The simple definition of cryptocurrency for beginners is digital money that exists exclusively in virtual space, meaning it does not have a physical form in coins or banknotes. Cryptocurrencies can be used to pay for goods and services online, to invest in, and to save funds (similar to bank deposits).
Cryptocurrency is unique as its issuance is not controlled by any government but is created by private individuals or companies. All data on transactions with virtual money is stored in a special platform – the blockchain.
Blockchain is a technology specifically designed for working with digital money. All information from this platform is distributed across the computers of network participants. The information is combined into a common chain of blocks.
Cryptocurrencies are divided into:
- Coins, i.e., money
- Tokens, i.e., digital assets
From a practical point of view, they are the same, but technically there is a difference between these concepts.
Cryptocurrencies are bought on crypto exchange platforms, for example, on Binance or HTX (Huobi). Digital coins can be stored both on these exchanges and in cryptocurrency wallets.
Cryptocurrency wallets are services that allow performing any operations with cryptocurrency.
How to earn on cryptocurrency without investments, or rather without significant investments, will be discussed below.
Ways of earning on cryptocurrency
There are two main ways to earn money with cryptocurrency:
- Trading is buying cryptocurrency at a lower price and selling it at a higher price.
- Mining cryptocurrency is creating digital coins and selling them.
Cryptocurrency can be traded in various ways, including trading, arbitrage, copy trading, holding, and participating in token selling and NFT auctions.
With trading, profits can be made due to changes in the prices of digital currencies. Traders purchase cryptocurrency and wait for it to appreciate by a few percent, then sell. Trading is the most common way to earn money with cryptocurrencies.
For instance, the price of Dogecoin changes every minute. You can buy and sell these coins several times a day. This way, you can earn income from each new transaction, which can be as much as 1% to 10% of all initially invested funds.
Holding, on the other hand, refers to long-term investments. In this method, investors buy cryptocurrency not for the short term but for several years ahead, counting on its price growth.
Holding can yield as much profit as trading, sometimes even more. Holding is more attractive than trading because it requires significantly less time.
If you're trying to profit from price increases, it's important to understand that not all cryptocurrencies grow. However, you can find a highly promising cryptocurrency on which you can earn a significant amount of money.
The most striking example is the price growth of Bitcoin. Since 2012, the price of the flagship cryptocurrency has soared by 625%. You can imagine how much investors who invested in this digital asset at the dawn of its appearance have earned.
Cryptocurrency arbitrage is essentially trading, but the difference is that cryptocurrency is bought on one exchange at a not-so-high price and then sold on another exchange at a higher price.
There always exist price differences between exchanges. To detect them, you can use special arbitrage scanners, such as Arbitrage Scanner, P2P.Army. For instance, the OKX exchange has its own arbitrage bot.
If the exchange is popular and assets are in demand, the price difference will be small, sometimes even a fraction of a percent.
A trading instrument is two assets that are exchanged for each other on an exchange platform. For example, it could be two cryptocurrencies or a cryptocurrency and fiat money (dollars or euros). In the trading instrument BTC/USD, dollars need to be exchanged to receive bitcoins, and vice versa.
If the trading instrument is not very popular and the exchange has lower activity, the difference in cryptocurrency prices can be quite substantial. Sometimes, the gain from one exchange (i.e., some 5-10 minutes) can reach 5 or even 10 dollars.
A portion of the profit from arbitrage will go towards paying the commission. Therefore, it's better to engage in arbitrage when you have at least $1,000 in your pocket. With such capital, the transaction fee will not be as noticeable.
Copy trading is another type of trading that involves copying the trades of a more experienced trader. It works like this: an experienced market participant registers as a lead trader (acting as an expert) and then begins trading.
Other market participants can subscribe to the lead trader, after which all their trading operations (cryptocurrency exchanges) begin to be copied into their trading accounts.
Copy trading as a way to earn is available on exchanges like Binance, Bybit, OKX, Bitget, BingX, etc. You can subscribe to verified strategies directly on these exchanges.
You can also use separate platforms, such as TraderWagon – a partner of the largest exchange Binance. On the platform, you can view traders' strategies and join them on Binance.
Another way to earn money in the crypto market is by participating in token sales. This means you buy virtual coins of a new blockchain startup before they become available to other market participants.
Token sales come in several forms:
- ICO, which stands for Initial Coin Offering. A startup releases and sells tokens that can later be used to pay for its services. The peak of ICOs occurred in 2017. Today this method is used much less, having been replaced by more contemporary methods like IEO and IDO.
- IEO stands for Initial Exchange Offering. The essence of this method is that a startup goes to a centralized exchange and sells tokens at a low price.
- IDO means Initial Decentralized Offering. Here, a startup raises funds on a decentralized exchange. The startup goes to the exchange almost simultaneously as it starts selling virtual coins.
The main goal of token sales is to buy cryptocurrencies at the lowest price so that later, as the startup develops successfully, they can be sold at a higher price.
