What is passive income?
How you can earn passive income with cryptocurrencies
Where you can earn passive income
Pros and cons
- High interest: One of the biggest advantages the crypto industry has over traditional finance is the potential to passively earn dozens of times more than putting your money in a savings account.
- Diversification: One of the most important characteristics of any investment portfolio is its diversity. Portfolio diversification helps offset exposure in any single position and helps investors protect themselves against volatility in different sectors. Adding crypto to your portfolio will add great diversification to it.
- Speed: Just like anything that happens over the blockchain, it is vastly faster than traditional finance. It can be a matter of just minutes to lend or stake your holdings and start earning interest.
- Transparency: On blockchains, personal details are concealed but transaction details are immutable and public. If you want to know which transactions took place, when, just look. Everything is available for inspection.
- Technological risks: These involve hacks, bugs, and exploits. Locking up your tokens in a staking wallet or a smart contract always carries the risk of bugs. Usually, there are multiple choices available with various degrees of quality. It is imperative to research these choices before committing to one.
- Lockup periods: Some lending or staking methods require you to lock up your funds for a set amount of time. This makes your holdings effectively illiquid for that time, leaving you vulnerable to any event that may negatively impact the price of your asset.
- Crypto fluctuations: While the volatility in the crypto space has considerably decreased, it still can be very volatile. While you’ll still receive the interest, and your holdings will increase, the value of those holdings can go down if the crypto market tanks.
The bottom line
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