You might have come across the term p.a. in traditional investment cycles, but how does it relate to crypto? In this article, we’re breaking down what p.a. means, how to get in on it and how it relates to the crypto industry.
What does P.A. mean?
P.a. is an investment term that stands for per annum. This refers to the interest an investor can gain over a year's period and provides insight into the yields that the investment will generate. This is calculated on a simple basis and not compound.
You might see digital wallet platforms offering reward rates of 8% p.a. Or 14% p.a., this tells the potential investor that the platform will provide 8% of the initial investment, over a 12 month period.
PA can also stand for price action, a popular term used on crypto Twitter. In this piece we're focusing on the annual interest rates version.
How can users make money with crypto assets?
There are several ways in with industry participants can earn cryptocurrency. Below we outline the most widely used, and safest options. Be sure to check each option with the relevant blockchain network as these will differ from network to network.
Crypto Mining
Crypto mining can be a lucrative means of generating a passive income, however, the costs might run high depending on where you live and what cryptocurrency you are mining. Each network has its own way of minting new coins, which require different hardware and electricity means.
Bitcoin, for instance, is a Proof of Work network that requires miners to use large amounts of energy as they race to finish a complex cryptographic puzzle. The first to complete this is rewarded with mining the next block and receiving the associated payoffs.
Bitcoin requires a large amount of electricity, not practical in areas with high electricity costs, and either a graphics processing unit (GPU) or an application-specific integrated circuit (ASIC), which can also be costly.
If you wish to get involved with mining cryptocrrencies be sure to do adequate research on what will be required and what income this could generate before investing any money.
Crypto Staking
Crypto staking is an alternative minting solution for Proof of Stake networks, such as Cardano and soon-to-be Ethereum. Crypto staking requires users putting their funds in a smart contract usually for a predetermined lock up period to confirm transactions on the network. This will typically require a minimum amount, so as to ensure that individuals hold a “stake” in the network and will act on good intentions.
When crypto traders stake the minimum balance, a node will deposit these funds into a staking pool on the network, similar to a deposit. The bigger the stake, the higher the chances of that user, now referred to as a node, being chosen to verify transactions. When the node is chosen to confirm transactions, they will create a new block and receive a reward for adding it to the blockchain.
Reward rates are specific to each blockchain network so be sure to check the details relevant to platform on which you wish to stake. As a security mechanism, the staked coin in the network is typically taken away if the node acts with ill intent.
Passive Income
There are a number of crypto initiatives that allow users to earn passive income through their crypto assets. These work in a similar way to holding funds in a wallet, however, these wallets will likely be on a cryptocurrency exchange or DeFi wallet and the user will typically not be able to access the funds for a certain period of time.
Over the duration the user will earn interest as stipulated in the initial agreement. Note that p.a. Values are subject to change with market fluctuations, rising when prices rise and falling when an asset’s price takes a dip. This typically works in the same way as a savings account.
Its worth noting that the onus lies on the traders to pay taxes on any income generated. It is important to check the crypto specific tax laws in your region.
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