Making money with crypto assets has become a pastime for many an investor with a slightly higher risk tolerance. There is definitely money to be made with the various digital currencies, and even bitcoin is now worth over $114,000 per coin.
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However, crypto is still a highly volatile investment. If you don’t want to invest in crypto but still want to use it to earn money, there are a few ways to make it happen.
Staking Crypto
Staking is when you lock up your crypto for the security and operation of a proof-of-stake blockchain. You then get staking rewards for locking up your crypto. For example, this is a core function of blockchain networks, like ethereum, that use a proof-of-stake consensus mechanism or as an energy-efficient alternative to the proof-of-work mining used by bitcoin.
“In return for helping the network run smoothly and securely, you receive more of the cryptocurrency you’re staking,” per Coinbase. This is similar to a certificate of deposit (CD); funds are locked away for a set period of time and the holder earns interest.
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Cloud Mining
Cloud mining involves renting cloud-hosted crypto mining equipment and earning rewards for mining certain cryptocurrencies and digital assets. Instead of purchasing the necessary hardware to mine crypto, you rent the equipment and software needed from a cloud mining provider online.
Cloud mining can be risky, though, as many cloud mining companies can end up costing you more money than you earn in fees and have poor reward systems. It’s important to work only with established and trusted cloud mining companies and understand how the fee structures work.
In general, cloud mining can be profitable when the cryptocurrency you mine goes up in value.
Liquidity Pools
Joining a liquidity pool is similar to the process of staking, as you’ll lock up your crypto to be used for trading liquidity on decentralized exchanges. According to Kraken, liquidity providers (LPs) receive LP tokens, which represent their assets in the pool, and they earn a “proportional share of all transaction fees charged to traders that use the pool.”
A key to earning more from liquidity pools is choosing tokens that have high trading volumes, resulting in more fees collected. And tokens that go up in value are (obviously) worth more as you earn them. Just be sure to watch out for platform fees that can reduce your earnings.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 3 Ways To Earn Money With Crypto — Aside From Actually Investing In It
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