Passive Income in crypto: Ultimate Guide

As Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work till you die.” According to DefiLlama, over $100 billion is locked in DeFi, generating passive income for investors. Want to get in on the action? 

Here's a deep dive into 4 ways to earn passive income with crypto that we've personally tested

Staking 

 Staking involves locking up your crypto to support blockchain networks and earn rewards. 

Think of it as earning interest by just holding your crypto! 

Here’s a look at some staking yields: 

▹ $ETH: 3.3% 

▹ $SOL: 7.2% 

▹ $DOT: 11.5% 

▹ $ADA: 3% 

▹ $SUI: 3.3% 

▹ $AVAX: 8% 

▹ $NEAR: 9%

Staking is super easy with built-in options in wallets like Ledger, or on exchanges like Kraken, Binance, and Coinbase. For Ethereum, check out Lido Finance or Rocket_Pool

You're not just earning; you're securing the network too!

 Benefits 

▹ Earn extra income 

▹ Help secure the network 

▹ Turn your crypto into a productive asset 

 Risks:

▹ Lock-up periods 

▹ Slashing penalties if running a node 

▹ Minimum staking requirements

DEX Liquidity Farming 

Providing liquidity on decentralized exchanges (DEXs) like Uniswap or PancakeSwap allows you to earn a share of transaction fees. It's like being the house at the casino, but less risky… kinda. To be an LP, you deposit tokens into a pool (e.g., $ETH/$USDT). 

Your assets are used by traders, and you earn fees in return. It’s passive and can be lucrative, but watch out for impermanent loss — more on that later. 

Risks of DEX Liquidity Farming 

▹ Impermanent Loss: If one asset's price moves too much compared to the other, your total value might drop.

▹ Smart contract risk: Always use battle-tested protocols to minimize risks.

Curious about impermanent loss? 

It’s not as scary as it sounds. It just means your asset values can fluctuate as market prices change. It’s “impermanent” because you can recover losses if prices move back. 

Lending Protocols 

 Lending platforms like Aave & JustLend turn your crypto into a cash-generating machine. You deposit your crypto, borrowers pay interest, and voilà — you’re earning! 

At its peak, Aave offered 14% on $USDT. Compare that to your bank’s 3%! 

With lending, your funds are secured by collateral from borrowers, reducing risk. However, smart contract bugs and hacking are always potential pitfalls. Never put all your eggs in one basket! 

Yield Aggregators 

Yield aggregators like Yearnfi and Beefyfinance

optimize your yield farming strategies by automating investments across DeFi protocols. 

They find the best pools, maximize returns, and save you on fees! 

How Yield Aggregators Work? 

Deposit your assets into a vault, and it handles the rest — seeking out the highest returns across multiple protocols. It’s a one-stop shop for your yield farming needs! 

Risks of Yield Aggregators 

▹ Protocol risks: If any underlying protocol has issues, your investment could be affected. 

▹ Market volatility: Can lead to liquidation or impermanent loss. Always diversify and stay informed!

Conclusion 

DeFi offers incredible passive income opportunities, but it’s not without risks. 

Always do your research, understand the protocols, and never invest more than you can afford to lose.

Crypto might just be your new money tree!