How to Make Money off Ethereum – Earn Passive Income with ETH

Since the launch of Bitcoin back in 2009, hundreds of cryptocurrencies have entered the market and compete with Bitcoin for market share. 

Ethereum launched in 2015 and has since become the second most popular cryptocurrency globally, with 11.8 % of the market share.

This article aims to give an overview of the Ethereum network. We will also outline a few ways that you can start making money with Ethereum.

Why Does Ethereum Have Value?


To understand why Ethereum is valued, it’s essential to know how the Ethereum network works; understanding the fundamental principles of Ethereum makes it easy to see why it has value for people interested in cryptocurrency.

What is Ethereum?


Ethereum is a platform that developers can use to make decentralized applications (apps) using smart contracts. 

Smart contracts are an account on the Ethereum network; they can be added to the network and run automatically, meaning there is no need for someone to control it.

Anyone can interact with a smart contract by submitting transactions that execute a function defined on the contract. Smart contracts can define rules and automatically enforce them via the code.

A significant driving factor for the value of Ethereum is that anyone who uses the network needs to spend small amounts of Ether when sending transactions to the network. The payment of these fees represents a belief that the Ethereum network will continue to grow over time.

Smart contracts are becoming more and more popular and are the main driving factor in Ethereum’s rise in value.

Ethereum

Active vs Passive Income


In simple terms, passive income is money that you earn on investment or for work you have completed in the past. For example, say you made a website that requires no involvement to generate ongoing revenue every month; this is passive income.

Active income is money that one earns to actively perform a service, for example, trading the stock market.

How To Earn A Passive Income With Ethereum


There are several ways you can make passive income with Ethereum; here are some of the most popular methods.

Automated Trading


Automated trading allows users to generate passive income with their Ethereum by using a bot to follow specific trading rules.

Automated trading software such as Cryptohopper, Bitsgap or CoinRule allows users to set their own trading rules; users can also select from premade templates that employ different trading methods based on the user’s attitude to risk.

Holding


If you believe in the future of Ethereum, an adequate passive income stream could be to buy and hold the cryptocurrency. The best place to hold your coins are hardware wallets. And while we are at wallets, here is the list of the best Ethereum wallets.

Ethereum saw a growth from $141 to over $1800 from March 2020 to March 2021.

This means if you invested $5000 in Ethereum in March 2020 you would have made over $50,000 in one year.

Many people holding Ethereum are not aware that they can increase their gains by taking advantage of other passive income streams such as staking, lending and yield farming; lets take a look at a few passive income methods.

Staking


Staking allows anyone to earn cryptocurrency by participating in transaction validation on a proof-of-stake (PoS) blockchain. Ethereum blockchain is currently in the process of transitioning from PoW to PoS and that will enable anyone who has 32 ETH to join the staking infrastructure on Ethereum 2.0.

To stake Ether directly, you need to deposit a minimum of 32 ETH to activate validator software. As a validator, you will be responsible for storing data, processing transactions, and adding new blocks to the blockchain. This process helps keep Ethereum secure and allows you to earn ETH in the process. 

If you don’t have 32 Eth to stake, you can still get involved by adding Ethereum to a staking pool. These staking pools allow multiple members to contribute Ethereum; they then receive a share of the rewards based on how many tokens they contribute.

Staking is also an excellent option for anyone holding alt-coins.

Anyone holding a cryptocurrency that supports staking can earn rewards; the more tokens you stake, the more rewards you will receive.

For anyone looking to get involved with staking, Binance is a great place to start. 

Binance makes it easy to earn staking rewards; users can gain rewards by simply holding tokens in their Binance account. 

For more information about staking on Binance, see here.

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Lending


Over the past few years, cryptocurrency loans have become very popular. Investors can earn passive income on their cryptocurrency by lending it to borrowers with a high-interest rate. 

There are two types of lending services, centralized and fully decentralized ones.

Centralized vs Decentralized Lending

Centralized lending platforms take care of all the technical aspects for the user. They offer the ability for investors to maximize the productivity of their assets. Centralized platforms tend to have higher interest rates compared to decentralized crypto lending. 

Typically, DeFi platforms are non-custodial and focus on cryptocurrencies only. Interest rates can vary depending on the supply and demand in the market. Interest rates tend to be lower than the rates offered by centralized platforms; however, DeFi is more transparent as anyone can access the protocols. The transactions are available to see on public blockchains.

Liquidity Mining


Liquidity mining or yield farming is a way to earn passive income by providing liquidity to decentralized exchanges. Exchanges will reward users that can bring assets to their platform. 

A standout feature of these platforms is the ability to exchange a token for another within a liquidity pool. Traders pay a small fee to trade their cryptocurrency. 

Fees generated by the platform rewarded between liquidity providers based on how much assets they provide to the pool.

