In 2008 Bitcoin was launched as a medium of exchange. But within the next few years, the crypto industry changed in such a way that the original purpose of Bitcoin faded, and it became an investment vehicle and a store of value. People started adopting cryptocurrency considering it digital gold. The crypto millionaires’ stories also attracted the attention of thousands looking for investments. Considering this increasing trend, the crypto industry focused on providing other investment opportunities. Today, in 2022, there are many options to invest in this industry such as crypto lending, staking, mining, etc.
Still, as the crypto industry is rapidly changing, there arises a question: are any of these investment options worth the hassle, for example, investment in crypto lending for interest. We will try to find it out through this blog.
Investment options in the crypto industry
We will discuss a few crypto investment opportunities and then will figure out which one is worth the hassle.
Crypto lending is a method of earning interest on idle assets by lending out to borrowers through a crypto lending platform. The interest payment can be up to 17%. Crypto lending requires the borrower to deposit collateral for taking the loan. But, actually when exploring how crypto lending works and whether it is worth considering as a way to earn passive income is very essential, as it will help you generate profit with this. Among passive investing strategies, the stock market, especially crypto lending is considered to be one of the easiest ways to earn passive income. This type of passive income is driven by capital gains or dividends. Also known as peer-to-peer lending, crypto lending has fewer barriers to entry than other types of investments and low-interest rates than many personal loans and credit cards, as they are secured by an asset.
Investment in crypto lending
Investors deposit their assets on the platform to make them available for lending. The platform takes care of the rest of the process and investors start receiving interest payments on a weekly or monthly basis, as agreed.
Almost every cryptocurrency can be used for crypto lending. Investors can take out their assets at any time. Several lending platforms do not have a minimum amount requirement for providing rewards.
The borrower must pay back the entire loan amount and interest to get back his collateral. Otherwise, in case of loan default, the platform will sell it to help investors cover their loss.
Crypto mining is one of the earliest methods of investing in the crypto industry. It is a process in which several computers compete to verify and add transactions to the blockchain ledger. The computer (miner) that wins the competition earns the right to add the transaction to the blockchain and in return it earns cryptocurrency.
Mining works for cryptocurrencies that use the proof-of-work method.
Investment in crypto mining
Crypto mining is rewarding. For example, specifically talking about Bitcoin mining, miners can earn 6.25 Bitcoins (during 2022-23) for successfully mining each block. But mining requires purchasing hundreds or thousands of dollars’ worth of mining equipment. This equipment then requires a huge amount of electricity, making crypto mining an expensive process, overall.
Moreover, there is no surety of returns on the investment because mining is a competition. If your equipment is competitive enough then you can earn otherwise it will be a complete loss.
Miners also have to pay tax on their profits.
Crypto staking is almost similar to crypto mining, as it is also a process of verifying cryptocurrency transactions. It involves crypto holders committing their assets to support a blockchain network to confirm transactions. In return, investors can earn passive income, on their staked coins which can be up to 15%.
Investment in crypto staking
Crypto coins that work on the proof-of-stake (PoS) method can only be used for staking. Investors must lock up their assets for a specific period and they cannot take out (unstake) his assets during this period. During this period, he may miss several other lucrative opportunities.
It happens through a crypto staking pool where investors offer their coins for staking. Staking pools have a minimum amount requirement for staking, which can be very high. Bitcoin does not come under PoS coins.
However, in crypto staking coins remain in possession of investors, just putting them to work.
Which investment option is worth the hassle?
For crypto mining, you must have a huge investment. It involves your active involvement and returns are not guaranteed.
For crypto staking, you must have PoS based coins and you cannot take out and use your coins for other investment options any time, during the staking period.
For crypto lending, you do not need any equipment nor PoS coins are compulsory. It does not require your active involvement either. Interest rates are also attractive. You can take out your coins any time.
After comparing these investment options, it is clear, crypto lending is worth the hassle. Though the crypto industry is rapidly changing, these are some of the major investment options which may evolve but cannot disappear. Moreover, as the crypto industry is taking the traditional financial sector by storm, the trend of crypto loans will undoubtedly increase, sooner or later.