CEO of a Blockchain Investment Firm
- Jake Brukhman says there are many opportunities for individuals to earn crypto yields.
- He recommends physical devices, staking, and yield farming as options.
- All three options require an initial investment but can then yield over time with minimal effort.
Investors who have been in the crypto game long enough to ride out a bearish environment may see a depressed market as an opportunity to buy things on sale.
However, if you’re new to the game, the idea of buying more of something you’ve already lost on may seem like running into the fire while everyone else is running for the hills.
Jake Brukhman, the founder and CEO of CoinFund, one of the first fully blockchain-focused investment firms, says you can earn crypto without continually buying it. This can be done by finding various ways of participating in networks in exchange for yields or rewards.
The firm, which invests in tokens, private equity, and convertible nodes, has been in the space since 2015. Its focus is on early-stage projects, based on the belief that blockchain technology will be disruptive to many sectors. However, you don’t have to be an accredited early-stage investor to participate and continually grow your position. Many of the protocols in crypto are better suited to individual investors rather than funds.
“As a big fund, most of these strategies don’t have enough capacity for us to invest. They’re much better suited for people who can take a smaller amount of capital and get a much bigger return on it,” Brukhman said.
From a purely economic perspective, why wouldn’t you do that, Brukhman asked rhetorically. It actually lowers your risk because what you’re earning can offset the
, he said. But he admitted that the trade-off is dealing with the complexity of each protocol, which includes collecting the yields and paying taxes on them.
3 top picks to passively earn more crypto
The first option to consider is physical devices that allow users to earn rewards in the form of tokens, Brukhman said. New networks that either create a service or collect data are releasing small hardware instruments that often look like an internet router. Most of these products can be purchased for well below $1,000.
Some of these devices can be considered miners, except they use very little electricity, are easier to set up, and don’t make noise.
One device Brukhman mentioned is a Helium miner, a hotspot that provides wireless network coverage for surrounding areas. This little box retails anywhere between $400 to $800 depending on the provider. The setup is simple: it requires an ethernet cable that will plug into an internet router. Rewards are earned in the blockchain’s native token HNT and can vary drastically based on where the device is placed and the strength of its antenna.
Eric Vladimirsky, a Los Angeles-based senior software developer, went all-in on Helium mining. He started off with two miners and then quickly scaled to 63. During a 30-day span in July 2021, he earned 1,386 HNTs. Today, the rewards have been slashed substantially but the price of HNT has increased from $12.88 at the time he mined to $16.33 as of May 4.
A similar device is PlanetWatch, a small box that tracks air quality and sells that data to weather companies. It rewards the holder with PLANETS tokens. The miner retails for about $600 and requires an annual license of $270.
Brukhman is also excited about Dimo, which is creating a user-owned internet-of-things platform that allows drivers to collect and share their vehicle data in exchange for rewards. The small device retails for about $345 and is placed on the vehicle’s dashboard.
Although there aren’t yet any set conversions for the points currently being issued into future tokens, it’s something the project is still evaluating, according to Alex Rawitz, a co-founder at Dimo. The website states that rewards will be based on what third parties are paying for that data. The full product is set to launch next year.
If you’re not a fan of hardware, strike is a second option† Investors who participate in this process are supporting a blockchain by validating transactions and blocks within the network. Users lock up a portion of their tokens and, in return, receive a yield denominated in that token, Brukhman said. Strike times may vary for each platform.
“This is for people who are interested in blockchain networks themselves. It’s an opportunity to run a node,” Brukhman said.
Knowing which staking protocols to use can be a daunting task. He recommends filtering options through a website called Blockdaemon, an independent blockchain infrastructure platform that supports these protocols.
Dan Reecer, chief growth officer at Acala, a platform that’s soon launching several types of DeFi applications including yield farming, recommends checking out staking platforms on BlockFi, Polkadot, and Kusama.
“They are implicitly choosing their partnerships. In doing so, they’re making good decisions about who to partner with and they’re not going to be partnering with some fly-by-night project or something like that,” Brukhman said. “All of the companies listed there are very credible, have been around a long time or have good prospects, and have credible investors.”
The third option is yield farminga process that involves users depositing their crypto into a DeFi platform.
Brukhamn says participating in these types of platforms usually means you’re adding
to decentralized exchange protocols or lending protocols. He recommends checking out a website called APY.Vision, which lists varying yield opportunities across different products.
This approach is high-risk relative to staking because users are trusting a protocol rather than a blockchain’s fixed consensus. This means if the project goes bust or gets hacked, you can lose your funds. On the other end, the rewards can be substantially higher than simply staking.
“There’s definitely risk,” said Sonali Giovino, the head of communications at DeFiYield, an asset management dashboard that allows users to link their wallets to various crypto protocols, including yield farming.
Projects can fail or get hacked, and users can get back pulled, which is when the creators of a project withdraw massive amounts of funds, devaluing the project. The smart contract could include loopholes that would allow for vulnerabilities within the protocol, Giovino added.
“So regular users wouldn’t be able to identify what’s safe and what’s not all the time, on their own,” Giovino said. “It’s really tough, sometimes you need a developer or technical tools to do that.”
DeFiYield’s dash warns users if any of the protocols linked to their wallet shows any signs of a red flag or vulnerabilities within the smart contract. Her advice to investors: Only put in what you can afford to lose.
Reecer recommends doing some internet digging. Look into the team. Make sure they aren’t anonymous and that they have been involved in other successful projects in the past, if not in crypto then in the
† Probe to see if others have done any audits on the network. And if the yields are too good to be true, they probably are.
“The other thing that you can do is also trust the evaluation process of others, or experts,” Reecer said. “So if you look into the team of backers or VCs that are backing teams, you can usually tell the quality. If you see some of these well-known or well-respected venture capital firms that are backing them, it means they’ve probably done their due diligence and you can probably trust them more than teams who may not have that sort of support.”
Yield farming projects Reecer considers legitimate include Aave, Compound, Uniswap, Curve, Trader Joe, Astroport, Saber, Raydium.”