Crypto world is blooming and money influx only looks to be gaining momentum. We are seeing growing interest in earning passive income with cryptos, but the problem is that many of those projects don’t bring anything new to the table. Just a note that this is not a how-to article, but an article focusing on projects that are innovative, recognized by the community and that will generate you more passive income than any pension fund ever would.

Let’s also quickly go over what passive income is. I will paint you a quick picture of where and how we usually get off the rails and we will then dive into the crypto sphere and find out which projects are worth the trouble.

What is Passive Income?

The phrase “passive income” leaves people with feelings that they never have to do more than a few clicks to get those passive income streams flooding in. Type “passive income” on your search bar and the first thing you are probably going to see is something like this…

This assumption couldn’t be more wrong.

Passive income is usually defined as money being earned with little or no effort, something that is visualized as work-form-home-be-your-own-boss lifestyle. What isn’t realized is that before this can happen work/investments have to be put in. Passive income can happen when you take money/time and invest it in front. As that investment grows you will generate passive income.

For example, renting out your apartment while you are away for travel is considered a passive income. 

What we need to keep in mind is that getting to a point where one can afford an apartment didn’t happen overnight. E-books, affiliate blogs, dropshipping stores – they happen overnight, but they are not giving you an instant return without effort.

People tend to confuse passive income streams with residual income. Residual income is where you do the work and get paid the equivalent of work you have put in. Passive income (in the perfect world) is where you get paid over and over again for work that you did once. Don’t get this wrong, the work you put in is in correlation with the income stream you are going to receive.

In the crypto world, the earning potential is definitely worth exploring.

Decred (Proof of Stake)

Decred (Decentralized Credit), in my opinion, is one of the most undervalued cryptos in the solar system. One of the first cryptos that combined PoW (Proof-of-Work) and PoS (Proof-of-Stake). This combination means that miners and stakers (holders) both have the voting power to make decisions (i.e about upgrades) and this is one of the prime examples of democracy in the crypto world. True stealth mode project backed by a brilliant team and knowledgeful community.

Why exactly should we care about Decred PoS system and how does it help us generate passive income?

One of the key incentives from the passive income perspective is their PoS ticket system. In simple terms, your Decred holdings make you eligible to purchase tickets. If your ticket gets drawn, you will get back the ticket amount + reward. If your ticket is not drawn, you will still get back the Decred (DCR) that was invested into the ticket.

For example: If the current ticket price is 65 DCR and you have 325 DCR you could buy 5 tickets. If your ticket is drawn, you will be rewarded with a 2.15% interest per ticket, which currently equals to ~1.4 DCR. What you need to consider is that your funds used to purchase tickets are locked until the ticket is selected to vote or if it expires. I, personally, wouldn’t worry about this too much if you are in it for the long-term. However, you should have your risk margins calculated and this is definitely a factor to consider.

So what are the chances of my ticket voting?

Statistically, your ticket gets to vote on average within 28 days and it has a 99.5% chance to vote before expiry (142 days). In order for this to be profitable, it must generate more interest than a bank. In the USA this is a 2.25-2.40% 5 year CD. Let’s compare this with our Decred example. You have 5 tickets which means you have a fair chance of earning 7 DCR per month as a passive income. This equals average 84 DCR/year (DCR = 33.38 USD at the press time) meaning 25.84%/year ROI on 325 DCR. One could argue that this is a far riskier investment, but then again, there is no need to go all in as there is no need to keep all the eggs in one basket. Even though the price of the ticket has gone up Decred smashes into our top passive crypto income list easily.

Advantages compared to alternatives:

  • In my opinion, heavily undervalued
  • Your vote has direct influence
  • Very attractive ROI potential

Disadvantages compared to alternatives:

  • Relatively high vote (entrance) cost (~65DCR/~2170 USD). Possible split ticket variations in the future.
  • In order to Solo Stake, you need a computer with 24/7 Internet connection (Pool Stake is possible, comes with a 5% fee)
  • Locked in tokens during staking
  • Factor of luck

Here are few get-you-started links with Decred:

https://dcrstats.com/ (ticket price, statistics, pools)

https://docs.decred.org/faq/proof-of-stake/general/ (general info)

https://www.decredible.com/ (wallet, how-to)

https://reddit.com/r/decred (community)

NEO (NEO Gas)

NEO is currently one of the most promising crypto projects in the world and owning their tokens can earn you money while you sleep. Setting it up couldn’t be any easier either and there is no catch. You just need to accumulate yourself some NEO tokens – get them off the exchange and earn dividends.

