You will be sorely disappointed if you’re only interested in making a quick buck with crypto. The crypto market is volatile, so you can’t often rely on spot trading to earn money fast. Instead, if you hold your cryptocurrency, there are several opportunities for you to earn rewards and grow your investment in a more secure and rewarding way than taking considerable risks in spot trading. Here are a few ways to earn rewards by holding your crypto investment.
Staking is one of the best ways to hold your cryptocurrencies, as it allows you to earn passive income from your holdings. While it can be a bit more complex than simply buying and holding, staking still has many benefits for investors looking for an easy way to make money.
How does staking work?
Staking is when you lock up your coins in a wallet (usually online) and allow them to “stake” their share of the network’s rewards for helping secure it. This means that instead of leaving your coins in exchanges where they don’t earn interest or gain value, you transfer them onto an exchange that supports staking features. Once you’ve moved your coins to a platform that supports staking, you have the opportunity to become a node on the blockchain network or join the stake pool of another node already on the network. These nodes are operated by stakeholders randomly selected to verify transactions on behalf of the blockchain. Each node needs tokens staked as collateral to be selected for verification. If your node operator continues to verify transactions in time successfully, everyone with coins staked will receive rewards. If your operator fails to confirm on time, all stakeholders in the stake pool will face losses as collateral.
The most significant benefit here is that you don’t have to leave any funds on exchanges while still receiving benefits like interest rates and increased coin supply over time–you’re locked up long-term. You will continue to earn passive rewards over time. You can learn about staking opportunities and how they work by visiting the FTX platform. FTX offers traders access to various tokens, investment opportunities, and an extensive knowledge base for beginner investors.
A yield farmer is someone who buys and holds cryptocurrency to earn interest on their investment.
It’s called “yield-farming” because the farmer is rewarded with interest for holding their coins in a wallet that supports staking. When you join a yield-farming operation, your coins are collected into a liquidity pool with other investors’ coins. These coins are then locked into this pool for a certain amount of time, during which they are lent out to borrowers on the network. Yield farming is an excellent option for anyone who wants the rewards of lending but doesn’t have the capital to lend on a large scale through a P2P platform.
As with any form of investment, there are always risks involved. When it comes to yield farming VS staking crypto, you have to consider your goals, how much risk you’re willing to take, and how long it may take to earn your rewards. Though yield-farming can offer you quicker returns than staking, there is a possibility of permanent loss if your borrower falls through. While with staking, you lock up your coins as the token and blockchain continue to grow and operate daily. Though staking rewards may come to you more slowly, they are a steady and secured return that will generally not give you a loss unless your node operator falls through.
If you have money to lend, lending is one of the easiest ways to earn interest on your crypto. You can do this via lending platforms (often called “peer-to-peer” or P2P) or by connecting directly with other users.
Lending platforms are a bit more straightforward than P2P lending but also come with higher interest rates and fees. If you’re looking for a small amount of interest — say 5% returns per year — then using a lending platform may not be worth it. However, if you want more than 5% returns per year, consider getting on one of these platforms because they usually provide better terms and conditions than any individual could negotiate independently in their local market.
The downside is that these services charge fees, which eat into their profits; therefore, investors who use these platforms aren’t making as much money as they could get elsewhere.
While it’s true that the crypto market is volatile, there are ways to maximize your rewards for holding crypto. You can earn extra rewards by holding your coins in a wallet with built-in staking functionality or by moving to a new exchange that pays dividends to its users. You can learn more about how to earn crypto rewards by joining an online crypto community such as FTX.