Generate passive income through cryptocurrencies
You know how to invest in cryptocurrencies to try to get more value on your investments. However, unlike a lambda asset, crypto-assets have the characteristics of a currency (exchangeable, storable and standard values). So, just like your dollars , you have the possibility to make your cryptos work in order to generate passive income.
Here is a set of methods to round off your end of months or more!
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Mining is often associated with Bitcoin but it is much more widespread than that. For example (even if it is destined to change with new version 2.0) Ether – the cryptocurrency of Ethereum – works via this mining protocol. Thus, by securing the PoW (Proof-of-Work) network, the miner will create new coins / tokens in order to remunerate his work. So it is important to know at which halving the cryptocurrency is located as this will determine the number of coins distributed.
Via your own machine
To become a miner, you will have to first buy a machine composed of either GPU (graphics cards) or CPU (processors).This choice will have to be made according to the currency you wish to mine. Because blockchains are not equivalent, they do not work in the same way. Before any action, look at the blockchain of the target token.
However, care must be taken with regard to the costs involved. In fact, in addition to the substantial initial budget to buy the machine (depreciated on average over 3 years), you have to take into account the electricity costs, which represent a significant part of the operating costs. It is after deducting that that you will be able to have your return (ROI). To help you, sites allow you to estimate the latter such as CoinWarz.
Finally, you have the risk of obsolescence of your machine. Suppliers are constantly racing to produce ever more powerful and less energy-intensive equipment. So it is possible to find yourself in a situation where you buy a machine that becomes obsolete the next month because a model twice as efficient has come out.
Example of yield by mining
Take the example of Feel mining’s Discovery machine. It features 4 graphics cards capable of 120 MH/s in total. With an electricity consumption of 500 Watts and an electricity price of 0.12 € (low price for France), we get the following results:
In our case, we can see that the most profitable is to turn to Bitcoin (BTC) with a daily profit of $2.33, or €2.11 per day. This amounts to about €2,310 over three years. Deducting the price of the machine (amortized over the same period), yields about 6.6% per year. In fact, this rate changes in line with the evolution of the price and price of electricity. Thus, if the price of the BTC rises, you will bet more and vice versa.
I’ll leave it to you to make your own simulations and take a closer look at what it generates.
Via a pool of minors
Since mining works on the principle of a competition (you have to solve the math puzzle first to get the prize), revenues are neither steady nor stable. For this purpose, groups of miners have been set up. Regularly referred to as mining pools or mining cooperatives, these groups make it possible to pool computing power and thus smooth out earnings. The distribution of profits is then proportional to the share in the pool. This is roughly the same principle as dividends.
Cruxpool is an example of a mining pool. There are many others, of course, and once again, I invite you to delve into the subject before you start. You will find various subjects here.
The masternodes
Masternodes are similar to staking (discussed below). Thus, it is mainly possible on blockchains using a PoS (Proof-of-Stake) consensus and a variant.
Like mining, masternodes help secure the network. To do this, you will need to lock some of your cryptocurrencies (this is called the collateral) in order to build your masternode. This represents a node that supports the blockchain network and is thus strategically positioned. If you imagine this, you see a highway network. Where the stake could be perceived as a service station, the masternode is a toll, that is to say a privileged place of passage, hence the fact that we speak of a knot. This node will usually be located on a server you rent (such as DigitalOc) or Amazon's AWS). The goal is to be able to have a masternode that works day and night, 24 hours a day, without you having to take care of it every day. By checking, controlling and carrying out the transactions, you will then collect between 5 and 20% of the transaction fees. The return is therefore higher than staking. As an indication, here are two examples of annual return via Masternodes that you can find on the market: 1.Dash: 7.6% 2.ZCoin: 17% But beware ! If the yield is higher it is also because it is not easy to set up. Programming with the server is not for everyone, and the collateral can be very high. Moreover, the choice to create a masternode is not much different from an investment in a young cryptocurrency or in an ICO. So there are a lot of things to consider and check before getting started. You will find a complete guide here. This is why companies have specialized in the field to offer you turnkey solutions. Masternode pools also exist with the same advantages and disadvantages as a mining pool. Find out in detail what masternodes are. Staking Staking is one of the easiest methods of earning passive income. It works on blockchains in PoS protocol and its variants. The principle is simple. By holding cryptocurrencies, you participate in the process of securing the network. In return, you get a portion of the transaction fees on the ones you secured. To understand the difference between masternodes and staking, we can make an analogy with management: * Masternodes are team leaders who must complete a mission in order to move the business forward. Each correctly completed mission will be registered on the blockchain. * The employees are the nodes (nodes) who are responsible for fulfilling the task requested by their superior. This is staking. Access to this solution is relatively easy via exchange platforms such as Binance, Coinbase, Poloniex or the French Coinhouse. Moreover, it allows the user not to have to lock their funds. According to the CoinHouse site: "Earn 6% to 7% interest on your Tezos!"
