What Is Passive Income?

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What Is Passive Income?

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Passive income is a type of income that requires initial effort but is then earned without continuous or active participation.

Unlike active income (e.g., your salary), the passive one generates income that flows autonomously.

Think of passive income as growing a fruit tree. After planting the seeds and watering them for some time, the tree starts growing independently and with minimal care. All you have to do is bear the fruit.

Interest rate payments are a very common passive income source. They are regular payouts (weekly, monthly, etc.) calculated as a percentage of a deposited sum.

Other sources include rent, dividends, and royalties.

Interest rates can be simple or compound. The former is calculated only on the principle of the deposit/loan.

The compound is accrued on both the original amount and the accumulated interest from previous periods.

The most common way to earn passive income in the crypto niche is through interest-bearing savings accounts. By depositing crypto into a digital asset savings account, you can ensure regular interest rate payouts.

Bear in mind that, in many jurisdictions around the world, passive income from cryptocurrencies or other investments is taxable.

Consult a tax professional about the best way to handle such income in your situation.

Which of the following is an example of a passive income source?

“Cryptocurrency will change market structure, and maybe even the architecture of the Internet itself.”

Abigail Johnson


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