Passive income is one of the biggest keys to financial independence. If you are not familiar with the term, it’s basically income that you receive for doing very little. Hooked yet? One common example is a stock that pays dividends. You buy the stock and every so often you receive cash for holding it. It really does not get any easier than that! There are quite a few ways to generate passive income in the Cryptocurrency space, but I will be going over the 3 most common right now. These are Dividends, Rewards, and Masternodes/Staking.
Most people will be familiar with this one since there are a lot of stocks that generate dividends. Luckily, there are quite a few Cryptocurrencies that pay out dividends, or at least plan to in the future. Essentially, the company takes a portion of its profit and pushes it out to anyone who holds their tokens. The interesting thing here is that these are generally not paid in fiat currency, but will either be paid in that company’s token or in one of the major tokens (BTC/ETH).
As an example, the TaaS project pays out a quarterly dividend based on their profits for the quarter. This payout is done in ETH and is made to the Ethereum wallet you have your TaaS tokens in. The payout after their 1st quarter in operation was roughly $0.28 per TaaS token and $0.33 for the 2nd quarter. TaaS sold for $1 during their ICO, so to have received $0.61 back in dividends already is quite rewarding. If you are interested in TaaS and don’t have an Ethereum wallet yet, check out “Setting up an Ethereum Wallet”.
I debated on splitting this section from dividends, but I do think they are different. Whereas dividends are paid out based on profit, rewards normally revolve around usage of the platform the token is a part of.
My favorite example right now is KuCoin Exchange and their KCS token. KuCoin Exchange pays out a portion of their trade fees to holders of the KCS token daily. This is a pretty nice benefit considering the fees correspond to the tokens being traded. At the end of each day, you essentially receive a basket of tokens. Don’t get me wrong, you aren’t getting 5 ETH and 10 BTC every day, but it’s not bad for simply holding their KCS token. If you are interested in learning more about this exchange, check out “KuCoin Exchange Review”.
3. Master Nodes / Staking
These methods do have their differences, but the concept is the same when it comes to the passive income portion. For either of these, you essentially buy xyz token and then ‘lock’ them up. This lock means you cannot use them while they are staking. Master Nodes are generally more complicated and require a substantial amount of capital to use, so staking will be easier to get started with.
Stratis’s tokens (STRAT) are a great example of a token you can stake. Buy some STRAT from an exchange, download the Stratus wallet, and then activate the staking. The more tokens you have the more often you should receive a payout.
NEO is another notable example. Like Stratis, you buy their tokens and hold them in your NEO wallet. For this one though, you receive GAS instead of more NEO. Check out my post on how to stake NEO to generate GAS for more info. Here is a screenshot from the Neon Wallet where you can see the ‘claim’ button to receive your GAS. GAS can then be traded on exchanges for other cryptocurrencies like Bitcoin or Ethereum.
Note that not every token will ‘stake’ the same, but those examples should give you an idea of what is involved.
As you can see, passive income is great because it is easy. Reinvest to take advantage of compounding and this can really build some wealth over time. While you will likely need to use an exchange to purchase them, be sure to move them off of the exchange into your own private wallet. A lot of Exchanges will not pass the income to people holding the tokens on their exchange!