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Author Topic: Earning More with Cryptocurrency  (Read 1290 times)

Deozaan

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Earning More with Cryptocurrency
« on: March 04, 2021, 01:05 PM »
I'm posting this in response to some interest shown by others on this site when I briefly mentioned in another thread I was using a Raspberry Pi to earn a little bit of cryptocurrency. The relevant bits of that thread are quoted here:

It's not making me rich, but it's earning me a decent amount of money simply for keeping a device running/connected that I'm already leaving running/connected 24/7 anyway as my personal media server and whatnot.

You buried the lede. What is that, and how does it work? Maybe on a new thread. That sounds interesting...

Considering I have two RasPi 4B's on 24/7 running Docker services, (and spare 2B, 3B, & 3B+), I'm also interested in this. :P

Before I get into the details, I need to make some clarifications and disclaimers:

First of all, I should clarify that my definition of "a decent amount of money" is really not a lot. There's been a recent boom in cryptocurrency starting around the new year, and even at the recent all-time highs I've only gained maybe up to $250 value over the past month from what I'm doing with my RasPi. Usually it's significantly lower than that. Nothing I'll mention in this post should be taken as a way to get rich quick. It's more about slowly increasing your wealth over the long term. Like gaining interest in some kind of savings account.

I also need to admit that I very much oversimplified what I'm doing with the RasPi. It's not as simple as buying $50-100 worth of RasPi hardware/accessories, installing some software, and then running it and forgetting all about it while raking in the cash.

And finally, the big disclaimer: This is not financial advice. Do your own research. Don't "invest" more than you can afford to lose. Et cetera.

Okay, let's get to the fun stuff.

Earn More Cryptocurrency Through Staking

Have you heard of staking (proof of stake, or PoS)? It's like mining but without all the crazy electricity demands. It has an initial financial demand instead. It feels more similar to earning interest on money you already have.

In contrast to traditional proof of work (PoW) mining blockchains, which have everybody in a fierce competition frantically hashing as quickly as possible to be the first person to mine a block and propagate it to the network, PoS blockchains assign people their turns to mine in a raffle-like manner based on how much of the coin has been staked. Everyone knows their turn well in advance of when it actually needs to be done, so you keep your "mining" hardware connected to the chain (or at least connect it early enough that it can catch up to the current state of the chain), wait your turn, and then it mines a block when it's your turn. It's all very orderly and relatively cordial. It's more of a cooperation than a competition. There's no need to constantly be maxing out your CPU/GPU/ASIC 24/7 because you know in advance exactly when it will be your turn to produce a block. This means that the hardware requirements are (or can be) much lower in PoS blockchains than what is typically required for PoW blockchains. Some chains can even have low enough requirements that blocks can be produced with a Raspberry Pi.

Tezos

I've been using my RasPi with the Tezos blockchain (the coins are called tez, with XTZ as the symbol). Tezos is a lot like Ethereum in terms of functionality, but it has a built-in governance model, which basically means that upgrades (or changes) to the protocol are voted on and passed by the "community" on the blockchain itself. The purpose of that is to avoid instances of conflict and division such as the schism(s) and several resulting forks of Bitcoin (e.g. Bitcoin Cash) due to disagreements on what the purpose and future of Bitcoin ought to be.

Mining in Tezos is called baking, and as I said earlier, there is an initial up-front financial cost to become a baker. The baker has to lock up some collateral, essentially saying "I promise I won't do anything wrong, and if I do, I will forfeit this collateral." The collateral is unlocked, along with the baking rewards, about 2 weeks later. To register as a baker in Tezos, you need to have a minimum of 8,000 tez in your account or delegated to your account. A baker should earn somewhere in the 5-8% range (annually) from block rewards. If we use the lower bound of 5% of 8,000 tez then that's 400 tez in a year, or about $125 per month at the current price of about $3.80 for 1 tez.

