If we could all sit back with a pile of money and not have to go to work every day, we would. It’s a fairytale we hope to come true as we dive deeper into the world of cryptocurrency. According to Coinbase co-founder Fred Ehrsam, more than 10 percent of Americans own cryptocurrency.
With so much promise and volatility in the market, it’s easy to get all jazzed up thinking you’ll get rich quickly. While that may be the case for some, most of us aren’t so lucky and will have to take calculated risks and make tough decisions in order to make money in crypto.
Since you work hard for your money, your money should also be working hard for you.
Let’s look at the 3 main ways you can make passive income in crypto with a focus on staking and farming using a decentralized exchange like PancakeSwap.
1. Trading Cryptocurrency
Perhaps the easiest way to wrap your head around making money with crypto is trading: buy low, sell high. It’s the same concept as buying and trading stocks and you can do it yourself. Download apps like Binance and Coinbase to trade on your own.
Trading crypto is a 24/7 business and can diversify your portfolio. Just like with stocks, day trading is constantly changing, and considering the potential for high returns and losses, it’s easy to get impatient and let FOMO take over your better judgment. If you’re able to be patient and dedicate time to trading, you can make money in crypto.
2. Lending Cryptocurrency
Another way to earn passive income in cryptocurrency is to lend it out and collect interest on it.
A decentralized lending platform is needed in this case. You can think of this platform as a third party that will give someone a loan to buy crypto.
Here’s how it works for the borrower and the lender.
A borrower puts up collateral in the form of a cryptocurrency asset in order to get a crypto loan from the lending platform. The borrower pays back the loan with interest and gets back their collateral once the lending platform is repaid.
You deposit cryptocurrency into the lending platform. Once the loan is repaid, you get your crypto back and collect the interest on your funds.
3. Featured Way to Make Passive Income in Crypto: Yield Farming and Staking
Yield farming and staking are newer and more confusing concepts to the crypto community and have the potential for you to make passive income. We’ll spend the most time talking about these and how they pertain to exchanges like PancakeSwap.
Bare with us on this one. Yield farming is a complicated one. Here’s the breakdown.
The purpose of yield farming is to incentivize investors to lend assets to a third-party lending platform.
It works similarly to lending crypto except instead of just earning interest on your funds, you can earn the fees the lending platform charges for people to make transactions, as well as special tokens. We’ll get back to fees and tokens in a moment.
Investors like yield farming since the transactions are automated. A computer executes the deal when pre-determined conditions are met. This way, assets cant be traded without permission and developers can’t access your crypto.
However, this comes with a big risk.
The deal is written by a computer and if there are bugs in the way it was written, it can be hacked and your funds can be stolen and never recovered.
Less complicated than yield farming is staking. Staking means you are helping cryptos and networks validate their stability, security, and longevity. You invest long-term in a project. Staking cuts down on the volatility of the crypto market and while you can be rewarded for staking by earning interest and other rewards, you cannot sell your staked crypto for a certain amount of time, much like holding a bond.
This leads us to newer exchanges like PancakeSwap where you can make money both farming and staking your crypto.
PancakeSwap allows you to exchange digital assets using what’s called a liquidity pool. This is where all the users deposit their funds. Users are then charged a fee to make transactions and trades using assets in the pool.
Here’s where we come back to the fees and tokens we talked about earlier.
In exchange for depositing assets into the pool, you get tokens. You can later use those tokens to get back what you deposited, plus a percentage of the fees being charged in pool transactions.
You can also farm the tokens you get from the pool in PancakeSwap. If you then deposit tokens back into PancakeSwap, you can be rewarded with what’s considered to be the most powerful of all the rewards: governance tokens.
Owning these tokens, named CAKE, means you have voting rights to decide what happens to the future of PancakeSwap. You can vote on things like fee structure, what funds can be used for, and the user interface. Their biggest purpose is giving you POWER.
From here, you can even stake your CAKE governance tokens to earn more rewards.
As the case for any online site where massive amounts of money are exchanged, the sites are subject to hacking. PancakeSwap learned this the hard way in March 2021 when hackers redirected users to a bogus site in order to gain access to accounts. The issue was quickly identified and secured.
Ready to Make Passive Income in Crypto
Now that you know how to stake cryptocurrency, farm it, lend it, and trade it, you are better equipped to decide whether it’s the right move for you to make passive income in crypto. Farming and staking your crypto is certainly complicated but has the potential to yield big-time gains. Or maybe a project like PancakeSwap is more your speed where you can work towards creating the future of cryptocurrency.
Whatever your choice, we wish you very lucrative investing. There are many ways to generate income online. Check out our other opportunities here.