The so-called dividends are called Neo Gas and Neo Gas to NEO is like a fuel for a car. With that “fuel” you are able to make transactions in the blockchain network. For example, if you are making transactions with Ethereum you are paying Ethereum Gas in order to make the transaction go through. The nature of the beast is the same for NEO with the exception that gas for Ethereum couldn’t be earned by just hodling Ethereum. The only thing you have to do is get your NEO tokens off the exchange into a private wallet. Otherwise, exchanges will be claiming your Gas.

Let’s take a quick look at the actual numbers.

If your current NEO holdings are around 100 tokens you would be looking at a 10 free NEO Gas tokens per year. 10 NEO Gas/year (NEO Gas = $22.39 USD at the press time) meaning 7.41%/year ROI on 100 NEO. 

There will only ever be a finite amount of Gas produced so its price will rise over time. And if the value goes up, well… Let’s just say there is a fair amount of potential in this project. NEO and NEO Gas breeze through top passive crypto income easily.

Advantages compared to alternatives:

  • Extremely easy to set up
  • No entrance restrictions

Disadvantages compared to alternatives:

  • ROI potential

Here are few get-you-started links with NEO:

https://neotogas.com (NEO Gas calculator)

https://www.reddit.com/r/NEO/ (community)

https://neo.org/ (general)

ARK (Delegated Proof of Stake) 

ARK might be the less known of the two, therefore a quick overview of what they bring to the table. This is a very ambitious project that is forked from Lisk. Simply put, ARK’s underlying technology SmartBridge interacts with other compatible blockchains. In an example, if you want to send 1 BTC to ETH wallet you would need process this transaction through an exchange. This is a pain in the bum as it takes time and money. However, with ARK’s SmartBridge, you could send 10 ARK straight to ETH wallet without manually going through any intermediaries. There is a small conversion fee from ARK to ETH, but this is virtually painless compared to alternatives.

ARK is great, but what is DPoS and how could we get those passive income streams flowing?

The difference between Proof-of-Stake and Delegated Proof-of-Stake is probably exactly what you are thinking of. In a nutshell, PoS (Decred) is a direct democracy and DPoS is a representative democracy. In ARK’s case, every wallet with coins in it is able to vote for delegates and these delegates will be their voice in the ecosystem.

Each ARK counts as a vote and you have many delegates to choose from. Each delegate can choose how much they pay out to their voters, which currently varies from 70-95%. In terms of passive income, owning 2000 ARK’s (ARK = $2.72 USD at the press time) earns you a 208.06 ARK’s/year. Which equals to 10.4%/year ROI (dutchdelegate pool).

Advantages compared to alternatives:

  • No luck factor
  • No locked in tokens

Disadvantages compared to alternatives:

  • Somewhat low ROI potential (compared to Decred)
  • Somewhat hard to set up (compared to NEO)

Here are few get-you-started links with ARK:

ARK profit share calculator

How to set up and vote ARK delegate

https://www.reddit.com/r/ArkEcosystem/ (community)

There are many other promising PoS/DPoS projects that didn’t make it to the list.

The main reason for limiting the list is somewhat personal. I simply like the listed projects, either from innovative, community (recognition) or investment perspective. Yes, I could have featured other passive income variations as masternodes (considerable initial investment) or lending (has its own advantages/disadvantages), but the backbone of this article was to focus on the established, and in my opinion, somewhat secure options where you could really set your camp up.

What needs to be mentioned separately is OmiseGO. Their PoS system is similar to NEO and you will have similar option to earn interest as you do hodling NEO. This is expected to be announced around October 2017 and will very likely be on top of our list.

Please keep in mind that these are theoretical calculations and not guaranteed returns. Your own research must be done and there are several other factors you should consider before making any commitments.

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