How to start making money with cryptocurrency? This burning question piques the interest of the general public more and more. In the past, the ways to generate some passive income used to be limited. Nowadays, market growth coincides with increasing and inclusive opportunities. So, it is no wonder everyone wants to bite a piece of that pie.
There are many effective ways to earn rewards with cryptocurrencies. In this article, we will discuss 7 of them. So, not to go around the bush, let's just get straight into it.
What is Cryptocurrency And How Does It Work?
It is an asset that is traded peer-to-peer (P2P) without trusted third parties such as banks. They have no physical medium such as coins or banknotes, are not regulated by a central body, and are not indexed to the dollar or gold, for example. Users simply convert them into dollars using exchange or bitcoin wallet apps like Crypto.com, Coinbase, Coinmarketcap, and MyCointainer.
That's why many believe that cryptocurrencies represent greater value than the ones issued by the government. It's not meant to be arbitrarily extended and is so far relatively protected from government hindrance and manipulation.
These new electronic currencies use blockchain technology to transfer ownership of cryptos between their different owners. By and large, cryptocurrency is a sequence of numbers whose ownership is transferred from one person to another.
How to Start Making Money With Cryptocurrency?
New crypto-assets are made by a mining process. People agree to lend computing power to secure the cryptocurrency and are rewarded. The process on which Bitcoin mining is based, in other words, the proof of work, requires several steps:
- A transaction takes place between two network users.
- This transaction is integrated in a block.
- Miners verify the validity of the transaction.
- Miners embed the most recent block header into the new block as "hash".
- They seek and find the solution of the mathematical problem posed.
- A new block is then added to the blockchain before being broadcast throughout the network.
Bitcoin is mined using extremely powerful specialized computers in order to process each of the transactions carried out on its network. In a nutshell, computers must solve complex mathematical problems inaccessible to a human brain. Solving these problems allows the creation of new transaction blocks within the blockchain.
For a block to be secure, you must find a key that will "seal" the block and create a new one. The network user who manages to find this key will be rewarded. Digital signing with private keys is the most critical process in the blockchain system. Stolen or abused private keys have caused the loss of huge amounts of digital assets worth billions of dollars and severely lowered the efficiency of processing along with other problems such as loss of coins and high management costs.
Now, your question is probably, "how much can I earn by mining?" As of April 2022, one miner is currently earning 6.25 Bitcoin ($250,000) for successfully validating a new block on the Bitcoin blockchain.
Also, when it comes to network maintenance, having a master node is also profitable. It allows you to hold a copy of a full blockchain archive of a particular cryptocurrency. DASH and PIVX are operating on master nodes. Many cryptocurrencies pay node operators a symbolic fee to keep a record of their activities on their native blockchains. So, if you want to earn some passive income, running crypto master nodes is one of the easiest ways to start.
Either way, these two methods require significant computing power and ongoing investment backed with technical expertise.
Another viable way to earn passive income is through staking. Certain cryptocurrencies use the "proof-of-stake" blockchain technology to enable users to propose a new block. People just vote to accept a proposed block by betting. Users simply put some of their own cryptocurrency on the line and, thus, are highly incentivized to choose the best one. The more that is at stake, the better a user's chance of earning transaction fee rewards. For staking you need to lock up tokens in a cryptocurrency wallet and unlike mining it uses less computing resources and provides more predictable rentability rate.
The biggest crypto assets that support staking are ETH, Solana, and Cardano. The first one relies on a mechanism called "Proof-of-Work" or PoW, and just like with mining, it requires a load of processing power to verify transactions on the blockchain. Given that Ethereum is one of the most power-hungry cryptos, a "Proof-of-Stake" or PoS mechanism appeals to individuals more. For a much better understanding of yields, check these staking metrics for different cryptocurrencies.
If you favor this way of earning some rewards, you will need to become a "validator". Validators stake their own cryptocurrency in an automated system. A MyCointainer wallet is the best and highly recommended cryptocurrency staking platform for beginners.
The idea behind airdrops is like this: creators of the cryptocurrency wish to increase recognition and awareness of their new project, and for that they distribute coins or tokens to current or potential users.
A crypto airdrop can almost be considered a "free" distribution of digital assets from a crypto project to multiple wallets. The advantages of an airdrop from a receiver's perspective are clear. They receive free tokens, which have tangible value. But why would the founders of a particular currency give it away for free?
The primary reason a company is willing to airdrop is to encourage the adoption of a particular utility token or cryptocurrency. They will do this because it is extremely difficult to stand out in such a dynamic and densely populated environment with over 1500 cryptocurrencies in circulation.
An airdrop encourages those who receive a token to research the project behind it. The hope is that a potential investor will like the project and be inclined to support it more by buying more tokens, for example. Additionally, airdrops add a sense of value or capabilities of a network. The successful delivery of tokens to multiple addresses shows that the network itself is working, and the transaction fees are low enough to make it practical. Also, airdrops allow the creators of a crypto project to promote it more effectively across different channels. For example, if you get tokens for free, you will definitely be tempted to share them with your friends or often be asked to tell about them on your social media for a little reward.
