Warren Buffet once said, 'If you don't find a way to make money while you sleep, you will work until you die.' Whether you find this quote inspiring or otherwise, in the world of cryptocurrency, one path to earning passive income while you rest is by operating a masternode.
Let’s assume you're a newcomer in the crypto world, and you've got a handle on basic nodes. Fret not, we’ll guide you through the basics of masternodes—what they are and how they can be a source of passive income.
Right to it, shall we?
What Is A Masternode
In simple terms, a masternode is essentially a server within a decentralized network, designed to perform certain functions that regular nodes cannot, such as enabling instant or anonymous transactions.
Due to their advanced functions, running a masternode generally requires a considerable investment. The operators, however, are incentivized as they earn a share of the block rewards in the cryptocurrency they're assisting.
Each masternode is unique, with networks bringing their own advantages and drawbacks, and differing in how they handle payouts. Some projects distribute rewards several times a day, while others do so daily. This model allows operators to earn without investing in costly mining setups.
Interested in starting your own masternode? Prepare to 'lock' a significant number of coins and configure a server that will manage these funds as per the setup requirements.
Not Just Proof-of-Stake (PoS)
A common misconception among crypto users is that masternodes are related to Proof-of-Stake (PoS) coins (i.e. cryptos that aren’t mined, but are staked , which isn't accurate. Masternodes are indeed utilized in Proof-of-Work (PoW) projects too; they are not limited to PoS.
Running a masternode shares a similarity with PoS systems, as you earn passive income by simply holding coins, similar to staking rewards in PoS.
Consider this: much like PoS currencies, masternodes offer passive income, but they aren't confined to the PoS domain.
How Much Money Can Masternodes Earn?
Well, that depends on a few factors:
- What coin you select
- The Role of a Coin in Facilitating Masternodes
- The Potential Value Appreciation of Your Cryptocurrency of Choice Over Time
There’s no universal answer because every project functions distinctively. Some will yield higher profits than others. But as for the third point, if the global cryptocurrency market continues to expand, masternode operators could benefit significantly.
Should the general value of all cryptocurrencies skyrocket in a decade, those who dive into masternodes could find themselves reaping substantial rewards, irrespective of the crypto they picked. Yet, nothing in life, including the growth of the crypto economy, is ever guaranteed.
Get a Glimpse of Masternode Coins, Their Values, and Earnings at Masternodes Pro .
In essence, masternode operators typically receive between five and 20 percent of a given block reward, depending on the cryptocurrency supported. These earnings help mitigate the initial costs and also encourage the creation of more masternodes.
The takeaway? Operating a masternode can be visualized as an advanced form of holding. It requires holding a substantial sum, but when done through the required protocols, it ensures regular block reward payouts. These payouts could turn into a fortune if the market trends continue upward.
How To Host A Masternode
For those inclined to start their own masternode, it’s essential to get accustomed to Linux command line basics. Alternatively, if you prefer to outsource this, there are reputable third-party server providers at your disposal.
Based on your provider and service plan, server hosting fees might range into the tens of dollars. When choosing a masternode hosting company, avoid those offering generic hosting solutions aimed at regular websites , requiring a VPS server for full control and software flexibility. Vultr is a well-regarded option for masternode hosting and costs about $10 each month per VPS.
Vultr are a company which provides cloud hosting for Masternode operation.
Explore different packages and paths to determine what suits you best, with plenty of trustworthy options. Narrow down to providers that appear reliable and offer pricing that reflects their value.
Future discussions will delve deeper into possible hosting services.
Cryptocurrencies Dependent on Masternodes
Numerous initiatives incorporate masternodes, though many remain under-the-radar in the broader ecosystem.
Standout Coins Employing Masternodes Include:
- Block (BLOCK)
- Bata (BTA)
- Crown (CRW)
- ChainCoin (CHC)
- Dash (DASH)
- Diamond (DMD)
- GoByte
- Innova
- ION (ION)
- Monetary Unit (MUE)
- Neutron (NTRN)
- PIVX (PIVX)
- Vcash (XVC)
- XtraBytes (XBY)
Inside DASH’s Masternodes
In being a top 10 cryptocurrency, Dash is the leading cryptocurrency employing masternodes in its decentralized framework.
DASH masternodes execute specialized activities like 'PrivateSend' and 'InstantSend.' A notable feature of DASH masternodes is that their operators participate in treasury management and governance voting—an advantage not extended to miners.