Centralized Lending Platforms


The following platforms allow users to earn interest on their cryptocurrency. These platforms will lend your assets to borrowers and pay you a share of the loan’s interest, providing a great way to earn passive income on any funds you are already holding.

BlockFi


BlockFi launched back in 2017, intending to help cryptocurrency investors do more with their digital assets. The platform offers various financial services; however, we are focussing on the interest account. Here is a full Blockfi review if you are interested to learn more.

Supported Cryptocurrencies and Interest Rates

The following table outlines the interest rates on offer at BlockFi.

CurrencyAmountInterest (APY %)
BTC0-0.256.00
BTC> 0.253.00
LINK> 05.50
ETH> 05.25
LTC> 06.50
USDC> 08.60
GUSD> 08.60
PAX> 0 8.60
PAXG> 05.00
USDT> 09.30
BUSD> 08.60

Visit BlockFi now

Crypto.com


Crypto.com formed in 2016 and has built an excellent reputation among cryptocurrency investors. The platform works similarly to BlockFi, allowing users to earn interest on their cryptocurrency.

Supported Cryptocurrencies and Interest Rates

The platform allows users to earn interest on over 30 different cryptocurrencies. Interest rates are more complex than at BlockFi and depend on how long you wish to lock your tokens for.

For a comprehensive overview of interest rates and Crypto.com platform – click here.

YouHodler


Youhodler formed in 2018 aiming to improve crypto-backed lending solutions, in addition to loans they also offer a crypto savings account where users can earn up to 12% APR on their cryptocurrency.

Supported Coins and Interest Rates

CurrencyInterest Rate (APY %)
USDT12.70
TUSD12.00
EURS12.00
LINK6.20
MKR2.50
XLM4.50
DASH5.50
HT3.00
USDC12.0
DAI12.0
BTC4.80
UNI7.00
LTC5.50
BNB3.00
EOS5.00
PAX12.00
HUSD5.00
ETH5.50
COMP2.50
XRP4.50
PAXG8.20
BCH5.50

Click here to read more about YouHodler and here to visit the site.

Celsius


Celsius formed in 2018; they offer a range of products, including an interesting account. Their interest account supports a wide range of tokens, and the company has an excellent reputation amongst the cryptocurrency community.

Supported Coins and Interest Rates

CurrencyCEL Interest Rate (APY %)In-Kind Interest Rate (APY %)
ETH6.355.05
CEL4.86
BTC5.104.06
SNX17.7813.99
MATIC17.7813.99
TGBP13.3010.51
GUSD13.3010.51
THKD13.3010.51
TCAD13.3010.51
DAI13.3010.51
USDC13.3010.51
PAX13.3010.51
USDT13.3010.51
TAUD13.3010.51
BUSD13.3010.51
BNT13.3010.51
AAVE9.487.51
UMA8.847.01
PAXG6.925.50
DASH6.925.50
X AUT6.925.50
COMP5.784.60
LINK5.664.51
BCH5.664.51
EOS5.604.45
LTC5.124.08
ZRX4.403.51
BAT4.403.51
XLM3.883.10
ETC3.773.00
DOT3.462.76
KNC3.172.53
XRP3.132.50
UNI3.132.50
ZEC2.532.02
MANA2.532.02
BSV2.532.02
OMG2.532.02

Click here to read more about Celsius and here to visit the site.

DeFi protocols


Yearn Finance


Yearn is a liquidity aggregator that offers an automated and effective yield farming strategy that aims to make its users the highest yield possible at all times.

The yEarn platform works by moving investors tokens between several lending protocols, all of which run on the Ethereum network. These lending protocols are AAVE, dYdX, and Compound.

For example, a user can deposit tokens into the liquidity pool (known as the yPool), and yEarn will add the tokens into whichever protocol is the most profitable. Yearn will also transfer coins from one protocol to another automatically, ensuring investors get the highest possible return at all times.

The estimated return for liquidity providers using the yPool is around 10% however this interest rate can vary due to market conditions and other factors.

Uniswap


Uniswap is an exchange platform; it works similarly to yEarn and allows you to make passive income by contributing tokens to a trading pool.

Uniswap allows users to swap tokens and Ethereum by trading against a pool of assets held in a smart contract. 

Similarly to yEarn, you can make passive income by adding assets to a pool; this will allow you to earn a share of its trading fees.

Interest Rates

Interest rates on Uniswap vary depending on which pool you contribute too, each pool has its own interest rate which varies depending on market conditions. You may wish to research the historic data of each pool before making an investment to a liquidity pool.

Aave


AAVE supports most ERC-20 stablecoins (USDT, USDC, TUSD, DAI, to name a few) and several other popular Ethereum-based tokens. The platform also gives users the option to indirectly earn interest on bitcoin via the Wrapped Bitcoin, an Ethereum based token.

Users earn interest by supplying assets to the platform. Average interest rates vary from 1% – 15% at the time of writing.

Another way to earn with AAVE is through staking.