Speaking of current prices, 8,000 tez costs about $30,000 USD right now. That obviously is (or can be) prohibitively expensive for many people wanting to become bakers or earn "interest" on their cryptocurrency. But fear not! You may have noticed that I mentioned the possibility of having funds delegated to your account. This means that if you can convince other people to delegate their funds to your account, you can start baking even if you don't personally own 8,000 tez. What this also means is that you can delegate your funds to a baker and have them bake on your behalf. Bakers typically charge a fee of somewhere in the range of 5-20% (with 10-15% seeming to be most common). Or in other words, if your delegated funds earned a total of 50 tez, a baker with a 10% fee would keep 5 and send you 45.

A few important points about Tezos: Funds you delegate to a baker are still in your possession with your private key. They can't be seized, stolen, or lost by the baker. You are essentially delegating the "rights" of your coins for use in baking and on-chain governance (voting). But you still maintain full ownership of the coins and can change your delegate at any time. Additionally, Tezos uses a Liquid Proof of Stake protocol, which means that delegated funds are never locked up. You can spend or transfer them at any time. Only the baker's personal funds are locked up (and potentially forfeited) during the baking process. But the baker is also not required by the protocol to send you any part of the rewards earned. From the point of view of the protocol, the baker takes on all the risk and therefore earns all of the reward. So it's up to you to make sure your baker is paying you according to your agreement with them, and if not, delegate to another baker who will honor their agreements. The vast majority of bakers are trustworthy but of course you'll always find a few people scamming others when there is the opportunity to do so.

I initially bought a RasPi 3B+ for baking on Tezos but at the time there was no official 64-bit OS for it (due to it only having 1 GB of RAM) and shortly thereafter some Tezos upgrades required 64-bit support so I couldn't use it anymore. But with the release of the RasPi model 4 with more RAM came official support for a 64-bit OS, and Tezos definitely uses a lot of RAM anyway, so I'd recommend a 4GB+ RasPi at a minimum (I have the 8GB model).

All of this has been very specific to Tezos because that's what I'm using my Raspberry Pi for. But there are other PoS blockchains out there, such as Cardano (ADA), which also allow you to earn more through staking your funds to another block producer, though I'm not familiar with Cardano's requirements (in terms of minimum stake or hardware) for becoming a block producer yourself. And if you weren't aware, Ethereum also has plans to transition from using PoW to using a PoS algorithm soon™.

In summary:

  • If you use a PoS cryptocurrency, look into staking your coins to increase your holdings!
  • If you have enough coins to become a block producer, and you have the hardware and technical knowledge/experience, look into doing that so you can keep 100% of the reward rather than paying someone else a fee to do it for you.

The above is nice and all, but there's always the risk that the cryptocurrency could drastically go down in value. It's no use to have 5% more of a cryptocurrency that has dropped 95% in value! So now I'm going to talk about something I've recently discovered that has the possibility of much lower risk.

Earn More Cryptocurrency by Providing Liquidity

At the beginning of the year, I looked at my savings account with my bank and noticed that my interest rate had fallen (again). When I first created the account about 10-15 years ago, my interest rate was above 3%. Now it's around 0.3%. So pathetic.

I started looking into cryptocurrency-related alternatives and discovered something really amazing. There are cryptocurrency apps/services that are offering 3-12% annual interest on various cryptos, depending on a variety of factors. But what stood out to me was that the cryptos with the highest interest rate also tend to be the "safer" stablecoins. One such stablecoin is USD Coin (USDC) which, as its name suggests, has its value tied to the dollar. In other words, there's no volatility in USDC's price. You can always buy and sell 1 USDC for $1 USD (on Coinbase).

I quickly realized that meant I could be earning over 10% APY on the money in my savings account rather than the 0.3% my bank was paying me. I may have done the math wrong, but I calculated that I could earn as much interest in a single month using one of these apps that my bank would pay me over the course of three years!

Here's how it works:

  • You provide liquidity to the service by depositing some funds to your account.
  • The service makes fully collateralized loans to others. (I'm no financial expert, but this seems like a virtually risk-free loan to me.)
  • Eventually the loan is repaid, with interest.
  • The service shares a significant portion of that interest with you.

