Just how many times have you come across this question? Often, right? So here we are, making a genuine attempt at facilitating the formation of a balanced out opinion for you regarding this field.
Everyone is talking about crypto for a reason
Lately, Cryptocurrency has become the new buzz word. Pretty sure that you must have come across this term quite a lot of times. But there has to be a reason for it, right? 🤔
Decentralization
One of the reasons why cryptocurrency has become popular is because it is decentralized. It is run by its developers, not by the government or any institution, which keeps it free from its monopoly. It ensures the stability and security of the currency. 🔐
Ease of transaction
With the coming of cryptocurrency, money can be sent anywhere from your devices, with the only aid of a secure internet connection. The main advantage is that users are exempt from paying a high transaction fee and it's almost negligible, due to the elimination of third parties. 💸
Value for privacy
Cryptocurrency is known for upholding the anonymity of users. They have pseudonyms that are not linked to any other accounts of users or stored data to respect the privacy and security of users. 🗝️
How do people make crypto their passive income?
If you have heard and read about cryptocurrency, then you may be aware of its popularity. In your day-to-day lives, conversations with friends and family, in newspapers, etc. you must have come across information like “how is the crypto market doing?” and so on. 🙋🏼♀️
It is becoming one of the main sources of income and transactions gradually, largely for investment purposes. As the title above suggests, it is used by people to create a passive income. Several means are available for holders to profit from their holdings, but not without technical expertise and risks that accompany the process. But how? Let's look at those methods together. ⬇️
Cloud Mining
This is one of the simplest methods to earn from cryptocurrency. There are companies referred to as ‘cloud mining providers’ whose equipment can be rented out by you to accomplish this. Users don’t need to possess or run any related program to begin mining. But people are required to pay a minimal sum for opening an account. This can be done on an individual basis as well. Here, you are just a few clicks away from purchasing a contract, which has made mining more accessible and economically beneficial for people. 🌨️
Staking
In this method, crypto assets are used to verify transactions, handle blockchain networks, and in turn profit from one’s holdings. The methodology based on which the process is carried out is ‘proof-of-stake’ , and this is considered to be an energy-efficient option. Different aggregators come in handy for this process. Blockchain platforms like Solana, Ethereum, etc. are helpful here.
How does this system function? If you store your cryptocurrencies in a wallet for a stipulated period of time, you will earn rewards (similar to the way a bank pays you interest on your deposits 💁♀️). The stakeholders are also the ones who can choose the miners. The only condition is that you should not hold cryptocurrencies in a non-compatible wallet because this prevents automated staking.
Saving Accounts
Hopefully you guys know that people generally open a ‘savings account’ in banks using which they carry out their transactions and can even earn interests, depending on the bank’s policies. Is the same rule applicable for your crypto assets? 🤔
Yes. A considerable number of businesses and platforms offer crypto accounts through which you can earn an interest by keeping your crypto on exchange. These companies try to get users on their respective platforms so as to have funds kept there, and pay you for the purpose. Your cryptocurrency might be used by them to stake it, lend or even allow investments. 🤝🏼
Affiliate Programs
Ever heard of ‘affiliate marketing’ where you refer the products and services offered by any company to people, and get paid for it in return? In the context of cryptocurrency too, certain affiliate programs offer to pay you if you refer them to new users. For this, you need to create an account on their platform, after which you will get access to a link that you can share on various social media sites, and depending on the number of recruitments you get a commission. 🤑
⚠Risks involved that you should be aware of
After reading the above-mentioned information regarding earning through crypto, you must be feeling quite elated, right 👀? You can just have an internet connection (which you obviously have otherwise you would not have been here 😅) and do your research, and start making money. Sounds simple? But wait ✋!
Everything comes both with its pros and cons, and so does cryptocurrency. Since working with crypto is not the same as the traditional ways of dealing with finances, you need to be aware of certain risks before you begin. 🔊
Decentralized nature
Decentralization might sound like a very intriguing idea, but let’s not forget that it comes with both pros and cons. One of the biggest risks associated with crypto investments is the fact that they are not backed by any government or financial institutions (banks) and so are subject to people’s skepticism. They work on the ‘public ledger system’. Although the blockchain on which it is built or is native to may assure users of its security, the decentralization aspect of it and the anonymity feature can be both, a threat and a pro.
