Definition ∞ Passive income crypto refers to various strategies and protocols within the digital asset space that allow individuals to earn returns on their cryptocurrency holdings with minimal active effort. These methods often include staking, lending, providing liquidity to decentralized exchanges, or yield farming. The returns are generated through network participation, transaction fees, or protocol incentives. It represents an opportunity for asset holders to grow their capital over time.
Context ∞ The pursuit of passive income in crypto is a significant driver of user engagement and capital flow within decentralized finance. News frequently covers new protocols offering yield opportunities, alongside warnings about associated risks such as impermanent loss or smart contract vulnerabilities. Regulatory bodies are increasingly scrutinizing these activities to determine appropriate classifications and consumer protection measures.
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