Every cryptocurrency portfolio should have some dividend tokens in it, especially for the passive income opportunity they provide.
In this post, I will be sharing with you everything you need to know about dividend tokens and the best dividend tokens out there that you can invest in.
But first, let’s cover the basics…
What are dividend tokens?
Dividend tokens are the native cryptocurrencies of projects that distribute a portion of their profit to the token holders.
Any token that earns you a share of a project’s profit is a dividend token.
They’re similar to stocks. However, unlike stocks, holders of dividend tokens do not have ownership rights in the issuing project or company.
How do dividend tokens work?
Dividend tokens payout rewards or dividends to holders on a regular basis, such as, daily, weekly, or monthly, based on certain conditions.
For example, with the CryptoSorted Token (CST), rewards are distributed every week among holders with a minimum of 100 CST in their wallets. And that’s if the project has any profits to share that week.
The main appeals of dividend tokens are, the:
- passive income opportunity they offer,
- potential for the price to increase as more people buy and HODL the token to earn dividends, and
- assurance that the project value is based on pure revenue and not just hype like most shitcoins out there.
Therefore, the more profitable the project is, the bigger the dividend payouts token holders receive.
Are dividend tokens the same as security tokens?
No. Dividend tokens are not necessarily security tokens, because security tokens offer you voting and ownership rights in the issuing company, but dividend tokens don’t.
However, whether a dividend token is considered a security token is subject to the securities laws of the applicable country.
For example, the SEC will consider a token as a security token if it “emphasizes the potential for profits based on the entrepreneurial or managerial efforts of others”
In that sense, many existing dividend tokens in the market right now are actually security tokens in the US.
You need to find out what constitutes a security token in your own country to be on the safe side.
Are dividend tokens the same as staking coins?
No. Dividend tokens are different from staking coins as they do not require you to lock up or stake your assets in order to receive dividends.
However, some dividend tokens may have a kind of staking requirement but that’s an exception and not the norm.
Furthermore, staking rewards are usually based on block emissions and require active participation in governance or securing the blockchain. Whereas dividend token rewards are purely based on the project’s revenue.
PS: Most of the so-called ‘dividend tokens’ you will find in other articles online are in reality, staking coins. The main attribute of dividend tokens is that they pay rewards from the “revenue or profit” of the issuing platform. Not block emissions (as in staking).
Are dividend tokens the same as reflection tokens?
No. Reflection tokens pay holders rewards from the taxes charged on transactions. But dividend tokens holders’ rewards are paid from the profits of the issuing project.
As such, reflection tokens are fundamentally different from dividend tokens.
Ok, with all that out of the way, let’s take a look at the…
Top 5 best dividend tokens you can invest in
Now that we have seen what dividend tokens are and what they’re not, let’s take a look at the top dividend tokens out there that you can invest in.
Let’s discuss each of them in detail below.
1. KuCoin (KCS)
KCS is the native token of the KuCoin Exchange which shares 50% of its daily profit, generated from trading fees, with the token holders.
To qualify for the KCS daily dividend, you must hold at least 6 KCS in your KuCoin Exchange account.
The amount of rewards you get depends on the number of KCS you hold in your account and the trading volume on the exchange for the day.
So, the more KCS you hold and the more trading fees the platform generates, the bigger your dividends will be, and vice versa.
I love KuCoin for many reasons which include,
- no KYC except if you want to withdraw more than 200 BTC per day,
- ultra-low KCS supply of 200 million, to be burned gradually until it drops to 100 million,
- multiple use cases for KCS (used to pay for gas on KuCoin Community Chain, discounted trading fee on KuCoin Exchange, etc.),
- lots of room to grow with great profit potential,
- no token lockup requirements to earn dividends.
According to KuCoin, the annual return on investment (ROI) on your KCS holding is estimated to be between 3% to 30%. This APR is based on historical dividends payout data.
Check out my KuCoin review to learn more about the exchange.
2. BitMart (BMX)
BMX is the native token of the MitMart Exchange which shares 80% of its revenue, generated from trading fees, with the token holders.