Traders keep an eye on token sales both on startup websites and on how to make money on cryptocurrency without investment exchanges. There are also special platforms where you can find all the necessary information, with CoinList being one of the most popular.
How to earn money with cryptocurrency without investments? For example, by participating in NFT auctions. In this method, participants in the crypto world earn income from the sale of NFTs.
NFTs allow for the creation of a unique certificate, i.e., an electronic signature that is attached to a specific object in digital space. One of the most popular transformations of artwork into an NFT is the black and white stencil Morons (White) from 2007 by the famous street artist Banksy.
In early 2021, the blockchain company Injective Protocol purchased this painting from the Taglialatella Gallery for $95,000. The company burned the painting live on Twitter to create a virtual NFT asset. A couple of months later, this token was sold for 228.69 ETH, which at that time amounted to $400,000.
To earn money on NFT tokens, network participants first create and then sell their own NFTs, or they can resell those NFTs that are currently in high demand.
Mining, faucets, and airdrops
Cryptocurrency can be created, obtained, sold, and all these activities can be quite profitable. Mining is the most popular method of generating cryptocurrency. However, since it requires significant electricity consumption and thereby harms the environment, it is banned in many countries, such as China, Iceland, and Kosovo.
Besides mining, cryptocurrencies can also be acquired through "faucets" and airdrops.
Let's start with mining. This process involves creating new cryptocurrency using the power of specialized equipment. To create a new data block in the blockchain and record transaction information, a complex mathematical problem needs to be solved.
If your equipment solves this problem first, you receive a reward in the form of new coins and a certain transaction fee (this data is included in the new block).
Mining requires the use of expensive equipment - ASIC miners, rigs, and farms. Personal computers can also be used for mining, but they need to be powerful enough to perform complex mathematical solutions. This is not cost-effective as mining would not pay off in this case.
Not all cryptocurrencies can be mined, only those that operate on the Proof-of-work (PoW) principle. This principle involves a mechanism crucial for solving complex mathematical problems to verify and record transactions in the blockchain.
Cryptocurrencies like Bitcoin, Dogecoin, Litecoin, and Monero operate on PoW. Ethereum used to operate on this principle as well.
There's also the concept of "cloud mining," which means renting mining power. In this case, there's no need to buy equipment or pay for electricity. A special company that rents out its power takes care of these aspects.
For instance, on the Binance exchange, renting power costs a minimum of $5.76, while on the BeMine exchange, it's at least $36.85 per month.
It's important to understand that you can both make and easily lose money on mining and cloud mining. It often happens that the mined cryptocurrency is not enough to pay for the rented company's power. Or, the mined amount of cryptocurrency does not cover the costs of purchased equipment and electricity.
Faucets are websites that give away a certain cryptocurrency for specific actions. However, this type of work pays very little. Typically, you get paid from 1 to 5 satoshis for one action.
A satoshi is one hundred millionth of a Bitcoin. One satoshi is valued at 0.00000001 Bitcoin. So, faucets pay just a few cents for one action. It's impossible to earn an average monthly income in Russia through faucets.
If you're still interested in earning through cryptocurrencies in this way, you can find faucets on specialized websites like FreeBitcoin, Wedex, or Free-Doge. On the Free-Doge exchange, you need to enter a captcha to get a code, which is crucial for participating in the draw.
These draws happen almost every hour. Most codes pay just a couple of cents, but four people will get $3, two people - $30, and only one participant will receive all $300.
An airdrop is a campaign where a blockchain project (or a platform) gives away cryptocurrency for free, but only if certain conditions are met. For example, a participant may need to subscribe to the platform or make a transaction on it. This answers the question of "how to earn money with cryptocurrency without investments."
Such campaigns are conducted solely to popularize a trading platform and attract new investors.
If you're looking for airdrops, you should visit services like Airdrops.
Airdrops are not frequent, and to meet the conditions listed on the services, it's essential to have certain resources and often even cryptocurrency, so it's unlikely you'll be able to earn significant money this way.
Passive income from how to make money on cryptocurrency without investment
Cryptocurrencies are appealing for investment because you can invest just once and then regularly receive income. There are two types of investments:
- Lending
- Staking
Lending means investing cryptocurrency at a certain interest rate. It works like this: you purchase digital coins and then lend them to an exchange. The exchange earns on this cryptocurrency, and you receive a percentage in return. Each exchange has its own rate it's willing to pay the investor, typically not exceeding 5% annually.
You can lend money not only to exchanges but also to users. Besides, you can lend cryptocurrencies to lending platforms. However, we advise you to interact with crypto exchanges as it's much simpler. Exchanges are usually ready to pay more favorable interest rates, and more virtual money is available there.
Staking is the freezing of digital money necessary to support the operation of the blockchain. It works like this: you save virtual coins in a special account and receive interest payments for it. So, it's kind of a deposit. The more cryptocurrencies you freeze in your account, the more profit you'll make.
