Top 10 Ways To Earn Passive Income with Crypto

ButterFinance • Update 22.06.2022 • 12 min read

We work actively in our jobs and businesses to earn a living. But how about earning without work? Who doesn't like it? This article covers all the necessary tools to earn passive income with crypto. So let the crypto work for you even when you sleep.

It is not easy to survive with rising inflation and decreasing income growth. Even if you are comfortably making ends meet, an international vacation, a bigger house, a better car, or a better education for kids are always required. Forbes lists many benefits of multiple income streams. Therefore, everyone is looking toward multiple income streams. Since we can't work all day long in different jobs, we need passive income sources that yield income even when we sleep.

The post-Covid19 environment has opened abundant opportunities for freelancers and entrepreneurs. All you need is to find your area of expertise, create samples, register yourself on freelancing websites, engage with professional networks for referrals and you are good to go. You may start slow, but once you deliver quality work in time, word of mouth and referrals shall overload you with work in no time.

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What's the Buzz with Passive Income & Crypto?

Blockchain-powered crypto coins, tokens, NFTs, and Defi, are emerging as prominent income instruments. You can earn in cryptos actively and passively, depending on your spare time and the amount of capital you deploy. Active traders use their fundamental and technical knowledge to earn. On the flip side, passive investors deploy their capital in crypto and earn through many passive income crypto tools and techniques.

The average returns in passive crypto investment are lesser than the active trading of cryptos. However, the risk of losing capital is also lesser. The risks and rewards are positively correlated in this space. Further, many platforms offer multiple tools to earn passive income. For example, Binance offers staking, liquidity pools, yield farming, and peer-to-peer lending.

By now, we have understood the difference between active and passive income. Also, the possibility of passive income through cryptos. Let us go through various crypto passive income tools and how they work.

Crypto Passive Income Tools

The most popular 10 crypto passive income instruments are mentioned herewith.

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As you might know, blockchains like Ethereum 2.0, Solana, Tezos, Flow, Cardano, etc., use a proof-of-stake (PoS) consensus mechanism for verifying transactions. Once you stake your crypto-token in a staking wallet, it is used in a staking pool. All the members of the staking pool get a reward for verifying transactions. Moreover, you can choose to be a delegator or a validator. A validator typically earns more than a delegator but also has to make technical efforts.

In addition, you can stake a full or a part of your crypto token in staking. Binance, Coinbase, and other third-party platforms offer staking services. However, to participate in staking, you must have the minimum number of tokens as specified by the platform. The APY varies for the blockchain and the platform.

Yield Farming

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Yield farming is one of the very complicated procedures for earning a passive income. However, yield farming platforms take care of the technical aspects; all you need to do is deposit your crypto token into a liquidity pool and enjoy the rewards. To explain further, a liquidity pool is a smart contract that collects the tokens and provides liquidity to the traders.

In continuation, yield farming is a Defi method. Traders borrow money from Defi systems and earn Interest on their assets. As a liquidity provider, you facilitate the trade by providing liquidity to the fund without directly associating with the lender or borrower. In return, you get a commission for facilitating the transaction.

For yield farming, you will need a Defi token such as Uniswap, Aave, or PancakeSwap.


Crypto Lending: What is it? How to invest in it? - The Home Bankers' Club

Crypto lending works in four different ways. You can choose any of the methods at your convenience. However, the lending protocols, interest rates, and lending period vary in all methods.

Margin Lending: It is about lending your crypto token to traders who want to leverage their positions in trade. Lenders return your capital with Interest.

Centralized Lending: The third-party infrastructure for lending governs the interest rates and locking period. Firstly you need to transfer your token to your account on the lending platform.

Decentralized Lending: The lenders and borrowers interact directly on the blockchain. Smart contracts govern the interaction between both parties and decide the interest rates for a period.

Peer-to-Peer Lending: There exist P2P platforms that bring lenders and borrowers on the same page. Users define their terms and conditions, interest rates, lending period, etc. To the platform's services, you will have to transfer your token to your wallet on that platform.

Interest Bearing Digital Accounts

How To Earn Juicy Interest on Bitcoin - Bitcoin Savings Accounts

You might have a bank account in which you earn Interest upon keeping the money in it. The Interest bearing digital account is similar to your traditional bank account. However, this account only holds crypto tokens. The platform offering this service controls the interest rates and distribution of Interest.

Some of the platforms are, Nexo,, Celcius, and BlockFi provide this service.

Cloud Mining

How to invest in cloud mining | ECOS BLOG

Cloud mining is an alternative to traditional crypto mining. Mining requires decoding hash functions; in return, you get rewarded with a coin or token. Cloud mining can be carried out by renting a cloud computing facility. You can also buy mining machines and fee a nominal maintenance fee to the platform. The rent can be paid in lump sum or pro-rata basis. Further, such platforms take care of all the technical issues. You must be cautious of the scamsters in the cloud mining space.

Dividend Earning Tokens

Earn Crypto Dividends | Free Bitcoin Life

Companies share a part of their profit with their equity shareholders. Similarly, the companies that issue a digital share in the company as a token also give dividends. The company announces a dividend as a percentage of the token value and cut-off date to identify eligible token holders. If you hold the token on the dividend cut-off date, you will receive the dividend in the form of a token.

KuCoin (KCS) is an excellent example of a dividend-paying token. It pays daily transaction fees accrued on the KuCoin blockchain asset exchange to its' token owner. The dividend is paid on a pro-rata basis.

Running a Lightning Node

How to Run a Bitcoin Lightning Node in 5 Minutes? - CoinCodeCap

Running a lightning node attracts a minimal fee and doesn't generate much passive income. However, it helps in running the payment system on the Bitcoin network. A lightning network is a layer 2 solution that runs over an existing blockchain. This helps in executing bidirectional transactions in contrast to the unidirectional Bitcoin network.

Running a lightning node facilitates the micropayment system by introducing scalability and liquidity.

Master Nodes

MasterNodes: What you Need to Know to Make Passive Income - Coin Bureau

Binance academy defines a controller node as the node on the network that requires a minimum amount of a given coin staked to access staking rewards. It runs on a decentralized network and has superior functionality to other nodes. If you have a sizeable amount of a token, then you can stake your token in the network and become a master node. As a master node, you shall store, validate and share the blockchain and get higher rewards than other nodes.

However, you should be careful when selecting a token for masternode as the upfront capital requirement can be very high and make the system illiquid.

 Affiliate Programs

You can earn by sharing the crypto projects' affiliate links if you have a more extensive network or a community. You shall earn a small commission when any member signs up and trades the crypto through your affiliate link. Some platforms offer a one-time commission, and others may offer a lifetime commission for every affiliate member's trade.

 Forks & Airdrops

Beginners Guide to Crypto Airdrops: Free Coins & Tokens | by Crypto Account  Builders | Medium

A software fork happens when software is copied and modified. In other words, forks occur when an existing coin splits into a new chain. The original project continues but another project branches out of it.

To earn a reward, you must hold the forked coins on the hard fork date. If the fork results in two or more competing chains, the holder will have a token balance on each one. For example, in 2017, when Bitcoin was hard forked, the owners got an equal number of Bitcoin Cash tokens.

Airdrops occur when new coins are created and dropped onto users as a reward for whatever reason. Users have no control over when these events take place. However, being involved in the crypto ecosystem increases your chances.