DeFi
September 28, 2022
What is Token Burn and it's effects on price
An A-Z guide on token burning and how it is largely impacting the cryptocurrency industry.
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Nowadays everyone looks forward to easy and fast money. Almost every other person has an alternate source of income where they don’t have to put much effort. One of these methods is investing your money in things like the stock market and cryptocurrency.
When it comes to investing, one’s primary goal is to boost the profit gains whether it is with crypto or shares. Talking about cryptocurrency, it is true that people earn profits with trading and investing.
However, one can obtain a handsome income with the help of cryptocurrency that is simply sitting idle in their wallets. There are a lot of ways that enable you to earn passively but when it comes to cryptocurrency, the profits you make can be higher. So, we will be talking about all the types of passive incomes present in the crypto world in this article.
Passive income is something that is earned from sources or ventures without being involved actively. With cryptocurrency it is possible to earn passive income with minimum effort. All you need to do is invest some money in buying cryptocurrency and then wait for the returns.
However, the returns may vary depending on the method of income you choose and also the amount of crypto you hold. Following are a few methods with the help of which you can earn passive income in cryptocurrency. Let’s begin!
You may have heard about Proof-of-Stake consensus mechanism. If not, it’s an upgrade over bitcoin’s Proof-of-Work (PoW) consensus system. Unlike PoW where miners get rewarded for adding a new block to the blockchain; validators in PoS get chances of adding new blocks depending on the number of tokens they stake and get rewarded accordingly.
It is a good way of earning cryptocurrency passively. You don’t need to buy any expensive equipment to get started. Just stake the desired token of a certain amount and enjoy the rewards in terms of tokens.
Liquidity pools are one of the prime elements of DeFi and decentralized exchanges. Liquidity pool is basically a large collection of funds secured with smart contracts. Anyone can access this pool for trading, lending or any other activity on decentralized platforms. Check out our article on liquidity pools to understand this concept in a more comprehensive manner.
If you are one of the liquidity providers in the pool, you can earn crypto every time a trader uses the pool and pays a trading fee of 0.2 - 0.3% of total volume for the same. The fee paid is distributed amongst all the liquidity providers.
Another great way of earning guaranteed cryptocurrency is through the BNB vault. Last year, Binance launched BNB vault as a part of its Binance ecosystem which enables users to earn 5-8% annually by simply staking the native token BNB.
The staked funds are accumulated over time and income is distributed on a daily basis. As an added benefit, Binance offers the BNB holders VIP rights, launchpad positions and users are also eligible to receive their airdrops.
Yield farming is one of the most complex systems for investors as it requires deep and thorough research by them. Nowadays, Yield Farming is more popular because of its benefits and earning passive income from it.
Yield farming is one of the profitable options to earn passive income in crypto space and allows investors to deposit tokens in a liquidity pool. Liquidity pool is nothing but a special smart contract. Yield Farming relies on Smart contracts and Liquidity that an investor provides.
Through the Liquidity poosl, you can receive a particular amount of fees. This fee is generated when traders access the pool. Apart from that, Yield farming is often done through Ethereum (ETH). Alongside Ethereum it uses Defi Tokens like Uniswap (UNI), or a stablecoin i.e. Tether
Lending systems have existed in our society from ages and this system is followed and practiced in the crypto world as well. The key points we follow in Fiat lending system are the same followed for Lending your Digital Assets.
Landing your digital assets is a good source of passive income as longer and larger loans, and interest rates help to charge more fees from the borrower. As the lending systems involve a significant amount of money, they are subdivided and hold different working to profit both the lender and the borrower.
By now, you may know that a centralized system does involve third parties. In a centralized Lending system, third parties decide the terms and condition, and the rate of interest. Nearly everything is pre-decided and fixed ahead of time. So the lender just has to deposit their money to the system and the process will continue accordingly.
As we know, to achieve complete freedom, decentralized systems were introduced, thus eliminating the involvement of third parties. In Decentralized Lending or DeFi Lending systems, the lender and the borrower can contact through smart contracts, in smart contracts, the interest rates are automated.
Peer-to-peer is the system with zero involvement of third parties and with no automated interest rates. Lenders have to deposit their sum to a custodial wallet and afterwards lender and borrower can interact and set interest rate and loan terms. Thus it provides complete freedom to people to borrow from each other.
Dividends or distribution of profits are provided to shareholders as a payout. Basically in the crypto world, Cryptocurrencies have stocks in the form of tokens and share systems somewhat work the same as the real world share market. The payout is sometimes paid for on a quarterly basis.
These were the 6 types of passive incomes in cryptocurrency that we put together for you to earn profits with minimum effort. The ways in which one can earn income easily are increasing and making room for the increase in passive income. So, choose which method you would like to adopt to gain profits with minimum effort.
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