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There are many blockchain projects that offer rewards for keeping a certain amount of their cryptocurrencies or tokens on their resources. This process is called staking. The project pays you a certain amount of its cryptocurrencies, depending on the amount of your investment. Like any investment of money, it has its own risks.
Initially, the term “dividend” refers to the distribution of a portion of a company’s earnings, which the board of directors decided and paid to a group of its shareholders. Traditional dividends can be issued in cash payments, shares of stock, or other properties.
Crypto dividends also use the similar concept of profit-sharing but it comes from various cryptocurrency companies. Know that this is not the same as airdrops, which dilute total supply, resulting in dilution of everyone’s holdings.
There are a few methods to earn dividends in the crypto world by holding a cryptocurrency – sometimes by simply holding the crypto passively and sometimes for taking specific actions. It’s crucial to acknowledge that the requirements may vary from one currency to another because each coin has its own way of operating and has its own terms and conditions. As a result, payouts can vary, sometimes paid daily or monthly. Based on the trading volume of the exchange, the crypto dividend is a flexible passive income.
Firstly, you can earn dividends by staking your coins
. This means you should hold Proof-of-Stake (PoS) coins in a particular wallet or a supported exchange. This method is often seen as an alternative to crypto mining.
Coin holders can “stake” their coins (basically lock the coins in an open wallet) for a chance to be randomly selected to make new blocks in the blockchain. In return, these coin holders can earn a reward based on several factors including the number of coins owned, how long they’ve been staked in the wallet, and the total value of the cryptocurrency in question. As many popular cryptos have migrated from a mining system to a PoS system, this practice is getting more common these days.