Newbie to Pro - How they deal with passive income and involved risks

Newbie to Pro - How they deal with passive income and involved risks

By lolobu | A life with crypto | 12 Jun 2021

Every investor's goal is to maximize on investments, beside the top-level decisions on which project has the best fundamentals and network effect to profit from the best chances of adoption there is another important factor to look at: passive income.  

 [Definitions on ways of passive income such as mining, stake, yield farming is listed at the end of this article]

Especially millennials being exposed early in their financial decision-making process with the opportunities blockchain technologies offer them investment opportunities right away. Similar to every new technology occurring at the horizon the elder is more resilient in the transition from the fiat investment strategies to cryptocurrency than the younger generations. The task for each project within the cryptoverse is to find their niche in offering best practice solutions to offer bridges into crypto investments. The spectrum of investor groups is wide. Below catagorization focuses on the risk taken and the required expertise to earn rewards.

Stake_Yield Farming comes with a risk


The undecided/clients are a group of investors who do like to be exposed to crypto but on a very low risk and self-involvement. This not only defines individuals but concerns also huge companies not willing to expose themselves to indeed more complicated ways of involvement from buy, store, secure, stake, yield and sell necessities required.  Instead of going into the rabbit hole to figure out the details on wallet types, best solutions of passive income etc. They like to use bridges into the fiat world such as ETFs, Exchange-traded funds which are similar in many ways to mutual funds. Those offerings self-expose them to passive income strategies to pass on to the investors. This might not the best outcome on passive income but a secure and easy way.  



The crypto newbies are willing to expose themselves to the cryptoverse and usually start by buying crypto on centralized exchanges. In the aftermath of the first trades their investments are kept in those more unsecure “hot wallets”. This is a very uncomplicated process on mayor exchanges such as Coinbase, Binance or Kucoin. After a token is purchased it is hold on a so-called hot wallet, the name itself presents you the disadvantage of having your investment not fully controlled as an exchange portfolio is connected to the internet and therefore vulnerable to online attacks leading to stolen funds. To store your tokens that way is indeed faster and makes it easier to trade or spend.

Some of those CEX (Centralized Exchanges) offer passive income oportunities by using their platform integrated “one click” solutions. Flexible strategies on which funds can be taken out immediately or fixed staking require to “stake” your tokens for a certain time span before receiving earned passive income. 

At this level of exposure to crypto Airdrops (see definition section) are often used to add some rewards to the portfolio. 



In contrast to the client a Crypto Newbie+ is willing to study and DYOR (Do Your Own Research). With knowledge comes power. Quickly the knowledge about the blockchain grows and thus also the urge to scoop out the advantages on self-governance. One of the first steps will be a decision on exposure to online wallets, the decision between having control due to private key governance or dependence. Moving your crypto from hot to cold opens several levels of security relating on how well you are owning your private keys. Still considered as Hot Wallet are Mobile Wallets like Edge and Trust Wallet or Hybrid Wallets like Blockchain and BTCPay. Those are still online but though server can be hacked you own your private keys. Owning the private key comes with a self chosen way, often a computer is used as hardware which has it’s own flaws of being exposed to hacks.   

With regards to passive income those mobile/hybrid wallets often offer much better choices in terms of diversity and yearly interests. Some wallets such as TrustWallet use dAPPS to connect to DEX yield farming opportunities etc.  

A step further to security and self-governance are Hardware Wallets. Those Cold Wallets such as Ledger NanoX offer passive income solution due to their own software integrated stake portals (LedgerLive) or can be used to connect into passive income structures with online wallets Metamask, Polkadot.JS etc. to secure the token access while deploying best passive income solutions offered for the cryptocurrency. 

Having some further knowledge about the cryptoverse might evoke thoughts research on mining (see definition section) to earn income which most won't follow though more and more projects offer nodes based on low hardware/software solutions even on laptops. Bottom line on mining is the use/benefit calculation on hardware and electricity.