This sounds very much like the traditional fiat banking system, with two exceptions: Banks tend to engage in risky lending because they know they will be bailed out if anything catastrophic happens to them. Also, banks are much more stingy and share very little of the profit with you, the liquidity provider.

Celsius Network

I've been using the Celsius Network to earn 10.51% APY on USDC. They make payments every Monday. I've earned over half as much in 3 weeks using Celsius as I earned from my bank in all of 2020, even though I had 2-3 times as much money in my savings account than what I've put into Celsius. It's nice! I'm not getting rich quick, but at least I'm earning something! And they have options for non-USA residents to earn even higher interest rates.

If this interests you enough to sign up, you can also create an account using my referral link and we'll both gain $30 worth of BTC after you make your first transfer of $200 or more. https://celsiusnetwork.app.link/1176188774

And after you've signed up, you can enter the promo code WEB40 in the app to get another $40 worth of BTC after making a transfer of $200 or more (in a single transaction) and keeping it in the app for 30 days. Or in other words, if you use my referral link, you can get $70 worth of BTC.

Crypto.com

Crypto.com (often abbreviated as CDC from "crypto dot com") has similar liquidity/interest features, though I find I prefer the rates on Celsius. But CDC also has a nifty pre-paid Visa card you can get which has some nice bonuses, such as earning 1-8% back as crypto, or even complete reimbursement (in crypto) for some purchases such as Spotify, Netflix, or even Amazon Prime subscriptions. If you use my referral code https://crypto.com/app/jzmj85npda then we'll both get $25 worth of cryptocurrency once you've met certain criteria, which I believe is to deposit about $400 worth of crypto into your account and stake it, which is incidentally also how you qualify for the first non-free tier of the Visa card bonuses.

I'm kind of a miser who doesn't like spending money (because money is usually tight) but I got the lowest non-free Visa card tier and have been kind of excited/happy when I spend money with it now, knowing that I'm earning a little back in a form (cryptocurrency) that may be worth much more in the future than it's worth now. But it's also such a small amount that if it goes down in value (even to nothing) then I'm not really any worse off than if I had just paid cash for things.

Conclusion

After interest was shown in what I use my RasPi for, I thought it would be a good opportunity to also share my recent discoveries of other ways to earn a little more cryptocurrency. I apologize for taking so long to write this after the initial interest was shown. I know that brevity is not one of my strengths, especially when talking about something like cryptocurrency, which has a lot of minor, but in my opinion important, technical details. That said, I've still chosen to leave some things out so that I'm not wasting time explaining every little thing if no one reading this is going to be interested in doing anything I talk about. If you have questions, ask, and I'll respond to the best of my knowledge and ability.
« Last Edit: March 17, 2021, 01:07 PM by Deozaan »

Tuxman

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Re: Earning More with Cryptocurrency
« Reply #1 on: March 04, 2021, 01:07 PM »
Buy stocks.  8)

tomos

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Re: Earning More with Cryptocurrency
« Reply #2 on: March 04, 2021, 03:00 PM »
Sounds interesting -- thanks for the in depth description deozaan.

Buy stocks.
I'm getting a huge amount of advertising for that lately (you getting paid here? :p)
Tom

Tuxman

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Re: Earning More with Cryptocurrency
« Reply #3 on: March 04, 2021, 03:01 PM »
I wish! I would post more!

