How to Make Money With Cryptocurrency
Updated April 19, 2020
There are several common ways to make money with cryptocurrency. Although it may seem basic, you would be surprised how people with years of cryptocurrency experience give bad advice. For example, see the Case Studies related to our Mining GPU Selector to learn how shooting from the hip can cost you.
Trading is a viable way to make money with cryptocurrency. As with most any other investment that appreciates, the idea is to obtain cryptocurrency at a lower value and then dispose of it at a higher value. See our Cryptocurrency Uses page for more information on obtaining and disposing of cryptocurrency.
Another way to make money with cryptocurrency is by mining. Mining is the confirmation of transactions in exchange for the transaction fee as well as a "reward." Mining is therefore vital to the proof of work (PoW) currencies because without it no transactions could be performed. The transaction fee is typically set by the sender and dictates how quickly the transaction will be confirmed. Miners are motivated to confirm transactions with higher transaction fees, so providing a higher transaction fee will usually expedite transaction confirmation. On the other hand, the reward is a predefined amount of cryptocurrency added to the total supply of the cryptocurrency. It is given on a per-block basis, where each block usually contains many transactions. After confirmation, the block of confirmed transactions is added to the blockchain.
Mining cryptocurrency can occur in three ways: solo mining; pool mining; and cloud mining. At a high level, cloud mining involves using hardware owned by others to mine, while solo and pool mining involve using your own hardware (referred to as a "mining rig").
In general, the party that owns the mining hardware receives the transaction fee and reward. This is the case with solo mining and cloud mining. With cloud mining, a portion of the proceeds are passed on to the "cloud miner" who funds the mining. However, with pool mining, the transaction fee and reward go to the party organizing the pool who then apportions a percentage to the actual miners.
A third way to make money with cryptocurrency is through "staking." Staking can be performed for Proof of Stake (PoS) cryptocurrencies only. This procedure works differently for each cryptocurrency, but in general it requires at least obtaining currency (the "stake") and possibly holding it for a certain amount of time. The procedure then varies depending on whether or not you use a staking provider.
In the last few years, many staking providers have come about allowing you to earn money through staking without running a node. Staking Rewards lists various providers grouped into 3 categories: providers, exchanges, and wallets. For example, if you already have an account at Binance or Binance.US, you can stake coins there by simply holding them in your account - no investment in hardware to run a node is required. Staking Rewards also allows you to see the staking fee and staking reward for each cryptocurrency.
If a staking provider is not used, you can then run a node and earn rewards by creating blocks (e.g., by validating transactions and assembling them in a block to be added to the blockchain) and/or by performing other operations related to the blockchain or other aspects of the cryptocurrency. The computing power required for staking is very low compared to mining as there is no "proof of work" in PoS cryptocurrencies. That said, the requirements vary and you should research them before deciding to invest and/or run a node.
The terminology for nodes and the procedure to earn rewards by running the node vary by cryptocurrency, but the concepts are pretty much the same. Below is information for some of the more common cryptocurrencies that allow staking and require you to run a node.