Earning Passive Income in Cryptocurrency
A basic definition of investment is to set aside money today to earn more money, through either asset appreciation or a stream of income, at a future date. A typical view of this by investors focuses on the former, asset appreciation. "What is the price of bitcoin today?" Many investors focus on timing the market to "buy low, sell high". Unfortunately, many fail.
Personally, I'm much more interested in cash flow. An investment that pays cash back to its holders can be a core part of a portfolio that grows without regard to daily price fluctuations, which are often noise and churn.
In traditional investments, dividend paying stocks tend to be established, low growth stocks with stabler prices.
This is not the case in crypto. There are two major drivers of passive income in crypto right now: Attention, and Securing the Network.
Race for Attention
There is currently a battle taking place in crypto. It's a battle for people's attention. It's a battle for network effects. It's a battle for users to adopt a particular platform.
The battle is bloodless, and the victors are us, the users!
In the past six months, we've seen airdrops (OmiseGo), hard forks (Bitcoin Cash), and staking rewards (NEO) designed to attract people to particular platforms.
In essence, those of us who are early adopters are being bribed to use or hold various tokens. It's a great time to be alive and online!
Securing the Network
Proof of stake is the other main income stream in crypto. Currently, QTUM is running proof of stake, and Ethereum will be running proof of stake in 2018. In this model, users "bond" their tokens to keep the blockchain secure, and receive a small reward (better than cash in the bank and many stock dividends!) at random intervals commensurate to the size of the amount staked. The more tokens staked, the more often users receive rewards.
Proof of stake allows crypto adopters to act more like bankers than investors. The seeming insanity of various market caps for nearly unproven cryptoassets reflects this expectation. It's a bit like owning a growth stock that's kicking out 8% dividends. This is only possible due to the inflationary nature of most coins (which is offset by the deflationary tendency of people burning tokens, losing keys, or inadvertently destroying the library to a multisig wallet).
What I'm not Covering
Certain platforms provide opportunities for making money with only a small amount of "work". Augur, Maker, and Digix are all Ethereum based startups that have semi-passive income. These aren't "set and forget", but neither is the work strenuous or time consuming. Steem Power Delegating is in this category as well.
Off to the Horse Races!
A lot of cryptocurrency speculators are focused right now on guessing the next big pump. It's rational-ICOs and little known tokens alike have seen some stratospheric rises. This is attracting a lottery ticket mentality to the space that is harmful.
This is a good gambling strategy, but a bad investing strategy. Don't confuse the two.
Furthermore, Ponzi schemes such as Bitconnect are popping up and attracting people with little to no knowledge of bitcoin. Don't just stay away from these, but actively tell your friends to stay away too!
Passive Income, Your Best Friend
If you're looking for passive income right now, here is a partial list. I'm hoping these continue to rise in price as well as continue to offer returns. This drives my investment choices- not finding a "lottery ticket" token.
I own the ones in bold. None of this is investment advice!
NEO (You must hold your NEO in your own wallet)
QTUM (You must stake it on your PC)
TAAS
XRL
BTC (airdrops and forks)
ETH (airdrops; Proof of stake soon)
What are your picks for passive income? Share in the comments below!
-Jeff
Note
There is a great deal of bad advice in the world of passive income. Tread carefully. Message me on Dust (ProtegeAA) if you're uncertain whether something is a scam or not (it probably is).
cool article. i am wondering, for a reg guy like me who lives paycheck to paycheck and can maybe put a couple hundred a month into cryptos .., are any of these options going to really be viable for me .. at all? in other words should i expect to only make a few bucks a month off of couple hundred investment? thanks
If you are paycheck to paycheck I'd put some money into an emergency fund first before into crypto.
You can volunteer your time on a project or two if you want to get into the space. Steemit is a good place to start.
We need to create a master list of cryptos that provide a yield. I think Dash would qualify. I haven't looked into it so much, but if you run a masternode then you receive part of the block reward. The same will be true of Zen, if it isn't already, for running a secure node. Polkadot will also provide a yield once it is built.
As I type this out I realised that someone on Steemit has already started a list: https://steemit.com/cryptocurrency/@mnemonic19/masternodes-in-cryptocurrency
I have been following zen cash for a bit and am going to try to build a node, when I get some time.
Dash, yes, but $400k is too much to buy a masternode.
Ditto, and agreed. I do have a couple of concerns re: Zen, but I'm not inclined to post them publicly since it it more an intuition rather than a scientific concern.
Nice post First to comment please upvote my comment..
STEEM delegation! My personal fave.
Mine too. :-)
Not sure I can call it totally passive, but it isn't exactly hard work, either.
Okcash is another coin that offers POS. The stake reward decreases over time but it’s currently 10%
https://okcash.news/okcash-your-own-future-bank-in-your-own-living-room-1e1a200dcd12
I’m not convinced of the long term future of the coin though so I’ve stayed away.
Interesting, haven't heard of it yet.
Why didn't you include
sbd
since we passively refill our voting juice
this means earning steemit reawards are only a matter of getting upvote's
and waiting for the payout date
So can you consider this as passive income or the easiest way in the world to get free cash and enjoyment
Either way
steemit beta is
AMAZING!!!
By the way why does
@trendingworld have only 2!
how is that even possible he just joined this october 2017
Spectre which is just about to start its main sale has a huge potential for passive income.
https://spectre.ai/?r=3goDS
The team behind this are legit and their plan is to see a 2%(yearly) dividend given to token holders weekly with the possibility of large bonus as well.