Table of Contents

• What is passive income?
• What are some ways to earn passive income through digital currency?
  • Mining
  • Staking
  • Lending
  • Run Lightning Node
  • Affiliate Program
  • Master Node
  • Forks and Airdrops
  • Blockchain-based content creation platform
• What are the risks of using digital currencies to earn passive income?
• Summary

What is passive income?

In the blockchain industry, people can earn income through transactions or investment projects. However, this approach often requires detailed research and takes a lot of time, and may not necessarily be a stable and reliable source of income.  

Even the most seasoned and top investors can suffer long-term losses, and finding other sources of income is a good way to survive a lengthy period of losses.

In addition to trading or investing, there are other ways to increase your digital currency holdings. These methods can create ongoing income similar to interest, but do not require much effort to set up, require no maintenance, and enjoy the benefits.

This way you can have multiple sources of income, which can add up to a lot of money.

This article will introduce some ways to earn passive income through digital currencies.

What are the ways to earn passive income through digital currency?

Mining

The essence of mining is to use computing power to maintain the network and obtain rewards. Although mining does not require owning the digital currency, it is one of the most traditional ways to earn passive income in the digital currency space.

In the initial development stage of Bitcoin, daily mining via central processing unit (CPU) was an effective solution. As network hash rates increase, most miners are switching to more powerful graphics processing units (GPUs). As competition intensified, it eventually became almost exclusively an arena for application-specific integrated circuits (ASICs)—electronic devices that use computing chips that are tailor-made for the mining industry.

Competition in the ASIC industry is fierce, and companies with large R&D resources dominate. These chips may be outdated by the time they hit the retail market and require a considerable amount of mining time to break even.

As a result, most Bitcoin mining operations have been taken over by professional companies, making it difficult for ordinary individuals to use it as a source of passive income.

But for some, it is still profitable to mine coins that use low hash rate proof-of-work mechanisms. In these networks, using GPUs is still feasible. Choosing niche tokens for mining does have higher potential returns, but the risks also increase. Mined tokens may be instantly worthless, illiquid, have bugs, or be hindered by numerous other factors.

It is worth noting that installing and maintaining mining equipment requires initial investment and certain professional skills.  

Staking

Essentially, equity staking is A less resource intensive alternative to mining. It typically requires holding funds in an appropriate wallet and performing various network functions (such as validating transactions) in order to earn staking rewards. Staking (meaning holding tokens) maintains network security through ownership incentives.

The stake-staking network uses proof-of-stake as its consensus algorithm. There are various other versions such as Delegated Proof of Stake or Leasehold Proof of Stake.

Equity staking generally requires setting up a corresponding wallet and directly depositing tokens into it. In a few cases, this process will require funds to be added to or delegated to a staking pool. Some trading platforms can do this for you. All you need to do is deposit your tokens on the trading platform, and the platform will take care of all the technical requirements for you.

Staking can be a great way to increase your digital currency holdings without much effort. However, some equity pledge projects adopt abnormal strategies to artificially increase the expected pledge yield. At this time, it is crucial to study token economics models, which can effectively "cool down" the promised pledge reward prediction results.

Binance staking supports various tokens. Each of these tokens creates staking rewards. Simply deposit your tokens to Binance and follow the guide to earn earnings.

Lending

Lending is completely a kind of digital currency that can be held through Passive way to earn interest. There are many peer-to-peer (P2P) lending platforms that allow users to lock funds for a period of time and then charge interest. The interest rate can be fixed (set by the platform), or it can be set by the investor based on the current market interest rate.

Some trading platforms that launch margin trading services have already launched this function on their exclusive platforms.

This method is ideal for long-term holders who want to increase their digital currency holdings without putting in too much effort. It is worth noting that locking funds in smart contracts always faces the risk of vulnerabilities.

Binance Lending offers a variety of options that allow you to earn interest by holding your assets.

Running a lightning node

The Lightning Network is a second-layer protocol that runs on blockchains such as Bitcoin. It is an off-chain micropayment network that can be used for fast transactions that are not immediately transferred to the underlying blockchain.

Transactions in the Bitcoin network are usually one-way. That is, if Alice sends Bitcoin to Bob, Bob will not be able to return it to Alice through the same payment channel. The Lightning Network uses two-way channels, requiring both participants to agree on transaction terms in advance.

Lightning nodes provide liquidity and expand the capacity of the Lightning Network by locking Bitcoin in payment channels. The operator then charges a processing fee for payments completed through its channels.

Running a Lightning node may be difficult for less technically capable Bitcoin holders, however the benefits will largely depend on the overall adoption rate of the Lightning Network.

Affiliate program

In order to encourage everyone to help the platform recommend new Users and some digital currency companies have developed reward programs. This includes sharing affiliate links, referrals from friends, or other discounts for new users you recommend.

If you have a high social media following, affiliate programs are a great way to earn a side income. However, in order to avoid word-of-mouth spread about low-quality projects, it is necessary to conduct a series of in-depth research on the relevant services beforehand.

If you are interested in earning passive income with Binance, join the Binance Affiliate Program and earn rewards by promoting Binance globally!

Master nodes

In short, master nodes and servers Similar, but it runs in a decentralized network and has special functions that are different from other ordinary nodes in the network.

Token projects tend to only grant certain privileges to participants who have made a significant contribution to maintaining network stability. The establishment of a masternode usually requires significant upfront investment and extensive technical knowledge.

However, some masternodes require very high token holdings, resulting in a lack of liquidity in these pledged assets. Projects using masternodes often tout high expected returns, so be sure to do your own research (DYOR) before investing.

Forks and airdrops

For investors Taking advantage of hard forks is a relatively simple strategy. The only requirement is that the user holds forked tokens at the time of the hard fork (usually determined by the block height). If two or more competing chains are created after a fork, holders will have a token balance on each chain.

Airdrops are similar to forks. Users only need to have a wallet address to perform airdrops. Some trading platforms will provide airdrop services to users. Note that sharing a private key is never required to receive airdrops. When this happens, it's usually a scam.

Blockchain-based content creation platform

The advent of distributed ledger technology has made many new content platforms a reality. This technology allows content creators to create and monetize content in a variety of unique ways without having to endure ad insertion.

In such systems, content creators always retain ownership of their work and often monetize attention in some way. In the initial stages, creators need to invest a lot of effort. After accumulating a large amount of high-quality content and successfully launching it online, this method can become a stable source of income.

What are the risks of using digital currencies to earn passive income?

• Buying inferior assets: Artificially inflated or misleading returns can induce investors to purchase assets of very low value. Some equity staking networks adopt a multi-token system and pay a second token as a reward, which invisibly creates continuous selling pressure on the reward tokens.
• User Error: The blockchain industry is still in its infancy, and building and maintaining these revenue streams requires technical knowledge and critical thinking. We recommend that some holders wait patiently for such services to become more convenient and faster before using them, or only choose services that require very low technical capabilities.
• Lock-up period: Some loans or equity pledges require users to lock funds for a period of time. This will cause its assets to be immobile during this period, making it impossible to take timely measures when prices are negatively affected.  
• Exposed to vulnerability risk:Locking your tokens to certain staking wallets or smart contracts always exposes you to vulnerability risk. Generally speaking, the quality of the different options varies. Therefore, careful investigation and research is necessary before making a choice. Open source software can be a good start since these options are at least community vetted.

Summary

There are more and more ways to earn passive income in the blockchain industry, and they are becoming increasingly popular. Blockchain companies have also been adopting some of these methods to provide mining services in a broad sense.

As blockchain products become more secure and reliable, they may soon become a reliable option for a stable source of income.