However, be aware of the high risks involved with airdrops. There are a whole bunch of scams used by hackers that you may fall prey to. Make sure to do thorough research of a crypto project and opt for more well-known cryptocurrencies, such as Bitcoin and Ethereum, especially if you are a newbie.
One of the best ways to make money online is to trade cryptocurrency. The question that then arises is how to achieve successful crypto trading operations. The first thing to do is to choose a secure, efficient, and reliable online stock broker that will allow you to buy or sell stock orders safely. For profitable crypto trading, one should first understand the crypto market. Having the proper analytical and technical skills to be able to analyze market trends on the performance of various assets are the key. It's essential to determine your trading style and practices to successfully sell thousands of financial assets at its highest value.
We also suggest that you never invest the amount that you cannot bear the loss. There is no need to recall that the crypto market is essentially volatile. Finally, you will benefit from choosing copy trading sites to draw inspiration from professional traders.
As of the middle of May 2022, the 24-hour average trading volume of all existing cryptocurrencies in the world reached the point of $88.6 billion. Earlier, in November 2021, the volume was $130 billion. (CoinMarketCap).
5. Lending and borrowing
If you own the assets you're not currently using, why not passively make money out of them? Instead of letting your tokens lie idle, try this way to earn money. To begin, you first need to find the safest lending platform. These are the factors to consider during the selection:
- Interest rates – Choose a platform that supports stablecoins with the interest rate range of that particular coin on any specific platform.
- Term of loans – Check if the loan repayment term is flexible.
- Fees – Compare the fees that different platforms charge for deposits and withdrawals of particular coins.
- Platform risks – Take into account the security issue and go through the platform's track record.
- Deposit limit – See what minimum deposit amount is needed.
- Collateral – Evaluate the required number of collateral needed for a specific loan amount among different platforms.
Once the platform is found, you must decide on the loan amount. Note that it is possible to borrow fiat currency, as well as cryptocurrency or stablecoin. Once the value of the loan is clearly defined, the collateral must also be clearly determined, which must be the cryptocurrency, of course.
Once completed, you need to make a clear contract to ensure the money is returned. The contract used is not what we usually expect it to be. It is a smart contract. In the virtual world where the loan is granted, the contract must also be concluded virtually. The smart contract is programmed as follows: if the person does not repay the loan within the agreed time, all the guaranteed money is automatically credited to the lender's account. Of course, like any loan, there is an interest rate, which is determined by the smart contract algorithm or even the platform itself.
Each transaction is completely transparent as it is defined by the smart contract. There is, therefore, no fear of errors in the current contract. Moreover, the borrower is well secured with his loan because he already has his private key, so that he can verify the money he borrows.
We all make 2-3 purchases daily using our bank cards. Imagine having a card that allows you to save up on each online purchase whenever you use it for payment. Well, you don't have to imagine that, because thanks to smart crypto wallets that reimburse you a small percentage of all the payments you make with them.
In recent years, cryptocurrency cashback cards have been gaining a lot of ground among technophiles who love good deals. And for a good reason: they generally pay you 1 to 8% of the amount of all your purchases, depending on the platform and your investments. It is a reduction valid everywhere, all the time, and can be combined with any promotion or loyalty card.
Note that the cashback you receive is in CRO, not in euros or dollars. However, you can convert it into the preferred currency you wish. You can also convert it to Bitcoin or any other crypto. This is good if you want to accumulate cryptocurrency effortlessly but also aim to keep your crypto earnings for several years, which will save you from having to declare them to taxes.
7. Affiliate programs
Many are misguided that using affiliate and referral links is only profitable for its owner. That used to be so. However, the crypto platforms have totally changed their marketing techniques so that the different parties are winners.
When you create an account at the crypto affiliate program, you are given a special unique link. You can share it anywhere you'd like on social media, websites, blogs, and forums. Whenever a person signs up or makes a purchase following your link, you will receive a commission. It is a percentage dedicated to each sale. Thus, if you already run a blog or have a huge following on social media, it's a fabulous way to turn your hobby into a passive income stream.
For instance, the Coinbase referral program encourages you to sign up and refer others. Those who are interested must register on the site, copy the referral link or send an e-mail invitation to a friend to recommend it. When the friend makes a purchase or transaction of $100 or more, you earn $10 each in Bitcoin. How amazing is that?
Cryptocurrency continues to become a more-commonly accepted asset by the day. A few years ago, only tech-savvy, privacy-focused individuals with a strong skepticism of centralized banking systems dabbled in cryptocurrencies. Now, you know multiple ways to earn money by trading, staking, or lending them without necessarily having much experience. Explore any of the proven ways that we have mentioned today and earn your first tokens.