Why Masternodes Are Your Next Big Profit In Crypto

If you’re into crypto, at some point, you’ve probably considered becoming a miner. Who wouldn’t want to be making passive income from Bitco...

If you’re into crypto, at some point, you’ve probably considered becoming a miner. Who wouldn’t want to be making passive income from Bitcoin while sleeping? But in all likelihood, you probably gave up on the idea, or spent USD$10,000 on a rig to mine Ethereum that barely covers the cost of electricity, and makes so much noise you now sleep with earplugs.

Mining farms have turned the mining of major currencies into a strangely centralized and high-roller game, where rewards have become uninteresting for individual users running the software on a laptop. However, other options exist. Recently, hosting masternodes (MN) to support blockchain networks has become a popular and more profitable way to make a passive income and be involved in the crypto world, normally without a major initial investment.

What are masternodes?

Think of a full node wallet. If you hold ethereum you have, at a certain point, likely downloaded a Misk wallet that took two weeks to sync and occupied around 60% of your available disk space, which you eventually deleted after researching where it was being stored to start with.

Master nodes are basically full node wallets with a higher level of functionality. They are capable of supporting instant transaction records, off-chain anonymization or decentralized governance, amongst other services, depending on the coin or project in case.

Lack of incentive and technical barriers have caused a decline in the number of full node wallets on the different networks. This poses several risks as it makes the network more centralized and vulnerable to attacks. In that sense MNs represent a refreshing solution to this problem, as they incentivize the community to support the network and its services by rewarding users with tokens.

In a sense, hosting master nodes is the safer and smarter type of crypto investment you can make, if your day job does not allow you to be a successful day trader.

How do they work?

For MNs to function, the host must lock away a certain amount of tokens in a watchable wallet. This serves the purpose of assuring the Bona Fide of the hosts as the capital could be lost if a malicious attempt is made against the network. It also prevents excessive centralization of MNs, which could endanger the network.

Each project demands a different number of tokens. In a way, this acts as a Proof-of-Stake style operation, but the MN system is also used by projects that operate with the more traditional Proof-of-Work system. There are several projects for which users can host MNs for, like Dash ($DASH), ChainCoin ($CHC), Stratis ($STRAT), PIVX ($PIVX) or Xuma ($XMX), to name just a few, all with different particularities. As it starts operating, the network yields tokens as a reward for the services performed by the node. Dash MNs yield DASH, Xuma MNs yield XMX, and so on.

How much do they cost?

While hardly as expensive as setting up a mining rig, MN hosting entails some investment. First, the host will have to acquire the necessary coins on an exchange to run the MN. Here the cost varies considerably. Xuma for instance, requires 10,000 tokens for the MN to operate, which right now is worth a bit north of USD$300. Some can cost as little as USD$80, some can cost several thousand dollars, all with varying levels of return on investment, which you can check here.

Also, setting up a masternode on your laptop can be a bit technical and you might have to brush off on your tech skills. Otherwise, you can opt for hosting your MN in a Virtual Private Server (VPS), which will set you back about USD$60 per year. Vultr is one of the most popular ones but there are many others to choose from.

This is a particularly convenient solution as MNs need to be online 24 hours per day to receive the rewards.

Which coin to choose? 

If Dash was the first project to function with Masternode system in 2014, many more have emerged since. This means that after deciding that you want to host an MN, you will have to choose which network to support.

How to do this? Well, the first issue to consider is return on investment (ROI) and entry cost. Here, you can see which coin better fits your investor profile. Some projects have return rates in the thousands, meaning you can pay your investment in just a few weeks - with the obvious catch that the project might not even have enough volume.

Once you pick one, or two, go on to the project’s website. Check their white paper and road map, check out what people are saying on social media and internet forums like bitcointalk, make sure the project, and its community, are active. In sum, do your own research.

If you are satisfied with the cost/ROI ratio and feel confident about the project you are supporting, you are good to go. Follow the project’s guide to set up the node and you can sleep better knowing that with every passing hour you are cashing in on your investment.

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