AAVE lets its users contribute tokens to what is known as a safety module. The safety module exists if something happens to the market, which results in customers losing their funds.TAAVE would then use the safety to repay depositors.

Anyone who contributes tokens to the safety module will receive an interest rate of around 4-5%.

Compound


Compound is another exchange platform that lets you put your idle assets to use by supplying them to liquidity pools. 

Compound supports a wide range of Ethereum based tokens and fiat-based tokens such as USDC, which is pegged 1:1 to the U.S. dollar. 

Historically, interest rates have been 0.3-6% APY for the Compound USDC pool. 

The DAI pool has seen interest rates between 0.3-12% APY. 

Synthetix


Synthetix is a decentralized protocol built on the Ethereum network.

The protocol allows for the trading of Synthetic assets. These synthetic assets are collateralized by the Synthetix Network Token (SNX).

This pooled collateral model allows investors to perform trades between synthetic assets using the smart contract. Synthetix helps to solve liquidity and slippage issues commonly experienced by decentralized exchange platforms.

Synthetix currently supports cryptocurrencies, synthetic fiat currencies and synthetic commodities. 

You can earn passive income through Synthetix by staking Synthetix tokens (SNX). For staking, you receive a portion of the fees generated from the use of the Synthetix platform. Users are rewarded based on their staking contribution to the network. 

How to Stake SNX

If you want to earn passive income by staking SNX, a few steps are required.

  • Buy SNX on any exchange and add it to a Web3-Wallet
  • Mintr, Synthetix’s proprietary portal interface for embossing and managing synths.
  • Connect your web3 wallet to Mintr (Synthetix’s interface for managing synths).
  • Select the type of Synth you want to mint.
  • Mint some synths
  • Confirm the transaction in your wallet.
  • After that, your SNX tokens will be clocked automatically.
  • You will receive a share of the platform’s fees based on your contribution of SNX.

Note: There is a 750% collateralization rate when minting synths.

Active Income Earning with ETH


Manual trading


Manual trading is an example of making active income with Ethereum. Trading can be complicated, but being able to read the market can be incredibly profitable.

Day Trading

Day trading involves technical analysis and the use of chart interpretation to read the market. Profits will vary depending on how much money you are willing to invest and your attitude to risk.

Ethereum Day Trading

Swing Trading

Swing trading is a more long term trading method. Traders take advantage of swings in the market to make a profitable trade. For example, if the price of Ethereum suddenly dropped by 20%, swing traders would see this as an excellent opportunity to buy. After the market stabilizes and the cost of Ethereum has increased, they can sell their assets for a profit. You can also go to derivative exchanges like ByBit or FTX and short Ethereum and earn even if ETH price drops.

It’s important to note that cryptocurrency markets can be highly volatile; for anyone new to trading, it is recommended they use a practice account to better understand the market before trading with their own funds.

Mining


Cryptocurrency mining allows you to contribute the processing power of a computer to solve complex mathematical problems. Miners help keep the Ethereum network alive by supplying their computing power to solve those math problems; this process is called proof of work.

Miners are rewarded in Ether each time they complete a proof of work task.

To start mining Ethereum, you should first evaluate whether the process will be profitable. 

Electricity cost is the main factor to consider; anything mining rig that consumes below $0.12 per kilowatt-hour should be profitable.

These figures make it very difficult to profit in developed countries where electricity prices can be pretty high; however, mining can be a great source of income for anyone living in regions with low electricity prices. 

Mining Ethereum at home is possible through the use of one or many graphics processing units.

If you want to calculate how much you could earn through Ethereum mining, we recommend checking out the calculator at Miningbenchmark.net.

Conclusion – Ethereum passive income


To summarize, since its launch back in 2015, Ethereum has seen a sharp rise in value and the outlook for its future is excellent. Many investors are simply holding Ethereum without knowing that they can make these funds work for them through lending platforms.

The easiest way to make income with Ethereum is through Centralized lending platforms such as BlockFi; investors can make up to 10% interest yearly.

Other decentralized lending options are available, allowing you to earn interest by contributing your assets to a liquidity pool or staking. While these platforms are more transparent, interest rates tend to be lower and change a lot.

For anyone looking for active income sources, trading may be a good option but requires a lot of training; the use of practice accounts allow aspiring traders to research the market and test trading strategies without risking any of their capital.

Mining involves using the computational power of a mining rig to complete proof of work tasks. It can be a good source of income for anyone who lives in a country where the cost of energy is very low. Mining is more difficult for users in countries with a high energy cost and will take a long time to see any return on investment. 

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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Torsten Hartmann

Torsten Hartmann has been an editor in the CaptainAltcoin team since August 2017. He holds a degree in politics and economics. He gained professional experience as a PR for a local political party before moving to journalism. Since 2017, he has pivoted his career towards blockchain technology, with principal interest in applications of blockchain technology in politics, business and society.

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