Volatility
The crypto market is not as stable as one might perceive it to be. If you read some business news, you will find out that lately the crypto market has been down, i.e. the prices have been falling with no scope of it stopping anytime soon. Rising inflation is one of the causes for the same.
Cyber threats
Since everything crypto-related is done digitally, it is very prone to attacks by cyber criminals. Since they are stored in digital wallets and even traded digitally, criminals are attracted to them because of their anonymity, and trap the victims through phishing techniques. 🦹🏼
Tax-related problems
The tax status of cryptocurrencies is debated in the sense that it hasn’t received the same tax status everywhere. Depending on the laws of different countries, cryptocurrencies are either put in the category of currency or assets.
Take for instance countries like US and Canada, where use of virtual currency for trading is legal, while China and Russia have prohibited their use at all. Due to such issues, users need expert consultations regarding taxes and related issues.
How is crypto a competitive alternative to the financial system?
The traditional market forces of web1/web2 economy might be too traditional for today
Regarding the traditional market systems, there are a lot of cases of money laundering in banks, which might make people lose trust in these institutions. Nowadays, people are also switching to online payment (UPI) on web2, in the form of apps like Paytm, Gpay, etc. which run on principles like KYC (Know Your Customer), requiring considerable information and data from users. 😔
What does this have to do with our discussion here 🤨? Well, dealing with cryptocurrencies doesn’t require you to be concerned with all that. No one can just come and steal your money, as it is protected through your very own seed phrase. This system also doesn’t make you uncomfortable with asking a lot of questions in the name of KYC or something. Cool, right? 😎
Do the banks have your best interests in mind?
This seems to be quite an important concern. Although banks and related financial institutions are the backbones of any economy, they might still not be accessible to a place’s population in entirety. Often in peripheral areas, there may be no banks at all or no branches nearby (imagine travelling a long distance of, say 150 kms, just to withdraw some cash 🙄). Crypto, on the other hand, is global, remote and can be accessed from anywhere with anyone! 🌍
Other than that, even very minor tasks (like deposition or transactions) require so much paperwork and is time consuming. They operate for fixed hours with breaks (9-5 with lunch breaks) and even the stock market is open for a fixed time everyday. In the case of crypto, there are no limitations with respect to time, as transactions can be carried 24x7 here. 🕐
When it comes to crypto, literally ANYONE with an internet connection can use it after understanding the procedure behind its purchase and investments. Yes, you too! 🎈
Access to crypto is wider
Yes, that’s right! It has been said again and again in this article that accessing cryptocurrency is relatively easier, but we can’t stress enough. 😅
The world has been progressing and in the process has moved from traditional banking to net banking and UPI transactions, and is now turning towards digital currency like Bitcoin, Solana, etc. The convenience of carrying it in the safety of your phones and not having to run to banks and ATMs again and again has contributed considerably to the popularity of crypto.
The global nature of crypto has further added to its popularity, i.e. there are no geographical boundaries for crypto transactions. You can buy and sell cryptocurrency from the comfort of your homes. For instance, sitting in India, you can invest in crypto in the US. 🌍
The only conditions are to beware of the obvious threats (that have been discussed above), do proper research, and have a stable internet connection, and you are good to go!
Crypto is the currency of the future (or we hope it is) 🙌🏿
With time, cryptocurrency is getting accepted widely as a form of payment. In countries like the US, you will find that a considerable part of the population would prefer cryptocurrencies for transactions. Even in India, this mode is gaining popularity and there are demands to make it a legal tender. It has helped people make a good amount of money without stopping. 🤑
Cryptocurrency may still be in a developing stage and people still are getting used to the technical know-how surrounding it. But, in all probability cryptocurrency might be the future of all kinds of exchanges and transactions (hopefully). 🔮
However, you need to be very cautious and do your own research, along with expert consultations before you dive into this new world of finance.
Now that you might be able to decide whether to invest in crypto or not, let’s move forward to the discussion points that you need to know before buying cryptocurrency.