However, establishing a DASH masternode requires staking 1,000 DASH. Given that one DASH is currently priced around $1,180, this represents an impressive financial commitment. If you have the DASH ready, here's more information here .
Stratis
Stratis (STRAT) operates as a 'sandbox' for developers and enterprises to get acquainted with blockchain technology, and has introduced a masternode solution on Microsoft Azure Marketplace.
Purchasing this module lets developers from various businesses learn the ins and outs of starting and managing masternodes, with the potential to popularize the technology in the upcoming years.
Per the Stratis teams’ announcement :
“The Masternode mechanism employs a collateral verification feature mandating the provision of 250,000 Strat in a monitored blockchain address by the node operator. This incentivization ensures adequate resources for network functionality.”
PIVX
PIVX is an emerging cryptocurrency project embracing masternodes. Users must deposit 10,000 PIVX to the proper address to receive a masternode.
Similarly to Dash, PIVX masternode operators have voting rights in the overall governance of the PIVX platform.
Image via pivxmasternode.org
Nonetheless, there are technical challenges, like the necessity of 24/7 uptime for your server and dedicated IP addresses, which may not be feasible for everybody.
However, it's fascinating to note that the PIVX team refers to masternodes on their network as 'commodity options,' potentially sold as valuable future items.
11Comments
Such a great illustration. These cryptocurrencies might pave the way for solving debts and usher in a climate change battle. Earnings from passive income could pay for power companies and establish solar arrays and wind turbines. By setting up masternodes on decentralized platforms, we'll protect our data from big corporations seeking to profit from it. I'm glad to have invested in CHC, convinced that the future challenge is counteracting climate change before it's too late.
Well-written article. Most ordinary people have no idea what cryptocurrency does, let alone terms like PoW and PoS or masternodes. Kudos for the explanation. We're currently integrating Masternodes into Machinecoin, I might repost a link to your piece 🙂
A question arises: with a mandatory requirement of 10,000 tokens for Master Nodes, wouldn't there be fewer MNs in the network than if the requirement was 1,000? Does that mean larger MNs derive higher percentage yields than smaller ones?
I might be a novice too, but I'll share my thoughts regardless, because of the 'internet.' As I understand, a masternode's payout isn't directly linked to the principal amount. I think it's more about the project's inherent characteristics. For instance, project A might demand X coins and return Y%, while project B could insist on 2X coins with returns of 3Y% or perhaps 1/2Y%. Such figures depend on block discovery rate, reward distribution among MNs, and the like. Reply if you find contrasting information!
It’s akin to dot-coms, Ponzi tactics, and network selling.
simply transforming and reshaping into the digital universe.
who's benefitting? The last person involved with the coins, purchasing them,
until there's nobody continually engaging with the coins to cultivate demands,
easy demands created by early MN creators, like 10,000coins, driving prices up and rewards stem from new buyers.
until no ones repeating it.
Even Satoshi himself advised against using MNs or PoS as the foundational system for Bitcoin mining.
What are Masternodes? A Comprehensive Introduction for Novices
Have you ever stumbled upon the term 'masternode' and wondered what it actually means? Don't worry—you're not alone. We're here to shed some light on the subject and guide you through the essentials.
Understanding Masternodes: A Beginner's Guide
There's a famous saying by the financial whiz Warren Buffet that goes, 'If you don't find a way to make money while you sleep, you will work until you die.' Love it or loathe it, this statement rings true in the crypto universe. Hosting a masternode is an opportunity to make passive earnings while you catch some Zzzs.
So you're stepping into the crypto space and just starting to grasp the concept of regular nodes. No need to fret—we're here to lay the groundwork for understanding masternodes, how they operate, and how they can help you earn income passively.
Yes it cost a lot.
Not Exclusively for Proof-of-Stake (PoS)
Cryptocurrencies Utilizing Masternodes
In layman's terms, a masternode acts as a server within a decentralized network, offering special functionalities that regular nodes aren't equipped to provide. They enable features like instant or private transactions.
Given their expanded role, running a masternode demands a substantial investment. However, the allure lies in the rewards: masternode operators earn fractions of block rewards from the cryptocurrencies they support.
Not all masternodes follow the same blueprint, as each network brings its own set of advantages and drawbacks. Different systems have distinct payout schedules—some distribute rewards several times a day, others do so daily. This model lets you earn while contributing to the network without needing pricey mining gear.