Top 5 Crypto Passive Income Strategies in 2023

We’ll show you the best crypto passive income strategies that you can use today to start growing your crypto stash without putting in any additional work. 
Many crypto investors choose to pursue passive income in crypto because actively trading cryptocurrencies is very difficult due to the high volatility displayed by many crypto assets. While crypto passive income strategies offer much smaller potential returns than what can be achieved through trading, they’re also less risky. 
You should keep in mind that any opportunity to make a profit carries a certain amount of risk. The same is true for passive crypto income strategies. Even though they’re generally less risky than active trading strategies, you can still lose money when trying to earn passively. We’ll outline the main risk with each crypto passive income we highlight.
How to make passive income with crypto?
Without further ado, here are the 5 best crypto passive income strategies that you can use to grow your crypto holdings over time:

On-chain staking: Stake your cryptocurrency directly on the blockchain to help secure the network and earn rewards.
DeFi lending: Lend out your crypto using decentralized finance protocols such as Aave and Compound. Withdraw your coins at any time.
Staking through cryptocurrency exchanges: Cryptocurrency exchanges provide a more convenient way of staking cryptocurrency, although the returns are slightly lower and more trust is required.
Lending through cryptocurrency exchanges: Many cryptocurrency exchanges offer lending products where you can earn yield on your cryptocurrency holdings. Typically, you will be able to choose between flexible and fixed lending periods.
Holding Dai: The Dai decentralized stablecoin has a feature called the Dai Savings Rate that allows holders to earn a portion of the revenue collected by the Maker protocol.

Now that we know the basics, let’s explore each of these strategies in more detail.
1. On-chain staking

On-chain staking is a method of passively earning crypto that applies to cryptocurrencies that have a Proof-of-Stake consensus mechanism. Examples of such cryptocurrencies include:

When you’re staking on-chain, you’re temporarily locking up your coins to provide additional security to the network. In return, you’ll be receiving staking rewards.
Depending on the blockchain, you’ll either be running your own validator or delegating your coins to another validator. If you’re delegating, you need to do your research on the validator you’re selecting, as poorly performing validators can incur penalties.
Some cryptocurrencies, most notably Ethereum, have steep requirements for stakers. In such cases, you can use liquid staking protocols such as Lido, which will allow you to stake a smaller amount of cryptocurrency even if you don’t have enough crypto to launch your own validator. 
If you’re interested in all the different ways you can stake Ethereum, make sure to check out our comprehensive overview of Ethereum staking.
The returns you will be earning will depend on the cryptocurrency you’re staking, as well as the staking method you choose. 
2. DeFi lending

Another way to make passive income with your cryptocurrency is to use decentralized lending protocols to lend out your crypto and earn interest. These protocols are entirely based on smart contracts on the blockchain, and they’re open for anyone to access.
There’s quite a few DeFi lending protocols on the market. In our opinion, the two most robust options are Aave and Compound. 
In most cases, you’ll earn the best yields with DeFi lending protocols while lending out stablecoins. However, the APY you’ll be earning can change rapidly depending on supply and demand in the market. 
The upside of DeFi lending is that DeFi protocols cut out middlemen and offer full transparency since all activity is permanently recorded on the blockchain. On the other hand, DeFi protocols can be vulnerable to smart contract exploits, and can be slightly more difficult to use than centralized crypto lending platforms.  
3. Staking on cryptocurrency exchanges

Staking cryptocurrency directly through a wallet can be a little bit intimidating or inconvenient for some users. For those that prefer to keep their coins on cryptocurrency exchanges, there’s thankfully also plenty of exchanges that offer staking services.
For example, exchanges like Binance, Coinbase and Kraken give users the option to stake ETH on their behalf. If you’re looking for a detailed guide to staking Ethereum through Binance, we provide a comprehensive guide on the subject.
Stake Your Coins on Binance
This is a very convenient way of staking your coins, although you should keep in mind that your returns will be a bit lower since the exchange will take a cut of the staking rewards in exchange for providing the staking service.
Another downside of staking on crypto exchanges is that you need to trust the exchange to handle your crypto responsibly.
4. Lending on crypto exchanges

In addition to providing staking services, many crypto exchanges also allow their users to lend out their crypto and earn interest in return. In contrast to staking, where the exchange uses customers’ coins to stake on the blockchain, funds deposited in lending products can be used in a variety of ways, for example in
You’ll typically find that exchanges offer flexible and fixed lending products. Flexible products have lower yield, but their advantage is that you can withdraw your coins at any time and still collect the rewards. Meanwhile, if you’re using a fixed lending product, you’ll need to have your coins deposited for a specified period of time if you want to earn any rewards.
As a general rule, when using these products, you’ll be earning a higher yield if you commit your coins for a longer period of time. 
If you’re interested in earning crypto yield on Binance, we provide an article explaining how the Binance Simple Earn platform works.
5. Holding Dai (earn through the Dai Savings Rate)

Dai is a decentralized stablecoin that has been going strong since 2017. The stablecoin is maintained by MakerDAO and represents one of the most impressive achievements in decentralized finance.
If you hold Dai, you can use it to earn yield directly through the Maker protocol. This feature is called the Dai Savings Rate, or DSR. The DSR module makes it possible for holders of Dai to receive a portion of the revenue generated by the protocol.
You can use an app such as to deposit your Dai into the DSR and earn yield passively. At the time of making this article, the Dai savings rate is 3.49%, which is quite solid for an asset that’s pegged to the US dollar. 
The bottom line
If you’re planning to invest in cryptocurrency for the long term, it’s certainly worth considering allocating a portion of your crypto portfolio into passive income strategies. On-chain staking is one of the safest methods of earning crypto, although it requires you to ensure that your cryptocurrency is stored safely.   
Before we wrap up, please keep in mind that when you’re staking or otherwise earning yield on volatile assets such as ETH or ADA, the overall dollar value of your holdings could drop even though your stack of coins is growing passively. 
When calculating how much you can expect to earn from staking, you need to take the volatility of the cryptocurrency you’re staking into account. If you want more predictable returns, consider using passive income products based on stablecoins instead.
In addition, you should be extremely careful if you encounter any crypto passive income platforms or services that advertise very high yields and “guaranteed” profits, as they are usually scams. Remember: if it sounds too good to be true, it probably is.

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