Earning a passive income is the gold standard of any financial endeavor. It is essentially the process of making returns whilst doing minimal work, which is no-doubt ideal to most people. In fact, the allure of earning a decent passive income is why many individuals turn to crypto. With this in mind, let’s take a look at how exactly you can achieve this if you are an Ethereum holder in 2024.
What is Passive Income?
Passive income is where you make a financial return on a certain investment or activity that does not require constant work or upkeep. It is not the same as earning from active and regular work, or being paid for strenuous activity. In other words, a passive income is where returns arrive without you making a consistent effort.
Can You Make Passive Income with Ethereum?
Yes, you can definitely make a passive income with Ethereum. There are several methods for this, which we will explore and examine below.
The Three Best Ways to Earn Passive Income With Ethereum
These are arguably the three best ways to earn a passive income with Ethereum.
Crypto Savings Accounts:
A popular method of gaining a passive income from Ethereum is to place it into a crypto savings account. These work similarly to traditional fiat savings accounts, where you earn a percentage based on how much you place in them. A popular option for this is Ledn’s Growth Accounts– with these, you can currently earn up to 4% APY on your Ethereum. This is an extremely simple method of making additional returns, with a very small learning curve.
Staking:
Since Ethereum 2.0 was launched, the blockchain has been running via proof-of-stake, as opposed to proof-of-work. This means that you can stake your Ethereum and lock it up on the blockchain to receive financial rewards. The most profitable means of staking is to do so on your own, rather than using a pool. However, you can only do this if you own 32 ETH, as this much is needed to validate a node. Otherwise, you will need to join a staking pool.
Yield Farming:
Yield farming is the process of locking your ETH away on a DeFi protocol, where it is used to add liquidity to an exchange, lending service, or other decentralized project. As an incentive for adding liquidity to these networks, you are given a financial reward. Yield farming is a popular way of earning extra returns on a range of cryptocurrencies, including USDC and USDT, as it has a lower learning curve compared to staking (although not as low as using a crypto savings account).
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Risks Associated With Earning Passive Income From Ethereum
Like all financial endeavors, there are some risks that arise from earning a passive income with Etheruem. Whether these are worrying enough to put you off from the process will come down to your own risk tolerance, and how likely you think these outcomes are.
Volatility Risk
Practically every method of earning a passive income with Ethereum involves locking your ETH away somewhere. This means that you cannot touch your crypto assets for a set period (although some services such as Ledn Growth accounts let you access your ETH holdings subject to a processing timeframe). If the Ethereum network, or the crypto market as a whole, suffers from a significant issue, and it leads the asset to drop dramatically in value, you may not be able to act fast and sell it, as it will be restricted.
Regulatory Risk
The crypto market is new, and so most countries are trying to figure out what rules they should impose on it. If something occurred that led to many countries viewing Ethereum unfavorably, then it could damage its reputation and harm its price. Or even worse, it could become illegal to use. If you have your assets locked away for the purposes of earning a passive income, this could have a dire effect on your financial strategy. That is not to say it is a likelihood, but rather that there is a non-zero chance of it happening, and so it is good to keep it in mind just in case.
Bankruptcy Risk
If you are using a centralized service for earning a passive income, then there is a risk that the company will declare bankruptcy, leaving your finances in limbo. This could result in the loss of your ETH, or it could simply make it hard to regain. It is not uncommon for the process of accessing your funds to be complicated and drawn-out, should a centralized custodian declare bankruptcy.
Is Passive Income the Best Way to Earn From Ethereum?
Earning a passive income is one of the simplest ways you can put your ETH to good use. Once you have completed the initial preparation and setup process, the rest is relatively easy, and should not require much effort moving forward. It is also relatively low risk; you’ll notice that the risks listed earlier seemed more like negative scenarios or edge-cases, rather than something that happens regularly.
For these reasons, some people consider earning a passive income to be the best way to make money from your ETH. However, that does not mean it is the most lucrative method. Active trading is a much more profitable way of earning with Ethereum, however with it comes much more commonplace risks. It is far easier to lose your assets trading than it is via staking, yield farming, or using a savings account. Therefore, trading is only advisable for those who have a high risk tolerance, and are comfortable with the dangers associated with it.
How to Get Started Earning Passive Income With Ethereum
Each of the three methods we covered require you to do something different for the initial setup process. But let’s check out how you can do this using Ledn’s Growth Accounts.
First, you want to visit Ledn’s Growth Account page, and open an account. This is no different from setting up an account on a crypto exchange, requiring you to provide your name, phone number, email address, and set a password.
You will then be asked to send over documentation that proves your identity and address, such as a passport or driver's license.
After this, you can begin placing your ETH into a Ledn Growth Account, and start to earn a passive income.
Conclusion
If you are an Ethereum holder, and you are looking into improving your financial situation, then you should definitely consider trying to earn a passive income. Take a look at the different options out there, and decide whether they look impressive or worthwhile to you. The three biggest methods are staking, yield farming, and crypto savings accounts– such as Ledn’s Growth Accounts which offer up to 4% APY on your Ethereum. Take a look at them, and see if any of them suit your financial strategy.
This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.