You can also do this through either your cold wallet or even a staking group. The latter, like the other pools seen previously, will have the advantage of pooling the locked funds and thus standardizing your profits. However, if you want to put yourself fully into this activity and hold a node, I invite you to read this article to fully understand the issues and risks to which you are exposing yourself. Whether for masternodes, mining or staking, do not hesitate to get closer to professionals or opt for a pool (less risky and much easier to set up). Just Mining or Feel Mining (among others) can support you in setting up a masternode, purchasing mining equipment or staking. The loans The interest of lending its crypto-currencies is that in return, you will receive interest just like a bank loan for example. In order to understand how the rates are calculated (broadly) one must understand the interest of borrowing cryptocurrencies. How does it work ? Unlike the current monetary system where when you borrow you create money, nothing like cryptos. When borrowing, you will need to secure collateral corresponding to 2 to 7 times the amount borrowed. This collateral remains yours, but functions as a guarantee in the event of non-repayment. Moreover, it is higher than the amount borrowed because the lender must be sure that you have more interest in returning rather than keeping the loan sum.
Why borrow?
1. The first interest is found in everyday life. Let's take an example where you are going to eat at a restaurant. Thanks to your crypto card, you can pay for your meal but you don't want to do it in Bitcoin because you are sure that it will increase in the next few days. Problem, you have no other alternatives. You then have the option of borrowing stablecoins like the Dai (indexed to the price of the dollar), with no borrowing limit, to pay for your meal. This will allow you to pay for your meal without de-indexing yourself from the volatility of Bitcoin. You can then repay the Dai once the rise in Bitcoin has taken place and thus take your profits. When repaying, interest will have to be paid but which should be less than the capital gain realized (if you have calculated your move correctly). In short, this allows you to keep positions while using cryptos on a daily basis. This example is on a small scale but you can very well see the case with someone deciding to buy a new mining farm.
2. The second interest is more advanced and will speak to the most initiated among you. Let's imagine that you have Ether (ETH) and that again you are sure that it will increase in value in the next few days. With so-called margin trading, you have the ability to leverage to increase profit. Be careful, this necessarily increases the risk of loss as well! This process is therefore not for everyone and requires solid knowledge. In the context of the search for passive remuneration, it is therefore the quality of lender that will interest us. That of lender corresponds more to an application of speculation on the markets.
There are two types of loans.
Those that are centralized, and those that fall within the scope of DeFi (decentralized finance) and are by definition decentralized. Centralized loan Going through a centralized platform such as Celsius, Nexo, BlockFi or even Crypto.com allows you to benefit from the user services made available such as a bank card for example. The risk is mainly in the confidence in the company and the probability that it will go bankrupt. An example of yield is from BlockFi: “BlockFi users can deposit their Bitcoin or Ether and earn up to 6% interest per year. Paid at the start of each month, interest earned by account holders adds up, bringing the annual return for our clients to 6.2%. Decentralized loan Decentralized loans are more complex to understand because they reflect several factors determining the nature of the exchange. The principle nevertheless remains the same, with the difference that what depends on the borrower and the lender is no longer a company but a smart contract. This is why most of DeFi works via the Ethereum blockchain: you can find the MakerDAO, BinanceDEX or Compound platforms there.
Liquidity pools
also fit into the DeFi ecosystem and are akin to lending/borrowing. However, its purpose is slightly different in dealing with the inefficiency of markets. As the name suggests, the idea is to be able to offer enough liquidity to a market. Just like the loans, you will be remunerated by interests which will be composed according to the situation of the transaction. Synthetix, Jarvis Margin, Uniswap or Curve are platforms that allow this practice. Brave "Users can earn $224 a year [€203] using the Brave browser." - Brendan Eich, CEO of Brave (AMA on Reddit) Brave is a peculiar and rather interesting web browser. Imagine that over 500 million people today use ad blocking software on their mobile and desktop devices. This of course creates problems for advertisers, and it shows the real problem people have with the advertising landscape. It's everywhere, overexposed and we get nothing out of it. That's what Brave wants to solve. Unlike historical browsers, this one will allow you to choose whether you want to view advertising or not. If this is the case, then you will receive part of the advertising revenue in their token, the Basic Attention Token. So, Brave lets you earn money while browsing the internet like you normally do. Moreover, it protects your privacy. Similarly, you can earn BAT as an advertiser if you own a website, blog, YouTube or Twitch channel. Without initial investment and very easy to set up, it could be one of the best ways to obtain passive remuneration.
This concludes our presentation of the different ways to generate passive income with cryptocurrency. Between mining, masternodes, staking, lending, DeFi and the Brave browser, you are spoiled for choice! Feel free to share your tips in the comments if you want to complete this article.
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