setup and pay expensive electricity bills, but it's worth it for a lot of people.

However, you don’t necessarily need a huge setup to mine cryptocurrency. In fact, you could probably do it on your computer right now without even noticing it. You can download specific browser extensions and software that will use your computer’s processing power to mine cryptocurrency in the background.

This might slow your computer down a little, but the rewards might be worth it, and you won’t even notice it. At the end of the month, you might be surprised by a lot of virtual cash!

Interest-bearing Accounts

Opening a savings account is one of the main ways people earn interest in general, but did you know there are also interest-bearing accounts in the crypto world? There are a lot of different exchanges, wallets, and crypto service providers that allow you to open an account there, buy specific tokens, and lock them into an account.

It’s almost the same thing as a savings account. When you lock your tokens in, you can earn a yield from it, and generally, the yield is much higher than it would be on a traditional savings account. Once again, the same risks associated with investing in cryptocurrency persist here.

However, there are also a lot of stablecoins you can invest in that won’t have the same level of volatility.

For example, the USDC token is pegged to the U.S dollar, which means its value won’t go above or below the USD. If you lock USDC tokens into an interest-bearing account, you could potentially earn a lot of money in interest. At least a lot more than you would if you just opened a regular savings account with a bank.

Dividend Earning Tokens

If you’re familiar with the stock market, you probably already know that stocks pay a dividend to their investors either monthly, quarterly, or yearly. For highly profitable stocks, the dividends can be quite high, and for those that aren’t profitable, there are no dividends.

Now, there are even ways for you to earn dividends in the form of cryptocurrency. This is possible with the help of “tokenized stocks.” These are essentially cryptocurrencies that are backed by assets in the stock market.

Whenever these stocks post a profit and pay out dividends, you will also earn that money in the form of cryptocurrency straight to your account.

This can help you get away with the regulation and monitoring that’s usually present whenever you invest in actual stocks. On top of that, you can benefit from the volatility of the cryptocurrency.

You can do this on crypto exchanges that support tokenized stocks, such as FTX, Kucoin, and Bitmax.

Yield Farming

Yield farming is a relatively recent concept in the world of cryptocurrency, but it has quickly become one of the top ways to earn interest in cryptocurrency. You can only yield farm on a decentralized exchange, so this won’t work on a centralized exchange like BINANCE or Coinbase.

Yield farming consists of an investor depositing tokens into a liquidity pool with the help of smart contracts. Whenever a token is added to a liquidity pool, it gets locked in for a certain amount of time.

These liquidity pools are what actually run a decentralized exchange and where the exchange’s users get their tokens from.

Now, whenever your token is accessed by traders, you will earn interest on that amount. These interest rates are generally quite high, making it a great way to earn a passive income. However, only certain tokens can be used in liquidity pools such as Ethereum, Uniswap, Tether, and Pancake Swap.

It’s not very difficult or complicated to pull off, and although there are certain risks with “locking” your tokens, due to the volatility, if you stick to stablecoins, much of that risk is removed.

Airdrops

In most of the methods I’ve mentioned in the list, you have to actually spend money to start earning a passive income. But there’s also a way you can earn a passive income by spending no money at all?—?airdrops.

Just like how certain bakeries will give you free cupcake samples to test them out, certain crypto firms will give you free cryptocurrencies for the same purpose. This process is called “airdropping” crypto, and it’s getting more and more popular with time.

Of course, most of the cryptos that actually do get airdropped are complete trash. In most cases, you’ll earn no money at all. But the important part is that you’re not losing any money. If the crypto ends up being a success?—?of which there are many cases?—?you’ll just be earning a profit.

If it fails, then it’s no big deal. You can be on guard for whatever the next big airdrop is by checking Google or any website that tracks upcoming airdrops. Sign up for as many airdrops as you possibly can, and eventually, the crypto will start absolutely pouring into your wallet.

Affiliate Programs

Affiliate programs are present in a lot of online services, and crypto services are no different. Many of the world’s top crypto exchanges like Binance, Coinbase, or FTX have affiliate or referral programs.

Basically, these exchanges will give you a specialized link, and every time someone signs up for these services using your link, you will earn a rather lucrative reward for it. You can market your link online on your blog, social media accounts, or YouTube channel to get started.

If you already have a big following, this should be pretty easy, but if you don’t, you can always promote your posts. On top of that, you can ask friends and family to sign up for these services as well using your code or link.

What are some of the ways you earn money with crypto? Let me know in the comments below! Subscribe to my YouTube channel for more information like this https://bit.ly/3720zFW

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