Cashing out without selling can refer to making passive income on your existing crypto holdings. Passive income, at its core, is money that you earn with little to no daily effort. It’s making your assets, whether monetary or intellectual, work for you. But how does this concept apply to the digital, decentralized world of cryptocurrency?
Passive income in cryptocurrency means generating a steady stream of income by leveraging crypto assets. This income can be generated through various mechanisms that do not require the constant active selling or trading of these assets. It’s like owning a rental property, but instead of a house, you’re making your digital assets work for you.
One way to earn passive income in the crypto world is through a process known as staking. In proof-of-stake (PoS) and its variations like delegated proof-of-stake (DPoS) blockchains, you can participate in network validation processes by “staking” your coins, essentially locking them up for a set period. As a reward, you earn additional coins over time.
Another popular method is through crypto lending platforms. These let you earn interest over time, much like a traditional bank savings account, but often with significantly higher yields.
Decentralized finance, or DeFi, takes things a step further. Through liquidity provision or yield farming, you can earn fees and interest by providing capital to decentralized exchanges and lending platforms. Similarly, some crypto projects offer dividends or airdrops, distributing a portion of their profits or tokens to their coin holders as a form of passive income.
In essence, earning passive income in the context of cryptocurrency revolves around strategically utilizing your crypto assets to generate regular returns without needing to constantly buy low and sell high.
However, it’s crucial to remember that each of these methods carries its own set of risks and rewards.