There are many ways to make an income from Solana. You could simply trade it, stake it or provide liquidity to a decentralized exchange. But does investing in Solana pay dividends?
Does Solana Pay Dividends: How To Invest In Solana?
Solana has a bit of a reputation, often considered one possible Ethereum killer. Many investors are attracted to Solana because of its immense potential, and there are several ways you can invest in it.
Staking
As Solana is a Proof of Stake (PoS) crypto, you earn rewards by staking your assets. But before that, you must entrust your Solana to a validator, who will reward you with interest gained on your staked SOL.
Staking boosts the blockchain’s security, helps combat censorship, and helps confirm the legitimacy of validators on the network. You earn a reward per the inflation rates, which vary with the number of transactions at any time.
At this writing, you can earn an Annual Percentage Yield of about 7% to 8% after validators deduct their fees. These rewards come at the end of epochs which mature every 2-3 days. Also, since staking Solana staking makes it compound, you can grow it over several years.
Liquidity Provision
Providing liquidity involves lending your SOL to a liquidity pool so other users can borrow it and pay interest in rewards.
You must fund the pool with two tokens with the same value before you complete your liquidity offer. Here’s a great example. Say you want to give out $260 to the SOL-RAY; you’ll need t deposit $130 of SOL and $130 of RAY.
As a liquidity provider, you earn a percentage of the transaction fees charged whenever participants in the pool use the SOL you lend.
Yield Farming
Like Staking, Yield farming rewards users on a blockchain network for securing crypto assets. It depends on the Automated Market Maker (AMM) algorithm to determine the amount of reward you receive for your contribution.
What’s So Good About Solana?
Solana comes with several advantages that attract users. Let’s look at some reasons that make Solana a good investment choice.
Large Market Capitalization
As of this article, Solana ranks 9th with a market capitalization of over $11 billion. If you’re a new Solana user, such a market cap assures you that Solana isn’t going away anytime soon. With increased market volatility, some cryptos with small market capitalization may be easily wiped out, but not Solana.
Fast Transactions and low fees
Most participants use the Solana blockchain because of its record speeds and almost negligible transaction fees. Solana transaction speeds encourage you to trade on the network and still enjoy instant settlement.
If you’re interested in learning more about Solana’s speed, you should read our full guide on the topic. Click on the link to learn more.
Huge host for NFTs and smart contracts
Solana is a significant host for NFTs and smart contracts, making it suitable for advanced crypto projects. With higher adoption of NFTs or smart contracts, the value of the Solana blockchain increases and improves your potential earnings.
Total Volume Locked
Solana is top of the list of cryptocurrencies with the highest TVL. An increasing TVL, number of users, and derivative markets put Solana in an excellent trading position.
Since more participants trust the Solana blockchain with crypto assets, you can earn more dividends depending on the amount of Solana you stake or activity on the network.
A leading Futures market
Solana is a leading coin in the derivatives market. Recently, more companies are adopting Solana as their parent blockchain for transactions.
A great example of such a company is Helium which decided to shift to using Solana instead of building its own blockchain. Also, as a web3 blockchain, Solana has limitless potential to partner with major companies listed in the trading exchanges.
Do You Get Dividends From Cryptocurrency?
After the inception of decentralized finance in 2018, one way to make an income is to earn dividends by holding several cryptocurrency assets. Although the crypto markets are volatile, users continue to adopt dividend earnings as they promise higher returns.
Participating in a blockchain network earns dividends in four main ways;
- Staking or rewards.
- Crypto airdrops
- Yield Farming
- Crypto borrowing and lending
How Does Crypto Make Passive Income?
The are multiple ways to make passive income out of the cryptocurrency venture. We’ll talk about the four popular ways that you can pick from if you choose crypto as your side job.
Staking
When you stake crypto, you lend your crypto tokens to help validate transactions. So, your cryptocurrency will remain locked to the blockchain for a while before you can start earning rewards from it. Although it has many advantages to mining crypto, staking has several perils.
You can only stake for blockchain networks that use a Proof of Stake consensus mechanism. Different cryptocurrencies have varying requirements for users seeking to stake on their networks.
Most blockchains have a minimum investment threshold before you can join in staking.
There is no limit to how many coins you can stake, as all networks offer different rewards for their participants.
Perfect tokens to stake today are Ethereum 2.0, Solana, Avalanche, Algorand, and more.
Learn more: Does Staking Crypto Compound?
Earning interests
Like the fiat banking system, you can deposit your tokens into a crypto bank and earn interest each time the crypto bank lets other users access or use the crypto. Today, many crypto banks offer such services to participants.
All crypto banks offer unique services targeting specific coins or market segments.
You will earn more interest on some coins compared to others. Some crypto banks include; Kraken Bank, Vast Bank, Webull Crypto, and Circle.
Airdrop
Airdropping is a marketing structure used by startup crypto blockchains looking to incentivize token adoption by creating excitement or awareness.
Here, crypto users in the network may receive random crypto donations from the blockchain to their wallets. After that, the crypto users can offer support in various ways to support the blockchain network.
Even though airdropping isn’t as profitable, you can still earn if the coin gains value. Also, ensure you avoid prevalent pump-and-dump schemes and dusting attacks that come with airdropping.
The first token to offer to airdrop is the infamous AuroraCoin, in early 2015. The government of Iceland offered about 31 AUR to citizens who gave out their identification details.
Direct lending
Anyone can set up a direct crypto loaning system for other users. As the lender, you can give out your crypto assets for use at interest for a certain period.
Like other ways of making passive income, direct lending also has risks. You should loan out to your close friends, but if money isn’t a problem, you can grow your client base.
What Are The Different Ways To Invest In Crypto?
Here are various ways to invest in cryptocurrency if you’re new to cryptocurrency.
Direct Purchases
Making direct crypto purchases is a common way to buy and own cryptocurrency. You can buy from individuals or well-established crypto firms and pay transaction fees. Some of the cryptocurrencies you can buy include Ethereum, Solana, and Bitcoin.
Crypto ETFs
It can be hectic to pick crypto from the endless list of cryptocurrencies. Instead, you can find companies that offer crypto-focused funds. Examples of such funds include exchange-traded funds (ETFs) and investment trusts.
Crypto Companies
Today, there are many companies with an interest in the cryptocurrency realm. Such companies are;
- Makers of ASICs mining hardware.
- Crypto mining companies.
- Companies supporting the adoption of cryptocurrencies.
- Companies with crypto in their portfolio.
Crypto ROTH IRA
Crypto ROTH IRA is conducive for users who seek to take advantage of tax cuts. Also, it’s one of the most secure ways to preserve crypto assets.
Crypto mining or validation
Besides making direct purchases, you can participate as a miner or validator on a blockchain network. All crypto miners and validators earn cryptocurrency as a reward for taking action on a specific network.
After that, you can decide to turn them to fiat currency or take up the investment route.
Final Thoughts
You can earn some pretty decent dividends investing in Solana. It shows much promise even in its early stages of development, and it has potential to pay more in the future.
