Passive is one of internet’s favorite buzzwords, yet only few people who use it actually know how to achieve it without investing unreal amounts into various conventional assets. Decentralized Finance (DeFi) is the key, and today, we’ll tell you how exactly you can give passive income a shot, too.
Let’s begin with the basics, and discuss what passive income actually means. Passive income is essentially earnings that a person or entity receives without dedicating present time to where the income originates. This means that those who earn passive income likely worked in advance to make this seemingly automated inflow possible, which continues to yield its beneficiary without further resources. There is a debate whether sources requiring relatively small amounts of time to maintain—think short-term rentals, for instance—still qualify as passive income, however, to make things a tad simpler, let’s disregard those for now.
DeFi is the abbreviation of Decentralized Finance, which is an aggregate term for crypto ecosystems that operate via their own distributed blockchains and unlock some level of potential financial benefits for their users. DeFi has been popular since the dawn of the crypto world as it allows participants of all backgrounds to take advantage of a wide variety of applications, regardless of their income, geographical location, technical knowledge, or financial expertise. In fact, DeFi was one of the first areas that managed to create an almost completely leveled field for those seeking passive income for everyone, which is the place we’re exploring in this article.
Now that everybody’s on the same page about the basics, let’s see how DeFi brings the opportunity to earn passive income to all doorsteps. Today we’ll look at the most widely used and potentially lucrative types of applications, staking and liquidity providing. Don’t worry if these phrases sound a bit complex at first, they could not be easier from a user’s point of view. Think of staking and liquidity providing as placing your funds into a bank, when you might not be aware of the exact mechanics of how your interest is created, but understand that your money earns a certain percentage for its time spent on your account. Staking and liquidity providing are similar to this from a process standpoint, albeit with different kinds of risks and assets.
In simple words, you just have to place your crypto assets, such as Bitcoin (BTC), Ethereum (ETH), Tether (USDT), or Cardano (ADA) to protocols like PancakeSwap, Yearn. Finance, or 1inch, and watch them grow without any additional effort from your side. Choosing is fairly straightforward, as these protocols tell you all the necessary details, such as expected annual percentage yield (APY), required lock period, and the sort. This way, your assets could earn you textbook passive income that is potentially higher than those offered by centralized financial institutions, regardless of how much you put up in the first place.
Passive income is an often used concept that, in reality, tends to be the privilege of only a handful of wealthy. However, thanks to DeFi and its revolutionary applications, passive income can be anyone’s way of earning. All investments and income streams carry a certain level of risk, and DeFi’s passive income opportunities are no different, but trying them out will likely be something that most candidates won’t regret.
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