Anyone that has been around for a while has seen the prices of many coins go up and down. A conservative trader might not trust the cryptocurrency industry and will not find it a suitable asset class to invest in, but many of the younger generations saw the fortunes coming their way. In reality, loads of people did profit from this new industry but others have lost quite some money over time. The thing is, if you don’t sell it’s not considered a loss, right? There are a lot of people who have invested big amounts into projects that have turned out to decrease in terms of price. That moment you either sell all your tokens for a big loss or you hold the tokens in the hope that the price will gradually increase over time. In the second option, there are some opportunities to benefit from the fact that you’re holding the tokens. You do not have to simply hold them in a wallet and wait, there are more options.
The first option you have is staking. It totally depends on what kind of project you are supporting, but nowadays many projects offer the opportunity to stake your tokens with a financial reward as a return. They do this as their network is built using the Proof-Of-Stake mechanism, having these coins partake in the process of verifying transactions and securing the network. The easiest way of staking is by simply depositing your tokens into a wallet and the rest is done by the network. With others, you should deposit your tokens into a specific smart contract that will then have your tokens locked up for a set period of time. The returns can be pretty good, totally depending on what project you support.
Some numbers say there is over 7 billion in token value being staked right now as of today, that’s around 5% of the total market cap the entire industry holds. That’s big, but it’s easy to understand with an average rewards rate of up to 12.5% for a dozen different projects.
In the case of staking, you basically let the network use your tokens in order to keep functioning. With lending, most of the time you lend your tokens to other people that want to use your tokens. There are several forms of lending that can be done, both varying in complexity and the amounts of rewards.
Have you ever heard about margin trading? It’s simply trading with funds you do not possess. Let’s say you have $1000, but you are so confident about the trade you are about to make, you would like to add a little extra money to it. Then, you can choose to increase your position by using a margin. In some cases, these marginal options go up to 125 times the amount that you own yourself. So in the example, you would put $1000 on the line to then be able to trade with $125,000. The money that you are trading with that is not yours, is coming from someone else. That’s where lending comes in. This person gets a reward for letting you use their funds in order to make your desired trade. Do note, the moment you do margin trading, there’s always a risk of losing your entire position. In this case, you buy a position of a trade, you do not own the asset that you are trading on.
Lending in the name of the word
As we all know, in this world you can loan money from other people or institutions if you do not have the money yourself. In the traditional world, this usually goes through banks. As we operate in an ecosystem that is building an alternative to banks, the loan-industry is actively being utilized in the cryptocurrency industry. There’s the option to loan FIAT currencies by putting your cryptocurrency up as collateral, or the other way around. It’s also possible to do peer-to-peer lending through several platforms. This industry is big and it’s growing even. With the use of smart contracts, there is no need to trust the other party, the contract does it all it has to do, no middleman required. When you are the one that is loaning the funds, you can earn some money with the interest the person who loans has to re-pay you.
A couple of months ago a new concept was introduced in the cryptocurrency industry. We have seen before that lots of projects are dependant on the performance of their social media channels. The community plays a big role in the marketing of a project in a positive or negative way. Social mining has found the perfect way of putting your community to good use and rewarding them at the same time for the hard work. All you need to do is put up a number of tokens into the social mining platform and start generating content. After that, the other users of the platform can upvote your content and every set period, rewards are paid out to all the contributors on the platform.
Some successful and upcoming projects like Elrond, Ferrum, LTO, and 2Key have integrated Social Mining as a way to boost the activity of their community. When searching for these projects, you will find loads of community-generated content from translations to memes to entire reviews. It’s impressive to see what a community can do in order to boost a project.
The alternative to all of the options above is running a masternode. In this case, you’re basically staking your tokens but at the same time, you are a core part of the network. By running a server and dedicating RAM memory, bandwidth, and processing power to the network you’re supporting the network. You keep it stable, keep it secure and decentralized. This does come at a price. There is usually a big investment required before you can start your own masternode. For some projects, this investment is a couple of hundred dollars, but big projects like DASH, require an investment of close to $70,000. In return, you do get some big rewards that can go all the way up to thousands of dollars per year. It’s the most complex and expensive way of putting your coins to work for you, but in most cases, it is the option that brings the biggest rewards.
As you can see, there are many ways of putting your coins to work for you. You can earn some passive income by doing so. Whatever you choose to do, always make sure that you do some proper research before you decide to loan out your tokens, stake them in a smartcontract or initiate a masternode. All these options require some thoughtful decisions to be made and a general dedication to the project of your choice. Be aware that in some cases you take away the opportunity for yourself to sell your tokens whenever you want, you might be stuck in a smart contract that does not allow you to do anything with them for a long period of time. So whatever you do, always do your research first.