So you have heard of the invention of Bitcoin and other decentralized cryptocurrencies. Maybe you’ve even tried them out by buying some on crypto exchanges. At this point, you have somehow already fallen down the rabbit hole, and you feel like it is much deeper than most people even realize.
What most people outside of the cryptosphere may not know, is that there is an independent, decentralized and fast growing economy formed around blockchain technology and cryptocurrencies. This means that there are myriad ways to earn cryptocurrency, beyond simply buying it on an exchange with fiat money. Let’s explore some of the options out there.
Hodling or Trading
Some cryptocurrencies have seen significant growth in value over the last ten years. For reference, when the first Bitcoin exchanges became available, Bitcoin traded a value below one US-Dollar. Today, Bitcoin’s trading price is around $10,000 dollars. Some of those who bought in early and held on to their Bitcoins, have earned massive returns.
How can someone grow one’s crypto holdings? There are many ways as we will discover together. You can “hodl”, trade, earn cryptocurrencies.
Since the inception of Bitcoin, the prevailing mantra has been to “HODL”, which is a funny way to say that someone is “holding one’s cryptos”, without ever ever trading those cryptos (sell some to benefit from short term price moves to then rebuy those after some time). In a nutshell, Hodlers buy and accumulate cryptocurrencies in the hopes that their value goes up and do nothing more than waiting. For those of you who want to know the background story behind the “HODL” term you can refer to this now historical page of bitcointalk.org!
There is obviously no guarantee that the value of cryptocurrencies will continue to grow forever though. You are investing into crypto at your own risk and their market prices are highly volatile.
DeFi Lending to earn crypto
Another way to grow your crypto holdings is through Decentralized Finance (aka “DeFi”). Indeed, there is a growing number of DeFi features such as lending, which make it possible to invest your cryptocurrency in order to earn an Annual Percentage Rate (“APR”). These returns can be higher than interest rates offered by fiat money stored at the banks, although these rates come as a reward to much more risks.
Investing in DeFi means that you provide funds to a common financial function, such as a market maker, an insurance fund, or a lending economy.
What is Lending
You can participate in lending economies either as a lender, or a borrower. This could allow the lender to earn an APR on their investment. On the side of the borrowers, they could take out a leveraged position on their crypto holdings, or gain some short-term liquidity without having to close a specific trading position.
The main currencies used for DeFi lending are stablecoins, which most of the time are pegged to the value of one US-Dollar. This removes the price volatility of cryptocurrencies, but also means that investors do not profit from bull markets. For this reason, many crypto owners prefer to HODL during bull markets, and move their coins to DeFi during bear markets.
If you decide to use DeFi, your funds are managed by an automated smart contract, which cannot be externally manipulated, but could be vulnerable to hackers. The same rules of caution apply as everywhere in the crypto space. Make sure that you keep your private keys safe from hackers, without losing them yourself!
If you want to know more about the benefits (or risks) of lending, here is an article about everything you need to know.
Lend through Ledger Live
When you own a Ledger hardware wallet, you get an excellent solution for crypto storage in DeFi. Ledger Live integrates lending through the Compound DeFi protocol with DAI, USDT, USDC and more coins to come in the near future.
Thus, you can have all the functions of your crypto holdings in one place, which allows you to simply manage your assets while earning interest, all from the security of your hardware wallet. There is no need to trust a centralized custodian, as your private keys are stored on an encrypted, which can sign transactions without ever having to reveal your keys to an online computer.
Staking, an other way to earn crypto
Staking is another way to earn passive income. With Staking, you are able to earn crypto without doing anything. Different ways to generate revenue by staking are available today. The rules depend on the blockchain you are using. But what you need to know is that from the user perspective, staking is a way of being rewarded for participating in the network ecosystem, it could be compared to interest savings in a traditional bank.
What is staking
In Proof of Stake (PoS) blockchains, new coins are not mined by conducting cryptographic calculations, but by distributing them to block validators who put their own coins at stake, and thus guarantee the validity of their blocks.
In a nutshell, staking, whether on your own or with the help of a service provider, lets you earn an APR on the cryptocurrency you stake. How high this APR is depends on the underlying blockchain network of a cryptocurrency, but also keep in mind that PoS cryptocurrencies are inflationary. The ratio between staked and unstaked coins thus plays a bigger role than APR alone.
