Top 6 ways to earn passive income from crypto in 2023

Cryptocurrencies have become increasingly popular over the past decade. Crypto assets such as Bitcoin, Ethereum, and other altcoins, have gained widespread adoption and recognition. However, the crypto market is known for being highly volatile. With that being said, trading and investing arent the only ways you can earn income in the world of crypto. Now, market participants are able to earn passive income without much effort.

What is passive income？

Passive income is by no means a new concept. The financial industry has been offering different methods of earning passive income for a long time. For example, using a savings account, users simply deposit funds into their account and earn interest. Within the crypto market, there are several tools which allow participants to earn passive income in a similar manner. Its a type of investment that generates a return with little involvement from the investor, sometimes it can be as easy as locking your crypto up on an exchange for a specific period of time.

That eliminates the need to have to trade and constantly monitor the market. You simply allocate a certain amount of money to generate passive income. This can be done in a number of different ways as we are about to see.

Earning passive income still comes with its risks, however, overall it's deemed as a relatively safe and simple investment strategy. Here are 13 methods which you can use to generate passive income within the crypto market.

1. Staking

Staking is a process that occurs on a Proof-of-Stake (PoS) blockchain network. It‘s one of the most popular methods of earning passive income. It requires little effort, all you need to do is lock your crypto up for a certain period of time. In return, you receive rewards in the network’s native cryptocurrency.

Depending on the network, this can come in the form of new tokens or transaction fees. Staking is a low-risk method of earning passive income, especially for long-term crypto investors.

2. Liquidity mining

Moving on, liquidity mining is another popular way to earn passive income from cryptocurrency. This has become popular due to the rise of decentralized exchanges (DEXes) and swap pools. Essentially, DEXes require liquidity pools that are used to facilitate transactions of a certain token. These tokens come from community members, called liquidity providers. They deposit their tokens into a liquidity pool, which is just a smart contract for the DEX. In exchange, users receive passive income for contributing to running the DEX.

3. Yield farming

Another common method used to earn passive income comes in the form of yield farming. This is a practice of depositing cryptos into yield-generating pools on DeFi platforms. This is a popular way of generating passive income but requires research due to the variety of DeFi protocols out there. Yield farming demands slightly more attention compared to the other methods weve discussed so far. This is due to the fact that returns tend to fluctuate.

4. Decentralized crypto lending

Crypto lending is one of the most popular ways of earning passive income in the entire industry. Similar to liquidity mining, with this method, all you have to do is deposit your crypto into a lending pool. Once again, users must conduct thorough research when it comes to selecting the best crypto lending service.

The interest comes from borrowers who borrow the coins that you deposited. They are expected to return the funds in the agreed amount of time and pay interest rates. The entire process is all facilitated but the use of smart contracts. Lenders must also provide some sort of collateral, this safeguards the lender.

5. Airdrops

Another popular way of earning cryptocurrencies passively is participating in airdrops. Airdrops are performed by crypto projects or sometimes crypto exchanges. What this means is that theyll send free cryptocurrencies to users who fulfill certain requirements. Airdrops are often performed by new crypto projects that seek to distribute their assets. Often, such projects may be supported by exchanges or other larger projects.

6. Crypto savings accounts

An additional method of earning passive income within the crypto space is by using crypto savings accounts. These are similar accounts to the ones offered by traditional banks. However, these ones are available on crypto exchanges — centralized exchanges, to be precise. Apart from exchanges, there may also be other specialized platforms that offer such services.

Crypto savings accounts are simply interest-bearing accounts for cryptocurrencies. The platforms allow you to deposit your money into an account, and in return youll earn interest based on the amount you deposited. Meanwhile, they use your money for various purposes. The platform might act as a liquidity pool, a lending platform, or something similar. For investors, it is important that their funds are safe and that they will grow in time.

Is passive income the best way to earn from crypto？

Whether passive income is the best way to earn from crypto is something that depends on the individual. Your investment goals are what decide that, along with your risk tolerance and personal preferences. Within the crypto industry you can earn passive income in a variety of ways, including running crypto nodes and other methods mentioned above. All of them have the potential to provide steady returns over time. Furthermore, all of them require less involvement than trading or investing.

Passive income can be particularly rewarding for long-term investors, who plan to hold crypto for a long time either way. Any of the methods described above can help them earn additional cash while they wait for the prices to surge. However, all of these strategies also come with risks. Market volatility, regulatory changes, impermanent loss, are only some examples. This is why every crypto user needs to be familiar with what they are doing and what the risks are.