Crypto Earn: How to Generate Passive Income?

Review of Earn Products: How to Earn on Cryptocurrencies

Cryptocurrencies attract investors with the returns they can provide; however, losses can be colossal if assets are chosen incorrectly. Considering that the crypto industry was initially positioned as an alternative financial system, it is not surprising that analogs of traditional types of savings, called Earn products, have appeared in it. 

In this article, we will tell you in detail what Earn products are, what types exist, and also consider the advantages and risks of using them. 

What is Earn?

Earn is a way to make money on cryptocurrencies regardless of market movement, meaning you can earn in both rising and falling markets. Earn products provide much lower returns compared to trading, but they are valued for minimal risks, provided you find reliable providers of these products. 

Earn can be compared to traditional bank deposits: cryptocurrency is transferred to a specific wallet, and you are credited with profit for its use, expressed in an annual percentage. In essence, owners of Earn products bear the same risks as cryptocurrency holders, but they also receive a small profit. 

Earn products are suitable for both beginners and pros. It can be difficult for a beginner to understand cryptocurrencies, and to keep money from sitting idle, they can deposit it into a special account, i.e., purchase an Earn product. Professionals can use this tool when "pouring" liquidity from one asset and waiting for the optimal price for another. So that USDT doesn't just sit in the wallet, it can be sent, for example, to DeFi staking at approximately 6% per annum. The income is indeed small, but it exists, and stablecoins aren't just lying around. 

Types of Earn Products

Fixed-Rate Deposits

Around 2020, cryptocurrency exchanges adopted the principle of deposits from traditional banks and began offering them to their users: now it is possible to provide crypto platforms with your digital assets in exchange for an annual income. The benefit for crypto exchanges lies in a general increase in liquidity, which allows for fast trading operations on the platform. 

A fixed-rate deposit implies freezing assets for a certain period: 10, 30, 60, 90 days, but there are other terms as well. The percentage that the user will receive for providing their own cryptocurrencies is specified immediately and does not change throughout the entire duration of the deposit; it depends on how long the user leaves the assets: the longer the term, the higher the rate. 

Flexible-Rate Deposits

This type of deposit differs in its floating rate, as well as the ability to withdraw your own cryptocurrency at any time. Unlike a fixed rate, a floating one is extremely difficult to predict: it changes based on the exchange's income, which can increase or decrease. However, it is ideal for moments when cryptocurrency is idle and it's unknown how soon you will need it. 

Fixed Staking

In order for blockchains with the PoS consensus algorithm to function, the network must be supported by nodes, which are formed by locking the cryptocurrencies of that network. For the fact that blockchain users lock their cryptocurrency to maintain its functionality, they receive a reward consisting of newly minted coins and transaction fees. 

As a rule, crypto exchanges provide the possibility of staking in a pool: the more funds locked in one pool, the greater the probability of confirming a transaction, mining new cryptocurrency, and receiving a commission. A user can independently lock coins for staking through the official project website; however, in this case, the probability of receiving a reward decreases, as does the number of cryptocurrencies received: in a pool, they are divided among all participants depending on the number of locked assets. In the case of solo staking, the entire reward goes to one user. 

DeFi Staking

This definition refers to the same locking of cryptocurrencies for a certain period, but not on crypto exchanges, but on decentralized finance platforms. The cryptocurrency that the user provides to the platform will be used for DeFi processes: it can be loaned out, used as liquidity, re-pledged at a higher interest rate, and so on. 

Usually, DeFi staking offers higher rates than regular staking. The point is that the use of decentralized platforms is associated with certain risks, namely hacks. While crypto exchanges have reserve funds to cover losses from hacker attacks, decentralized platforms do not. In this regard, DeFi projects offer greater returns in exchange for the risks associated with using this type of staking. 

Launchpool

Launchpool is a decentralized financial platform, usually belonging to a crypto exchange (Binance, Bybit), designed to facilitate the launch of new cryptocurrency projects.

It creates liquidity pools where projects can build liquidity, providing the necessary funds for their functioning and growth. Users provide their currency to increase the project's liquidity; in return, after the official listing of the token, they receive a certain amount of it in their exchange wallet. 

The primary function of Launchpool is staking existing cryptocurrencies to receive new tokens as rewards. Rewards can vary, including a share of exchange fees, decentralized, or bonus income. 

Dual Investment

Dual investment is a short-term trading tool that allows you to earn income by predicting the price direction of a crypto asset in a certain period. Investors choose between two types of products:​

1. Buy Low: investing in stablecoins (e.g., USDT) with the aim of purchasing cryptocurrency at a lower price;

2. Sell High: investing in cryptocurrency with the intention of selling it at a higher price.​

On the settlement day, the outcome depends on whether the asset's price reached the set target price.

For the "Buy Low" product:

1. If the settlement price is less than the target price, the investment amount and accrued interest are used to buy the cryptocurrency at the target price;

2. If the settlement price is greater than the target price, the investment and interest are returned in USDT.​

For the "Sell High" product:

1. If the settlement price is greater than the target price, the cryptocurrency and accrued interest are sold at the target price, and the resulting USDT are credited to the account;

2. If the settlement price is less than the target price, the cryptocurrency and interest remain in the account.​

This tool is suitable for markets with low volatility and allows you to earn income regardless of market conditions. However, it is not particularly suitable for market beginners due to its complex structure and the need for a basic understanding of cryptocurrencies. 

