Trading cryptocurrencies is not the only way to earn from the decentralized digital revolution. With one dapp after another being rolled out on the Ethereum blockchain, and many more dapps expected to launch on other platforms, the opportunities to earn are on the rise.
But generating income from the blockchain revolution can be a lot easier than launching a dapp or day trading cryptocurrencies – in fact, it’s possible to earn passive income by simply hodling certain cryptocurrencies.
In this article, we take a look at our favorite cryptocurrencies for generating passive income.
Blockchain-Based Models for Passive Income
There are several models that allow for regular returns on your digital assets through holding cryptocurrencies.
Mining used to be all the rage in the early days of the digital gold rush, but it has since become less and less profitable due to high competition. Especially for the larger cryptocurrencies, such as Bitcoin and Ethereum, mining requires a large initial investment, and the return on this investment can take several years to yield profits.
There’s a chance to succeed if you figure out a way to get cheap electricity, but you would still need a large initial investment. Mining smaller cryptocurrencies can still turn out to be profitable, but the risk that the coins you’ve mined will decline in value is also a lot higher, as the mining space has become super-competitive.
That said, if you’re interested, this website can help you figure out what to mine.
Running a masternode, especially for the more popular cryptocurrencies, can still be incredibly profitable. Simply put, a masternode functions as a server, but in a decentralized network. Masternodes are used to complete unique functions that regular nodes can’t, such as instant and private transactions.
Running a masternode requires holding a large amount of native cryptocurrencies of the network you want to become a masternode of (around $1 million in Dash, for example). In return for staking such a large amount of cryptocurrencies to support the network, you’ll get rewarded handsomely in the cryptocurrency of the network.
If you’re interested in running a masternode, this website provides all the information you need.
The PoS model is the alternative to the energy-intensive PoW model for mining cryptocurrencies. Instead of mining for cryptocurrencies through hardware, cryptocurrencies using PoS blockchains are created by holding cryptocurrencies in a staking wallet. In this model, the more coins you stake, the bigger the chances are that your wallet will solve the next block, consequently earning you even more coins.
This can be seen as a downside, as the chances of you earning through this model depends on the amount of coins you have invested in the first place. But an upside is that you can stop staking and sell your holdings at any time. Here’s a solid article about comparing PoW with PoS, and if you want to explore this option further, check out this list of all PoS coins.
Some blockchains offer dividends to holders of their native cryptocurrency. These cryptocurrencies have to be kept in the wallet specifically created for that blockchain. Traditionally, companies reward their shareholders by paying them dividends – that is, a portion of the profits – based on their number of shares they hold.
It works the same with blockchain projects – the decentralized model rewards people who hold on to their cryptocurrencies. When holders are paid dividends in accordance with how many tokens they own, they are incentivized to keep their cryptocurrencies instead of trading them. This, in turn, leads to greater price stability of the cryptocurrency.
Our Favorite Passive Income Coins
As you can see, there are multiple ways to make some extra crypto by hodling. The following 5 cryptocurrencies make this possible without the need for large initial investments, which are required for mining and for running masternodes. Your passive income will depend on the size of your holdings, but you can start making a return even with a small amount of these cryptocurrencies.
The blockchain platform NEO rewards holders of their native cryptocurrency. Earning this reward is simple, as all you have to do is store your NEO in an official NEO wallet. Binance also rewards NEO coin holders, but since it’s an exchange, you don’t hold the private keys and thus don’t really own the coins yourself. It’s an industry best practice to keep your cryptocurrencies in a private wallet. Other exchanges keep the rewards for themselves, so get your NEO out of those.
NEO holders are rewarded in GAS, the token used on the platform to pay for transactions. This means that as long as there are transactions on the NEO blockchain, GAS will be in demand – and thus will have value – which makes receiving free GAS tokens a pretty sweet deal. You can calculate the GAS reward for your NEO holdings here.
KucoinShares (KCS) are the native tokens of the Kucoin exchange, an increasingly popular cryptocurrency exchange. KCS has been used to attract funding to develop the exchange, and in return, Kucoin shares their daily profits with KCS holders.
50% of their earned transaction fees are rewarded to KCS holders on a daily basis, proportional to the number of KCS they’re holding. This percentage will decrease over time, but the transaction volumes are expected to increase, so the net reward will remain more or less stable. You can calculate the passive income for holding KCS here.
Ark employs a Delegated Proof-of-Stake consensus mechanism. This model is best described as a representative democracy, in which Ark holders vote for delegates to represent them. Voting is done with Ark coins through the official Ark wallet. Here you can find the list of all delegates to choose from.
The delegates are responsible for verifying transactions and securing the network, for which they receive payment in transactions fees and occasionally Ark coins. If delegates perform their tasks poorly or do not live up to the demands of their voters, Ark holders will replace them by voting for other delegates. For a full explanation, see this blogpost.
Once you’ve cast your vote, the delegate you’ve voted for pays you in Ark as a reward for your support. Voting with your coins is all you have to do to generate income. To start earning a passive income through Ark, you will first need to deposit your holdings into an Ark wallet. You can find the latest version of Ark wallets here.
PIVX is a fork of Dash, but in contrast to Dash, it has a strong focus on privacy. It uses a Proof-of-Stake mechanism for the mining of PIVX coins. Similar to NEO, PIVX rewards its coin holders for storing their digital assets in the PIVX wallet. No matter how small your holdings, everyone can stake and earn dividends by doing this.
There is one important prerequisite for earning rewards through PIVX staking, though: your wallet needs to be open and online to earn rewards. If you only run your wallet for half a day, you get half the rewards. Click here to calculate the rewards. To be able to earn through staking, you need to download the PIVX blockchain through the installed wallet, which can take several hours.
SIA allows anyone to make money by renting out their spare digital storage space through decentralized cloud storage. In this way, the platform leverages unused hard drive capacity all over the world. Instead of going through third parties, SIA’s cloud storage is based with its users, who earn by sharing their spare storage capacity. Storage providers engage in smart contracts to ensure they live up to their end of the deal and get paid for providing storage. For a full explanation, check out this video.
So, if you have plenty of space left on your hard drives, you can start monetizing it through the SIA platform. Since it’s an open market, the income earned in SIA coins for providing storage does fluctuate, and will move towards an equilibrium once the SIA cloud gets more users on board. You can find all the tools for providing storage here.
Other Passive Income Coins
Even though these are our 5 favorite passive income coins, there are many more out there, especially the coins based on the Proof-of-Stake model. These include but are not limited to:
- Stellar Lumens
- NAV coin
Good luck sitting back and earning more of your beloved digital assets! If you’re interested specifically in PoS coins, check out our list of 12 Best Proof-of-Stake Coins For Passive Income.