The APR is estimated to be between 35% to 50%.
BitMart employs a unique dividend distribution strategy that requires token holders to pledge (lock-up) their BMX to support their favourite projects on the exchange.
Initially, the BMX pledged against an asset listed on BitMart would be locked for 90 days and the user will earn a share of all trading fees generated from trading that project on the exchange.
After the initial 90 days lockup period, you can choose to continue earning the dividends or withdraw your BMX and stop earning.
BMX has a total supply of 1 billion, and BitMart plans to use 20% of its profits each quarter to buy back and burn the token until 50% of the supply is burned.
3. CryptoSorted (CST)
CST is the native token of CryptoSorted which distributes a portion of its profit to token holders every week as an airdrop.
To qualify for the CST weekly airdrop you must hold a minimum of 100 CST in your MetaMask or any other wallet that supports smartBCH (SEP20) tokens.
The token has an ultra-low supply of just 23,674 with multiple solid use cases and constant buybacks designed to help support its value.
PS: CryptoSorted has not started paying out dividends to CST holders yet until certain conditions are met as mentioned here.
4. AtomicDEX (DEX)
DEX is the native token of the AtomicDEX, a multi-chain wallet and DEX that supports atomic swaps.
The project distributes 50% of all trading fees it generates to DEX token holders in Komodo (KMD) coin.
The fees are accumulated for each of the tokens traded on AtomicDEX into a DEX address. They’re then all converted KMD and distributed to DEX holders.
So far, no dividend has been paid out until the accumulated fees reach $1 million or more.
5. AscendEX (ASD)
ASD is the native token of AscendEX, a cryptocurrency trading and investment platform that distributes 80% of its profit as ASD-staking bonus to holders.
The current APR for staking ASD is estimated to be 9.76 according to data on their website.
ASD is a classic example of a dividend token that requires you to stake your asset to receive divideds.
Why invest in dividend tokens?
Dividend tokens are a great passive income opportunity and a way to grow your crypto portfolio on autopilot.
In fact, crypto projects with a dividend token are some of the best to invest in because their reward is based on pure revenue and profit.
They’re more sustainable and likely to thrive than the shitcoins and Ponzi schemes out there riding only on hypes and marketing gimmicks.
Other reasons you might want to consider investing in dividend tokens include:
- Rewards on dividend tokens are higher compared to most staking, lending, or liquidity mining rewards.
- Your return is not fixed. As the project grows, your potential return grows as well.
- If you don’t sell your rewards, your portfolio will grow faster with compounding interest.
- Aside from the dividends, your investment also grows with the potential token appreciation over time.
The risks of investing in dividend tokens
- Dividend tokens could easily be classified as securities by regulators and this could have a lot of negative implications for both you and the project.
- The SEC could sue the project for offering illegal securities and take action to shut it down, especially if they serve or are based in the US. The FUD this will generate can hurt your investment in a dividend token.
- The project can change the reward structure or cancel the program at any time with or without notice.
- Your dividends will fluctuate with the revenue or profit of the project. If the project is not making money you could earn a lot less or nothing at all.
- A dividend token project could exit scam or get abandoned and leave you with worthless tokens.
- The project could be hacked or exploited in a way that could lead to their token losing its value irrecoverably.
- If the token is losing more value than the returns you’re getting, it’s pointless. That’s why you should invest in dividend tokens with good tokenomics and solid fundamentals.
Dividend tokens earns you a share of the profit of the issuing project and are a great passive income opportunity for crypto investors.
In this post, we’ve listed and discussed some of the best dividend tokens out there that you can invest in, which include:
- KuCoin (KCS)
- BitMart (BMX)
- CryptoSorted (CST)
- AtomicDEX (DEX)
- AscendEX (ASD)
This is not an exhaustive list, but they’re the most reliable or active ones right now that you can consider adding to your portfolio.
Some of these dividend tokens require you to stake your asset to earn the rewards. However, they’re not staking coins because they payout from the platform’s profit, not block emissions.
What are your favourite dividend tokens? Share with us in the comments section below.