The connoisseur's goal is self-governance and to follow a decentralised view on finance. Not only own your private keys to your finances but also searching for good oportunities of passive income. In this advanced stage investments are made in light of passive income oportunities. The whitepaper of an project is studied, the roadmap is inspected for developments on yield farming, DAO governance, partnerships etc. 

At this stage you will have a long list of duties to secure and maintain your portfolio on where and how your tokens are stored, staked, farm yield, being borrowed as collecteral, lend etc. This level of complexity requires a good sence for organisation. Also, the amounts of investments are usually much higher, more risks are taken to earn passive income to compare with easier stake options such as on a centralised exchange/ dapp.

Early birds benefit from high APYs as liquidity pools are low. This also inclines higher risks, most often on Beta platform and though certified solution might have flaws in the scrypt threatening the investment.



The rabbit hole is its living place. The maximizer are the definition of DYOR and usually aware of the newest developments in DeFi to earn passive income. Taking risks is inevitable. A complicated structure of passive income also is daily companion.

A good example of such inter layered ecosystem is Terra (LUNA). To this new kind of liquid staking, those complex ways to use and re-use of different assets, forces me to step away from the terminology passive income  but to use "earning interests" instead as it requires a certain activity which right now is far away from being passively involved.  

E.g the Anchor Protocol on Terra. To generate yield an investor bonds the Terra token LUNA with a validator and receives bLuna to forge staking rewards that are associated with the original Luna. Now an investor could provide this bLuna as collateral and borrow against this collateral on the risk to being liquidated. In this example the underlying loan pays you ANC (Anchor Protocol Token) for the liquidity to a pool. At this stage you can take your stablecoin, in this example UST, and invest in another DeFi oportunity or deposit it back to the protocol and earn yield (those annual percentage yields are aimed to be very hugh and stable to attract big player "clients" not getting those rewards in the fiat world). Using your rewards to buy more LUNA and restart this circle is a rewards-perpetuum mobile. 

The crypto future will focus on simplifying the UI (Userinterface). 

Anchor Protocol is rated as very easy-to-use UI for starters without intense explanation of Borrow/Lending required.Anyways, please DYOR if you opt to borrow/lend as you risk your underlying asset to be liquidated, at least read into the term "The loan-to-value (LTV)".  DeFi 2.0 aims to reduce those risk of impermanent loss. I will publish an article on DeFi 2.0,please search in my protfolio if interested.


Disclaimer: I am not a financial adviser. Investing involves risk, including risk of total loss.
If you like me to have a more detailed explanation on anything read in this article, comment below.





"Mining is the process of verifying transactions by grouping them and adding them to the network’s permanent digital record, or blockchain. It is executed by individuals, called miners, who use their computing resources to perform the computations necessary to maintain and secure the credibility of the network. Mining is an incentivized process as miners are rewarded in the blockchain’s native currency for contributing to the processing power of the network."



"Staking is defined as ‘locking up’ a certain amount of cryptocurrency in a digital wallet to be used as collateral. Staking is a requirement in proof of stake consensus blockchains, whereby an individual is eligible to verify, process, and record transactions based on the amount of cryptocurrency they have staked."



"Yield farming is the act of putting your money into decentralized finance (DeFi) applications as a liquid provider to earn interest, fees, or other rewards. DeFi applications offer services that you would typically find in a bank and other financial institutions. These services include savings with interest, credit, and currency exchange."



"An airdrop is an event where a blockchain project freely distributes their coins or tokens to the public. The conditions for receiving an airdrop vary; however, in most cases, individuals must meet specific criteria to be eligible."


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5years exposure to the cryptoverse. IT professional and ambassador for blockchain projects. Recently joined the revolutionary Multi Cross Chain Swap Protocol #KwikSwap Layer 2 Scaling powered by Ethereum, Polkadot, Plasm, Reef Chain, BSC & Acala Network

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