How to Generate Passive Income with Crypto: An Explainer

How to Generate Passive Income with Crypto: An Explainer

Passive income is money you make without actively working. It’s the lifeblood of anyone hoping to retire one day, as it removes the need to continue working or searching for new jobs. Passive income is often considered earnings that don’t require regular effort. Rather, they are streams of cash that are accessible whenever you want them. A primary way to achieve passive income is by investing in assets such as stocks and real estate, which generate cash flow over time without any further input from the owner. However, alternative options remain available if those aren’t your cup of tea. Even in a world filled with blockchain technology and digital assets, you can use old-school methods to create an ongoing income stream from crypto assets. Let’s explore four ways.


Staking means using your cryptocurrency to “take out a loan” from a network. The network rewards you for securing its network by paying you interest in more cryptocurrency — and no, you don’t have to pay back the interest! Some staking networks even allow you to earn passive income by simply holding your coins in your wallet while the network is live. This is often referred to as “staking with your wallet open.”



Hodling is an intentional misspelling of “holding.” To hodl means to hold onto your coins. This may seem like an odd way to earn passive income, but it does have some merit. If your coin experiences a massive price increase, you could earn a substantial passive income by selling. If your coin experiences a massive price decrease, you could earn a substantial passive income by holding onto it. While neither of these actions is guaranteed, they are both quite possible.

Developing a product or service with your coin

Many projects have tokens with real-world applications. For example, if you hold a token that can be used to access a decentralized file storage system, you can store data on it and earn passive income. If you’re a developer, you can build apps that use decentralized systems. If you’re a graphic designer, you can create marketing materials for these apps. Alternatively, you can build a service around these apps. For example, if you decide to build a decentralized application for storing important documents, you can offer encrypted document storage and retrieval as a service. You can even charge a monthly subscription fee for these services. If your coin’s value increases, so does your service’s price.



Mining is using software to solve mathematical equations to earn cryptocurrency. If you’re mining a proof-of-work coin (i.e., Bitcoin), you’re contributing to securing the network and earning a reward. However, that reward is negligible compared to the amount of money you have to spend on mining equipment. In addition, the network is designed such that it eventually becomes unprofitable for miners to continue. Mining a proof-of-stake coin (i.e., most altcoins) is the same as staking, except you don’t need to leave your computer on or open your wallet. You can simply install the software and let it run in the background while you do other things. Since these coins have much lower computational power requirements, you don’t need prohibitively expensive hardware. This makes proof-of-stake coins far more accessible to individual miners.


Passive income is elusive, but it doesn’t have to be. If you want to earn it, this article is meant to guide you in the right direction. Whether you want to stake, hodl, develop, or mine, you now have a few solid options. Keep in mind, though, that these methods can change over time. For example, blockchain networks may implement changes that make staking uneconomical. Or, your coin’s price may plummet due to a crash in the market. No investment strategy is foolproof, but if you’re willing to work, you can earn passive income with crypto.

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