Tools like stakingrewards.com let you compare various PoS networks and their inflation-adjusted rewards. Supply is only one half of the equation though. You also want to stake a cryptocurrency with constant demand. Keep an eye on network usage, development, and partnerships that may further increase demand.
If you want to know more about Proof of Stake blockchain, here is an article where you can find how it works and discover the main stakeable coins.
Stake with Ledger
Once again, Ledger Live is an alternative option that lets you keep custody of your own coins, while still being able to stake them easily. Ledger Live currently supports staking for Tezos (XTZ), Tron (TRX), Cosmos (ATOM), Algorand (ALGO) and Polkadot (DOT) with more coins coming.
Become a validator
For more advanced crypto owners, there are some more interesting options, such as setting up and running a validator node on their own. This means that they need a server (ideally running 24/7) that runs the validator software provided by the blockchain network.
Besides staking validator nodes, there is also the possibility to stake and operate a masternode that delivers secondary services, such as privacy features or an off-chain payment network to a blockchain. This can offer a much higher reward than simple PoS staking, but also requires more work.
Due to this extra work and the rather large stake required to run a masternode, crypto beginners might find this option a bit difficult and may prefer to begin with more accessible staking options in order to earn passive income.
Finally, there are a number of economic functions that can be achieved with staking, which are similar to DeFi. The difference between staking and DeFi, is that in staking, rewards are being paid out for minting new coins, while in DeFi, rewards are earned by collecting fees from the counterparties (e.g. interest from borrowers).
Other ways to Earn Crypto
There are countless other ways to earn crypto. In general, whenever you provide a service to a blockchain network (for example by dedicating a part of your hard disk for decentralized storage, or some of your bandwidth for peer to peer file sharing), you may expect some form of payment.
Whether or not this is worth your time and effort is up to you, but in general, the idea of a decentralized economy is that those who add value should receive some form of remuneration. The possibilities for how you can add value to decentralized networks are endless; here is only a non-exhaustive list of some of the opportunities.
Some social networks incentivize content creation by rewarding their creators with cryptocurrency. Some decentralized social networks, such as Hive, Steemit, Publish0x and Uptrennd implemented crypto rewards right from the get-go.
Other publishing platforms, like minds.com, implemented crypto remuneration at a later date, while others are planning to take this step in the near future. For example, Reddit is currently testing this business model for a few selected subreddits. Besides text, many of these platforms support uploading videos or live video streaming, which can earn you additional rewards.
Microtasks and Bounties
Microtasks are a growing part of today’s economy, where many tasks are being outsourced to artificial intelligence, but still require some form of human input. Many companies also use microtasks for increasing interest in their products (such as paying users for installing their app or watching their videos), or market research purposes (for example, paying survey participants).
Besides bounty platforms, most crypto projects have a bounty program of some sort, either to promote their product, or to find bugs in their code. Some bounties can net you hundreds of dollars for placing a Medium article on a major publication or a five- to six-figure sum for finding a critical bug.
Good, Honest Work
Finally, simply working with a crypto company as an employee or on a freelance basis is a good way to earn cryptocurrencies. Most of these companies pay their workers in cryptocurrency, either as a default, or upon request. Blockchain developers are highly sought after, but crypto companies also require social media managers, accountants, lawyers, analysts, managers, and many other positions.
When you work at a company that issues their own tokens, you can usually expect to earn some of these tokens as part of your compensation. Finally, you can of course become a crypto entrepreneur yourself and issue a utility token through an ICO or IEO. Especially for the early stages of your startup, the tokens will make up most of your compensation. As in all industries, founding a crypto company is risky, but the risk is well worth it, if you are successful.
Disclaimer: The content you are reading is for informational purpose only. Nothing contained in this article constitutes a solicitation or recommendation to buy or sell crypto-assets in this or in any other jurisdiction in which such solicitation could be unlawful under the laws of the country. Before using the services, please educate yourself to make informed decisions. Crypto assets are volatile. Carefully evaluate your goals and the financial risk you are willing to take. Please be aware that Ledger does not provide financial, tax, or legal advice. Decisions to perform operations involving crypto assets should be taken on your own or rely on opinions of reliable and qualified experts