Passive Income Generation

Definition ∞ Passive income generation refers to earning revenue with minimal ongoing effort, often through investments that produce regular returns without active management. In the digital asset space, this commonly involves staking cryptocurrencies, providing liquidity to decentralized finance (DeFi) protocols, or lending digital assets. It allows individuals to grow their holdings over time. This method contrasts with active trading or employment.
Context ∞ Crypto news frequently reports on various methods of passive income generation within the digital asset ecosystem, such as yield farming, liquidity mining, and staking rewards from proof-of-stake blockchains. Discussions often center on the associated risks, including impermanent loss, smart contract vulnerabilities, and market volatility. A critical future development involves the maturation of regulated and institutional-grade passive income products, potentially attracting a broader investor base to the digital asset market.