How Does Earn Work?

The entire process is quite simple: the user chooses the Earn product that suits them best (flexible deposit, dual investment, DeFi staking, etc.). Depending on which product the user has chosen, it is worth determining the necessary cryptocurrency: if you don't have it, you can buy it on the exchange. 

Next, the user transfers the required amount, receiving fixed or floating income in return, which depends on the chosen tool:

• In the case of a fixed deposit, you freeze assets and receive a pre-agreed percentage;

• With staking, you lock coins to support the blockchain's operation and receive a portion of the reward;

• In dual investments, income depends on the market price of the asset at the time of settlement.

It's worth mentioning that depending on the chosen Earn product, access to the cryptocurrency may be limited, meaning it cannot be withdrawn for a certain period. 

Advantages and Risks of Using Earn Products

Advantages

1. Earn products help create passive income simply by storing cryptocurrency. It's enough to choose the type of product once, and you can forget about it for a while; 

2. This type of crypto earning involves minimal investor participation; 

3. Today, many crypto exchanges offer Earn products, so investors don't need to look for separate platforms. Therefore, you can be calm about your investments: even if the exchange is hacked, all losses will be compensated to users; 

4. The variety of Earn products allows you to choose one that suits the investor's risk level and investment term. 

Risks

1. High volatility of the crypto market can make its adjustments to the use of Earn products. For example, during fixed staking, the price of the cryptocurrency may start to fall rapidly, and it will be impossible to withdraw it before the designated term; 

2. Security plays an important role when using Earn products. Given that crypto assets are locked for a certain time, their security should be at a high level, so it's better to choose proven platforms that can protect the stored cryptocurrencies. However, problems often arise with this: there are many exchanges and platforms on the market that do not comply with generally accepted security measures; 

3. A floating rate can provide unpredictable yields. For example, it's not uncommon for Earn product users to receive 1-2% per year—completely not the result crypto investors hope for at the beginning; 

4. Some Earn products have a high entry threshold. It will be quite difficult for market beginners to understand their mechanics and under what conditions they will receive a profit. 

How to Start Earning with Earn Products

1. First, you need to choose a platform. It is recommended to choose either well-known crypto exchanges or platforms with Earn products that have been tested by time. Scam platforms regularly appear on the market, offering ultra-high returns compared to competitors. However, in reality, they misappropriate investors' money and close down; 

2. Today, almost all platforms that provide Earn products require identity verification (KYC). This can be done with a photo of an ID document and a photo holding it. It usually takes no more than an hour but can last up to 24 hours in some cases; 

3. Next, you will need to deposit cryptocurrency onto the platform. Find the "Wallet" tab, select the cryptocurrency, and the system will automatically generate an address for you to transfer it to; 

4. Decide on the Earn product. Your choice should be based on yield, whether funds are locked, or if they can be withdrawn at any time. You can also read user reviews online regarding any Earn product, which may also influence your choice; 

5. After that, you need to confirm participation: specify the amount and term for which you are providing the cryptocurrency, and agree to the platform's terms; 

6. Now it remains to monitor the income, which is credited differently on each platform: somewhere daily, and somewhere at the end of the term. 

Frequently Asked Questions (FAQ)

How does dual investment differ from regular staking or deposits?

Dual investment is a trading product with elements of predicting market direction. Unlike staking or deposits, where you receive fixed or floating income simply for holding assets, in dual investments, the result depends on the price of the asset on the settlement date. This makes them riskier but potentially more profitable.

What should a beginner choose: a fixed deposit or DeFi staking?

Beginners are better off starting with fixed deposits on centralized exchanges—they are easy to use and less prone to risks. DeFi staking requires an understanding of decentralized protocols and carries increased risks, including possible platform hacks.

Can I withdraw funds early from an Earn product?

It depends on the type of product. From fixed-rate deposits—no, not until the term is completed. From flexible deposits and some types of staking—yes, but you may lose part of the income. In dual investments, early exit is impossible.

Why use Earn products if I'm just holding cryptocurrency?

Earn products allow you to "put your cryptocurrency to work"—that is, to earn even when you are not trading. This is a way to increase portfolio yield without active trading and with potentially lower risks.

What risks are associated with DeFi staking?

The main risks are vulnerabilities in smart contracts, the absence of insurance funds, and possible protocol failures. Yields are higher than with centralized products, but the risks are correspondingly higher.

Which type of Earn product is suitable for stable passive income?

For stable income, fixed or floating rate deposits, as well as classic staking, are best. They are less volatile and do not require market analysis. Dual investments are closer to trading.

How to distribute assets among different Earn products?

It is optimal to diversify: part in fixed deposits, part in staking, and a small percentage in dual investments (if you are ready for risk). This approach allows you to minimize risks and receive income in different market conditions.

Conclusion

Earn products are a convenient way to receive passive income in the cryptocurrency industry. They allow you to utilize assets that would simply "lie idle." Despite the apparent simplicity, it is important to understand the features of each product, the risks, and withdrawal rules. A competent approach to choosing Earn tools can consistently bring profit even in unstable market conditions. But, as with any financial instrument, the main thing here is awareness and understanding of the various mechanics of the crypto market — you can learn all this by reading articles, training, and cases from Arbitrage Scanner!