Many investors are now aware of an increasingly popular way to make money with cryptocurrencies. That way, of course, is staking your tokens.
Shiba Inu (SHIB -0.60%) is one of quite a few cryptocurrencies that can be staked. And you can make a surprisingly high yield doing so.
But staking isn't the only alternative available for making money with your SHIB tokens. Here's a new way to earn passive income with Shiba Inu.
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Burn and earn
On April 23, 2022, the ShibaSwap exchange launched a new burn portal. Burning removes SHIB tokens from circulation forever. As the late, great musician Prince used to sing, "Forever is a mighty long time."
The idea behind burning is that the scarcer a coin is, the greater its value will be. Taking enough SHIB tokens out of circulation should boost the price of the remaining tokens.
But the downside of burning tokens that you own is, well, you won't own them anymore. Very few people would do it if they didn't get anything in return. The good news for Shiba Inu holders is that they'll get something in return for burning their tokens.
For every SHIB token that's burned on the ShibaSwap burn portal, you'll receive one BurntSHIB token in exchange. And owners of BurntSHIB tokens will receive rewards in the form of Ryoshis Vision (RYOSHI) tokens.
How much can you make?
According to information posted on the ShibaSwap burn portal, 0.49% of all RYOSHI transactions will be distributed to individuals who own burntSHIB tokens. How much passive income can you expect to make from burning SHIB tokens?
In April, the burn portal website stated that burntSHIB owners could look for an annual percentage rate (APR) of 43.76%. That kind of return could motivate many SHIB holders to begin burning.
However, the burn portal pointed out that the APR will fluctuate. Don't be surprised if the actual yield from burning is much lower than the initial stated level.
Also, the rewards haven't begun flowing just yet. The official Shiba Inu Twitter account tweeted last week that "rewards will be available on May 17th, and continue every two weeks."
Feeling the burn
All of this probably sounds great. However, there are a couple of potential drawbacks that especially stand out.
First, it's possible that burning tokens won't earn sufficient rewards to offset any losses resulting from Shiba Inu's declining price. The token is down 45% over the past month.
Second, the rewards received from burning SHIB tokens could be less valuable than anticipated. For example, since the day after the ShibaSwap burn portal launched, the price of RYOSHI tokens has plunged more than 50%.
Burning could be a great strategy for Shiba Inu over the long term. The laws of supply and demand dictate that the price for any asset will rise as its supply decreases, as long as demand remains constant.
But is burning SHIB tokens a great way to generate passive income? That remains to be seen.
