Crypto Holdings: A Source for Passive Income

Key points

• Earning from Cryptocurrency Holdings
• Staking
• Lending
• Mining
• Lightning Node

Investment in market is done with a primary objective of receiving high returns. It is always recommended, to diversify your investment. It is essential that portfolio should be designed in such a manner that it is able to create passive income. 

Passive income is the money earned by your investments without your involvement. Any interest that a user gets from bank is also considered as passive income and most recently cryptocurrency assets.

In cryptocurrency assets, various platforms pay interest to its investors for their cryptocurrency holdings. 

Earning from Cryptocurrency Holdings

Cryptocurrency has made investing a lot easier than it was before. Some of the ways through which passive income can be made from crypto industry are:

Staking

Staking mechanism is used as a replacement for mining, that involved expensive hardware and significant power consumption, which for everyone was not possible. 

Proof of stake networks like Polkadot, Ethereum 2.0 and Cardano offered an easier way that was profitable for both experienced and new traders, called staking. In staking, validators are rewarded crypto when they stake crypto. Every staker who has delegated his crypto to the validators will be given a share in the payment received by validator. 

Staking is thus a good alternative for crypto investors, looking for long term investment. It is a process that requires little technical understanding, even though it is based on sophisticated mathematics. 

Staking can be carried on in two ways:

Firstly by acting as a validator, and operate own node. In order to host your own node, it is compulsory to have the required knowledge, and a safe and dependable technological infrastructure. In order to become an Ethereum 2.0 validator, one must have 32 ETH.

Delegation can be done for staking; coins are delegated to a validator having the required setup and in return you will be paid your cut. 

The rewards received are automatically reinvested. If a user wants to not invest his rewards and want to exchange them for fiat money, he is free to do so. 

Second option of staking is through cryptocurrency exchanges. Validators are run by most cryptocurrency exchanges, thus allowing its clients to stake with them. 

Lending

Lending allows users to make passive income from his cryptocurrency assets. Many peer-to-peer (P2) services allow its users to lock their funds for a certain interval and receive interest payments on them. This strategy is best suited for long-term investors who wish to build a portfolio with minimum effort.        

Mining

It is the oldest technique for generating passive income in crypto industry. In mining computer resources are required to secure a network, for reward, in exchange for the security offered.  

Lightning Node

It is off-chain payment system network, a second layer protocol, constructed over a network and is used for fast transactions. 

On Bitcoin network most transactions are one way. Lightning network on the other hand uses bidirectional channels, requiring proper agreement between the two parties involved in transaction.     

All operations through lightening node can be charged and the people running the node will be rewarded for processing the transactions.

Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.

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