Some examples would include renting property and equipment or owning a business that is set up with the right managers would no longer need your active involvement. Income from trading or investment portfolios does not even fall into passive income under the jurisdiction of the Tax Office because trading can also be active or passive.
The investment is when we place an initial amount in an asset that we expect to grow, making DCA (Dollar Cost Average — the gradual acquisition of an asset) monthly or periodically, over a long period of time.
That is why when we talk about investments we usually refer to more conservative parts such as stocks or stock indices.
In crypto, most people want to make a lot of money fast, which often requires active trading, whether we enter a currency and keep it in our portfolio for only a few days or we trade with margins.
The volatile nature of the crypto market makes it relatively risky for traders to play for longer periods of time. However, we can find some ways to earn passive income through crypto or with very little time and effort invested.
Cryptocurrencies that offer dividends
A dividend is a distribution of profit by a company to its shareholders, which is also borrowed by the crypto market. In order to attract and retain investors over the medium to long term, some crypto companies and projects offer periodic dividends, where the holders receive a daily share of the transaction fees accumulated by the platform. The amount received often depends on the amount of coins held in that portfolio.
Staking
Staking is very similar to how interest rates work — through staking, holders of the various cryptocurrencies they want to hold in the medium to long term can take advantage of crypto accounts that offer interest to earn more than the currency itself grows.
They can be received weekly, monthly, every 60 or 90 days, depending on the trading platform chosen and the offers present there. In addition to trading platforms, various cryptocurrencies can be purchased and put at stake directly on the websites of the respective projects.
Be careful though, these rates can be technically accurate given the optimal scenario in which things happen, when the price of that currency stagnates or rises, but in a few months a lot can happen, and quite a lot may be needed. attention, which would take over from the passive nature of income.
Yield Farming
Yield Farming is another decentralized method by which we can obtain passive income. This is made possible by dynamic decentralized exchange operations, which are basically trading platforms, where users rely on the combination of smart (or programmable) contracts and investors for the liquidity needed to execute transactions.
Here, users trade with funds deposited by investors — known as liquidity providers — in special smart contracts, known as liquidity pools. In turn, liquidity providers receive a proportionate amount of trading fees, such as dividends or staking that we talked about above.
And here we can take the role of liquidity provider, if we place various amounts that the liquidity pool needs — say, for example an ETH / USDT liquidity pool. For those amounts we will receive back equivalent chips, called cUSDT or cETH, if we talk about the Compound protocol.
They staked to receive additional interest, a strategy that can allow us to earn multiple interest from a single deposit. The passive income opportunities in crypto listed above are just a few of the many ways you can make extra profit with the currencies you can we already have them.