In the cryptocurrency world, there are a lot of ways of earning and making money. The most important thing is to choose the best way that suits you, according to the various risks and rewards ratio. Mining is a great way to get coins but buying and the holding coins long term is a solid plan. If you are the type to HODL, one of the secret and most often overlooked ways to earn passive income is using a Masternode.
Dash was the first cryptocurrency to implement the masternode model into its protocol. Under what Dash calls its proof of service algorithm, a second tier network of masternodes exists alongside a first tier network of miners to achieve distributed consensus on the blockchain. This two-tiered system ensures that proof of service and proof of work preform symbiotic maintenance of Dash’s network.
The masternode is Dash’s baby, but plenty of cryptocurrencies have adopted this mechanism as their own. What was originally intended to oversee instant, anonymous transactions is now being implemented for a multitude of other services.
What is a Masternode
Simply put, a masternode is a server on a decentralized network. It is utilized to complete unique functions in ways ordinary nodes can’t. They are different because they perform several other functions apart from just keeping the full blockchain and relaying blocks/transactions as a full node does in Bitcoin/Litcoin.
Some of the special functions that these nodes perform are:
- Increasing privacy of transactions
- Doing instant transactions
- Participating in governance and voting
- Enable budgeting and treasury system in cryptos
Because of their increased capabilities, masternodes typically require a sizable investment in order to run. But this is where incentivization comes into play, as masternode operators are rewarded by earning portions of block rewards in whatever given cryptocurrency they’re facilitating.
No masternode is quite alike as each network has its own pros and cons, but with that said, every system approaches payouts in a different way. Some cryptocurrencies pay out rewards to masternode operators multiple times in a day, whereas other projects payout operators once daily.
The benefit of this dynamic is that operators can earn passive income and provide a service to the network without having to invest in expensive cryptocurrency mining gear.
The yield from the masternodes depends on:
- The value of the coin at the time exchanged,
- Frequency of payouts
- The cost to host the node
- The cost of the coins
Hosting a Masternode
Hosting a Masternode requires a computer hooked to the internet and running 24/7. Its requirements are very minimal and a Self-Managed VPS from LFC Hosting is the perfect platform for hosting your own. As a 20 year veteran in hosting, you will have the perfect partner for service, reliability, backups, and ease of use.
What are the requirements to operate a Masternode?
If interested in becoming an operator yourself, you’ll need to “lock away” in a wallet what’s usually a large number of coins and set up a VPS Server through which these holdings can do their magic, as it were. The Masternode will remain profitable as long as you hold those coins in the wallet linked to the Masternode.
What is the ROI of a Masternode?
The big question! The ROI depends on the following:
- The price at which the bond was bought
- The block reward or the incentive mechanism
- The number of masternodes operating
- The monetary cost to host masternodes
- The time needed to host masternodes
- The Tax implications of masternode income
- The price at which the mined tokens are sold
- The final price at which the bond is sold
What is the best Masternode to invest in?
Masternode systems provide important network services, and they have a genuine utility. However, they are also used to create artificial demand for certain coins. Due Diligence is essential, crucial and a must.
- What is the utility of the coin, beyond being a masternode?
- Where is the demand for the coin coming from other than other masternode operators?
- Is the amount of coin needed to operate a masternode fixed?
- Are the current masternode operators happy or are they quite vocal about the rewards
- System? (Check Slack, Telegram and Reddit)
- Are the coin holding centralized or decentralized? (Was there a pre-mine or an ICO)
- What are the actual returns?
- Will the block rewards change in the future?
- Can the tokens generated be used to buy useful products?
Cryptocurrency With Masternodes
There are a bunch of sites that help narrow down current Masternodes and ROI’s but these sites are a good place to learn from.
Some masternodes to look for in 2018 are:
- Waltonchain (WTC)
- Venchain (VEN)
- Original Track (TRAC)
- DASH (DASH)
- PIVX (PIVX)
- XtraBytes (XBY)
- Monero (XMR)
Please investigate these masternodes and understand the HODL requirements for getting a masternode. Use the beginning of 2018 and this low market to accumulate stake in a masternode.
How to invest in a cryptocurrency Masternode?
First, decide on which coin masternode you want to operate.
This depends on:
- What can an investor afford?
- Which Cryptocurrency has the most future potential.
- Check https://www.coinswithmasternodes.com/complete-list https://masternodes.online or http://www.mnrank.com
- Look for a coin with good ROI and cost
- Visit the website to look at the roadmap and coin specs and coins needed for a MN
- Visit https://bitcointalk.org/index.php?board=159.0 and see what the community are saying about the coin
- Visit the github and see if the dev is active
- Check social media to see if there is an active community there.
Calculate how much Bitcoin is needed to buy the required number of coins as collateral for the masternode.
- Add some more coins to handle the transfer fees.
- The collateral can be either
- Bought all at ounce
- Staggered or bought slowly over time, to avoid buying at the top.
You will then needs to decide if the masternode will be hosted by a third party or DIY.
So there’s no one-size-fits-all answer to the ROI that can come from Masternodes, as every project will work differently. Some will be more profitable than others, some less so. But if cryptocurrency as a whole continues to grow, everyone running masternodes today will be sitting pretty if the market cap continues to surge up in unison.
If coins are worth more in ten years, than they are now, then running masternodes will end up being very profitable for everyone who took the leap with one pretty much regardless of which crypto you chose. Though, as always, nothing is guaranteed in life, no matter how obvious it seems that the crypto economy has heaps and bounds to grow from here.
Keep in mind, masternode operators typically receive anywhere between five percent and 20 percent of a given block reward, depending on which cryptocurrency is being supported. These rewards help offset the costs of running masternodes in the first place, while also inspiring the creation of further masternodes.
A masternode is sort of like next-level holding. You have to “hodl” a large amount, but in doing so according to the specialized process, you’ll earn constant block reward payouts. And these payouts could be a trove in a decade if prices continue trending upward in the long-term.