However, staking is not available with all cryptocurrencies. This savings method is only suitable for digital coins that operate on the Proof-of-Stake principle. Proof-of-Stake (often abbreviated as PoS) means that to add new blocks to the blockchain and to confirm transactions, it's necessary to own the network tokens and also to lock them for a certain period.
Cryptocurrencies like EOS, Tezos, Tron, and Cosmos operate on the PoS algorithm. On September 15, 2022, the Ethereum blockchain also switched to the PoS algorithm.
You can try staking on all crypto exchanges, but remember that each sets its own rates. For example, on the Binance exchange, you can start staking at 0.79% (and even higher) indefinitely. But you can also open staking for a fixed term: for 30, 60, 90, and 120 days.
How much can you earn from cryptocurrency?
The amount of money you can earn from cryptocurrency depends on the method of earning and the investments made. If you cannot earn a substantial amount from faucets, you can indeed generate income through arbitrage and especially trading, potentially up to USD 50,000 per month.
According to Coinbase surveys in 2022, 62% of investors profited from investing in cryptocurrency. Here are some illustrative examples: Alexey lives in Bali and earns through digital currency arbitrage. He has 2 million rubles in reserve. He calculated that he could make a 150% profit over one year on his available funds, thereby increasing his capital by 1.5 times. Once, when the price of tenge dropped sharply, Alexey managed to earn 200,000 rubles in just 4 hours.
In 2020, a trader earned $500,000 in just 30 minutes from a token sale. When BZRX cryptocurrency trading was launched on a crypto exchange, a network participant immediately attacked the coin's network, preventing other traders from buying it instantly. This trader quickly bought almost 2 million crypto units and later sold them at a high price.
You can earn significant capital with cryptocurrency. For instance, the price of one Bitcoin surged by 62.23% from January 1 to September 21, 2023. Thus, investing in Bitcoin at the beginning of this year could have increased your capital by half in less than a year.
However, when discussing income, it's always important to consider high risks. Cryptocurrencies are highly volatile, with their value changing by 10% or even 20% every minute. This volatility is due to most digital coins not being backed by anything, with their value depending solely on supply and demand. Therefore, investing in such virtual assets is extremely risky, as all invested funds can be easily lost.
Additionally, the cryptocurrency market is full of scammers, various pyramids, and hackers waiting to take your money. For instance, in the first half of 2023 alone, scammers stole cryptocurrencies worth $497.73 million.
You can start earning with cryptocurrency even with just 10 bucks in your pocket. It's always wise to start investing small amounts to avoid regret in case of a loss.
For a hypothetical 10 bucks, you can buy a fraction of a cryptocurrency. For example, on the Binance exchange, you can buy 0.00001 Bitcoin with this amount. However, Binance isn't the only option. You may buy a fraction of a coin on any crypto exchange.
Another good idea is to enable auto-investing, meaning you regularly purchase cryptocurrencies for certain amounts, such as $10 per month. Auto-investing can be enabled on exchanges like Binance, Bybit, and OKX.
Starting to invest in cryptocurrencies with significant capital, for example, $1 million, would be a blatantly bad idea. Investing large sums should only be considered after gaining experience and consistently earning a stable income from crypto investments.
How to start trading cryptocurrency
We've explored how to earn from cryptocurrency without significant investments. Now, let's discuss what needs to be done before starting to trade cryptocurrency.
First, you need to set up a cryptocurrency wallet. Second, it's important to choose a suitable cryptocurrency exchange. Then, you should develop a strategy.
A cryptocurrency wallet can be registered on sites like Trust Wallet and Metamask. These wallets are non-custodial and can be in the form of software on a personal computer, as applications on smartphones, or even as an online service. Custodial wallets mean that the information about the owner is stored with a custodian, i.e., a third party.
Choosing a crypto exchange can be challenging due to the plethora of options, each with its own set of advantages and disadvantages. The most popular exchanges among traders include Binance, Coinbase Exchange, and Kraken. When selecting an exchange, always pay attention to transaction fees, the available methods for depositing and withdrawing funds, and whether the exchange supports the earning method you prefer.
Having a strategy is crucial to avoid impulsive trades based on emotions. Your strategy should define which cryptocurrencies you will trade, when to enter these trades, and when to close them. For instance, you might decide to buy a predetermined volume of coins monthly, regardless of their price. Or, you might buy how to make money on cryptocurrency without investment when its value drops by 15% in a day. Alternatively, you might sell coins when they have appreciated by 10%.
An important rule in all this is to diversify all your investments. Diversification is a strategy where you spread your money across various trading assets. It's crucial to diversify everything - the coins you invest in, the services you use, and even the cryptocurrency wallets you hold. If you invest in only one coin, you risk losing all your funds if its value plummets. Similarly, if you keep all your money in a single wallet, you could lose your funds due to a hacker attack.
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