Hi, crypto enthusiasts!
In this lesson, we will start learning how to earn money with crypto. That is, not only using them for payments, but also for investments, active and passive income.
After this lesson, you will learn:
- Is it profitable to simply hold cryptocurrencies?
- What are ICOs, IDOs
- What is mining and what is staking
- What are the types of trading and which type suits you best
So what are the ways to earn with cryptocurrencies?
First — Holding, or HODL, from the English word «hold» — to hold. This means holding the cryptocurrency on your wallet and waiting for its price to increase to sell it at a profit.
Second — Investments — here, you buy new cryptoc at a more favorable price, while they are not yet freely available on the market, to sell them later at a higher price.
The third method is to create or mine new coins, such as Bitcoin, through mining.
This method is quite expensive, quite compleсated to execute, and requires technical knowledge and skills.
Fourth — staking and liquidity pools — different projects and exchanges pay us interest rates like banks for storing coins.
Next — Trading — traders know exactly when to buy and when to sell currency, for which they study the market and earn on the difference in exchange rates.
Automated trading is when robots or automated systems themselves buy or sell and earn on the difference in exchange rates, making decisions based on a strategy developed by a trader.
And the final method — Airdrops — literally translated — Airdrop is an air drop — someone just gives away coins from the air — not quite for free, but for performing simple tasks. This means that cryptocurrencies can be obtained for free, and a whole next lesson will be dedicated to this.
And now, in details about each method.
Holding cryptocurrency is the act of buying cryptocurrency and usually storing it in a cold wallet with the plan to sell it at a more profitable price in the future.
For example, a man could have bought 1 bitcoin in 2017 for $6,000 and sold it in 2021 for $60,000, so he had the patience and did not lose the seed phrase for his wallet.
The risk is minimal, patience and psychological resilience are necessary, and the returns vary.
Investing in new projects is the highest-risk type of investment but also the most profitable. It is possible to make 1,000% returns in a year, if you choose the right project.
In such cases, the investment should be made during the token sale, and the name of the token sale changes depending on how it is sold.
A token sale (selling tokens) on the project’s platform is called an ICO (initial coin offering). The project uses this tool to raise money and, in return, gives tokens and promises that they will increase in value. Often, these tokens can be used to pay for the project’s products.
The ICO boom was in 2017, and while this method is still used, it is not as common. It is a risky investment type since the project itself is the only guarantor, and it is unclear when the tokens will start trading on an exchange.
A token sale on a centralized exchange is called an IEO (initial exchange offering), where the exchange is the guarantor and it carefully selects which project to allow to place the token sale on its platform, and risking its reputation.
In an IEO, the token immediately begins trading on the exchange, so the investor does not have to wait long to sell their purchased tokens.
A token sale on a decentralized exchange, where anyone can add their token to trade, is called an IDO (initial DEX offering). Here, the exchange is also the guarantor, and the token is instantly traded on the exchange.
Additionally, besides exchanges, there are other platforms for IDOs, which also act as guarantors of project reliability. This is the most popular type of investment attraction today, and it is quite simple and accessible to everyone.
We will talk more about the types of exchanges in lesson number 8.
Each of you has definitely heard the word mining — it is prohibited or permitted in some countries, and it seems that many people earn a lot of money from it.
Mining has a meaning of resource extraction. For example, gold mining will also be called mining. But in our presentation we have digital gold — where cryptocurrencies are extracted.
And a computer is used for mining, which must solve encryption tasks to get its share of bitcoins.
I will try to explain using the example of bitcoin and gold.
The amount of bitcoins, like gold in the bowels of the earth, is strictly limited.
During the gold rush era in the United States, gold was on the surface, it was enough to take a pickaxe in hand and you could get yourself a lot of nuggets. Today, deposits are located deep underground, and to extract them, you need to use large drilling rigs that cost billions and can only be afforded by corporations.
The same goes for bitcoin, previously, a simple computer was needed to mine bitcoins, but today the difficulty of solving tasks has become so high that expensive and very powerful equipment is required. At the same time, you still need to calculate whether it will be profitable to buy this equipment, whether it will pay off at the current bitcoin exchange rate. The result is rather complecated and often unpredictable.
Miners provide power to the bitcoin blockchain with their actions and receive rewards for it.
A tool that is often compared to mining, but without equipment, is staking — receiving coins as a reward for storing them.
Staking helps a project increase the value of its coin — those who stake promise not to spend their coins and confirm this with a smart contract — in return, the project pays them interest, like a bank. The fewer coins are in circulation, the less is supply of coins on the market, and the higher is the price.
Projects allocate large sums for rewards for staking — this is a popular and fairly simple way to earn. The risk here is that while I stake the coin, the coin price may drop significantly and the value of the earned and staked coins may be lost.
Here is an example of a staking platform.
I will tell you more about staking and the mentioned liquidity pools in Lesson 14.
Now, trading — this is a type of activity that exchanges offer, active or not very active buying and selling of crypto. Exchanges receive a commission for the purchase and sale of assets, so they create convenient platforms for millions and tens of millions of people to buy and sell different cryptocurrencies to each other.
The trader’s task is to earn on the difference of the exchange rates. The exchange’s job is to make this process simple and safe. The tool is risky, but with the necessary skills, it can become the main source of income.
Many traders take money under management and trade your funds on their accounts — this is perhaps the riskiest way of passive income. Trust in the trader must be 100%.
Automated trading is also a way of passive income, but on your accounts. It is also a risky way to earn, but at the same time, the easiest. The robot makes trades for you on the exchange, and you only follow the trades and balance changes.
Strategies for such robots can be either fully automated, without human involvement, or copy trades of traders, but with a special algorithm.
It is very important that the robots you use have a good risk management system and provide open statistics for all past and current trades.
We will also talk about robots and copy trading soon, in Lessons 11 and 12, I will show how it works on our platform.
And the least risky way of investing is Airdrop — a project for marketing purposes gives away its tokens for free, you receive them in the hope that they will increase in price, and in return, you make the project more popular — by subscribing to their social networks and registering in their system.
But it is better for me to tell you how to get free coins in the next lesson and even better to show you.
There are many new terms in this lesson, take them and apply them.
I will be happy to earn a few free coins with you in the next Lesson 7.
It was Alina, see you.