Stoic Joker

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Re: Earning More with Cryptocurrency
« Reply #4 on: March 05, 2021, 05:42 AM »
Celsius NetworkI've been using the Celsius Network to earn 10.51% APY on USDC. They make payments every Monday. I've earned over half as much in 3 weeks using Celsius as I earned from my bank in all of 2020, even though I had 2-3 times as much money in my savings account than what I've put into Celsius. It's nice! I'm not getting rich quick, but at least I'm earning something! And they have options for non-USA residents to earn even higher interest rates.If this interests you enough to sign up, you can also create an account using my referral link and we'll both gain $30 worth of BTC after you make your first transfer of $200 or more. https://celsiusnetwo....app.link/1176188774And after you've signed up, you can enter the promo code WEB40 in the app to get another $40 worth of BTC after making a transfer of $200 or more (in a single transaction) and keeping it in the app for 30 days. Or in other words, if you use my referral link, you can get $70 worth of BTC.Crypto.comCrypto.com (often abbreviated as CDC from "crypto dot com") has similar liquidity/interest features, though I find I prefer the rates on Celsius. But CDC also has a nifty pre-paid Visa card you can get which has some nice bonuses, such as earning 1-8% back as crypto, or even complete reimbursement (in crypto) for some purchases such as Spotify, Netflix, or even Amazon Prime subscriptions. If you use my referral code https://crypto.com/app/jzmj85npda then we'll both get $25 worth of cryptocurrency once you've met certain criteria, which I believe is to deposit about $400 worth of crypto into your account and stake it, which is incidentally also how you qualify for the first non-free tier of the Visa card bonuses.I'm kind of a miser who doesn't like spending money (because money is usually tight) but I got the lowest non-free Visa card tier and have been kind of excited/happy when I spend money with it now, knowing that I'm earning a little back in a form (cryptocurrency) that may be worth much more in the future than it's worth now. But it's also such a small amount that if it goes down in value (even to nothing) then I'm not really any worse off than if I had just paid cash for things.

These two sound very doable as I've been thinking about this kind of thing for awhile now.

Dormouse

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Re: Earning More with Cryptocurrency
« Reply #5 on: March 05, 2021, 06:35 AM »
I'd point out that this modus operandi is characteristic of a Ponzi.

wraith808

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Re: Earning More with Cryptocurrency
« Reply #6 on: March 05, 2021, 07:42 AM »
I'd point out that this modus operandi is characteristic of a Ponzi.

This is not financial advice. Do your own research. Don't "invest" more than you can afford to lose. Et cetera.

Tuxman

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Re: Earning More with Cryptocurrency
« Reply #7 on: March 05, 2021, 08:52 AM »
The difference between stocks and crypto-something is that stocks are an investment and crypto-something is a fraud.

Enjoy.

wraith808

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Re: Earning More with Cryptocurrency
« Reply #8 on: March 05, 2021, 09:04 AM »
The difference between stocks and crypto-something is that stocks are an investment and crypto-something is a fraud.


Says Robinhood and Gamestop. Enjoy...

Tuxman

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Re: Earning More with Cryptocurrency
« Reply #9 on: March 05, 2021, 09:50 AM »
Never cared about either. That’s the difference between investors and hipsters.

wraith808

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Re: Earning More with Cryptocurrency
« Reply #10 on: March 05, 2021, 10:10 AM »
Never cared about either. That’s the difference between investors and hipsters.

Quite a bit of judgement there. I've never been the one to judge someone else's hustle...

Deozaan

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Re: Earning More with Cryptocurrency
« Reply #11 on: March 05, 2021, 01:08 PM »
I'd point out that this modus operandi is characteristic of a Ponzi.

I never got that feeling about Celsius. But I'd agree that there are some things about Crypto dot com that gave me that same feeling. Even so, for various reasons, including the fact that they actually are an exchange, are a regulated bank (or are partnered with one), and they are partnered with Visa for the cards, I chose to trust them with a small-ish amount of money.

In other words, it's not some mystery investment with impossibly amazing returns. They have legitimate methods of earning money as far as I can tell. Which says to me that even if the bonus perks and/or high interest rates aren't sustainable over the long term, all they have to do is stop giving the bonus perks and reduce the interest rates they pay out and they won't have ripped anybody off along the way. I think of it more like a "sign-on" bonus that companies often use to attract new customers.

That's how I see it. As stated previously, you are encouraged to do your own due diligence and decide for yourself. And if you happen to come across additional information that you feel puts out major red flags, please share it here so anyone reading this can have all the information they need to make the decision, and possibly save themselves from being scammed.

Dormouse

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Re: Earning More with Cryptocurrency
« Reply #12 on: March 05, 2021, 01:53 PM »
Trouble is that it can be very hard to see the difference between a ponzi and a legitimate business model. Most ponzis have legitimate connections. Ponzis always have a convincing story, and always look fine until they stop growing. There's always an incentive to bring new people in. Those who get aboard early enough can make money; it's the last in who carry the greatest risk.

Think about it:
complete reimbursement (in crypto) for some purchases such as Spotify, Netflix, or even Amazon Prime subscriptions.
where do you think the money for this actually comes from?

Deozaan

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Re: Earning More with Cryptocurrency
« Reply #13 on: March 05, 2021, 06:45 PM »
Think about it:
complete reimbursement (in crypto) for some purchases such as Spotify, Netflix, or even Amazon Prime subscriptions.
where do you think the money for this actually comes from?

What do you think cryptocurrency is? This is the logic I follow when I think about it:

They essentially minted a bunch of money out of thin air when they created billions of their own cryptocurrency tokens (CRO), which people thought were worth buying from them for about $0.02-$0.03 at the point of creation (according to CoinMarketCap). And the value people are willing to pay for those tokens has increased to around $0.15 in recent months. Even if they only reserved 1 billion CRO for themselves (I'm pretty sure they kept several times more than that), that's $150,000,000 at today's prices. That alone is a lot of money they can burn through to encourage users to adopt their platform.

Plus they charge fees on all transactions in their exchange. Plus they charge interest when loans are repaid, or take the entire collateral of people who don't maintain a high enough ratio of collateralization on their loans.

It's not uncommon for corporations to do things which incur an up-front, short term loss in an effort to increase adoption of long-term customers. Sony and Microsoft sell their video game consoles for less money than it costs to manufacture them. But they make up those losses by selling games over the next 5-10 years. Banks will often pay you $100 or offer some other kind of gift when you create a new account with them. Credit accounts will offer you 0% interest for the first 12 months when you create an account. Sometimes apartment complexes will give you your first month of rent for free. Your ISP may provide you with a discounted rate for the first year when you create an account. A webhost may occasionally offer highly discounted promotions where, e.g., you can pay for up to 3 years of hosting for 85% off. There are plenty of examples of this kind of behavior from legitimate companies who are not out to scam you. They have decided that they would be better served over the long term by having a larger customer base, so they come up with ways to increase adoption of their service.

It seems entirely plausible to me that a company such as Crypto dot com earns far more in fees on the thousands of daily transactions on their exchange and from repaid loans with the accompanying interest than it costs them to reimburse a $13 subscription fee to people who qualify for the credit cards, which requires you to "lock" away some money with them. That might sound suspicious, but there are plenty of other legitimate financial institutions which pay you to "lock" away some money with them. Certificate of Deposits (CDs), IRA accounts, Bonds, etc. You give them your money, which they use to make more money, with the promise that someday they will give you your money back plus a small portion of the profit they made while using your money.

There's a reason why services like Celsius and Crypto dot com are being called decentralized finance (DeFi). It's because they are bringing traditional banking and finance to the masses. Now virtually anyone can have access to banking. And now virtually anyone can act as a bank.

wraith808

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Re: Earning More with Cryptocurrency
« Reply #14 on: March 05, 2021, 08:33 PM »
Thanks for posting the info, Deo! It's a bit too much for me, but of course I said that about Bitcoin when Renegade was offering us free bitcoin to get a wallet. I wish I'd taken him up on it, now - LOL.

rjbull

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Re: Earning More with Cryptocurrency
« Reply #15 on: March 07, 2021, 02:56 PM »
Here's Private Eyew magazine's take on cryptocurrenies:

Private_Eye_cryptocurrency.jpgEarning More with Cryptocurrency

Target

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Re: Earning More with Cryptocurrency
« Reply #16 on: March 14, 2021, 05:35 PM »
and what appears to be a series of podcasts (note that I haven't listened to any of these yet so I can't vouch for their quality)

https://www.mofi.net/nfts-blockchain-powered-art-trading-cards-music-and-more/