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Using Masternodes to Earn Passive Income

It’s a well-known fact that investors are always on the lookout for valuable investment options which would payout a regular stream of income over a period of time. In the cryptocurrency context, crypto-enthusiasts are always on the lookout for making profitable investments in certain cryptocurrencies which are guaranteed to payout more. Traditionally, cryptocurrency profitability used to solely rely on holding of the asset, and waiting for a price appreciation. However, with newer innovations in the world of cryptocurrencies, many alternative methods of earning emerged, with one of them being Masternode Hosting. Masternode Hosting is considered a lucrative affair if done right, but could prove disastrous in the long run if prices fall.

 

Masternodes: Explained

To further understand the concept of masternode hosting, we need to delve deeper into the concept of masternodes. In layman’s terms, a masternode refers to a server situated inside any decentralized network. The masternode is entrusted with completing specific actions that are not possible with other nodes on the networks. Such features can vary, and can include special functions such as making transactions private or allowing direct transactions depending on the use case.
Masternode hosting can thus appear lucrative but requires technical knowledge and considerable resources to set up. However, if done right, masternode hosting can be greatly rewarding, depending on the cryptocurrency in question.

Lucrative Benefits Of Masternode Hosting

One of the first and most apparent benefits that masternode hosting has to offer is that users get a chance to make profits out of cryptocurrencies without actually holding or mining the coins themselves. The cost to run a masternode refers to the staking of coins initially on the network by the masternode operator. Operators can always extract the tokens and sell them if certain situations demand it.

Another great benefit of masternode hosting over other types of hosting such as staking is that Masternode hosting can be used with both Proof-of-Work and Proof-of-Stake coins.

Choosing The right Coins for Masternode hosting

There are number of factors that affect the level of earnings a masternode host can earn. This depends heavily on the kind of tokens chosen as well as other factors such as price and the particular protocol involved. In short, a masternode operator or host has to select coins which offer the most ROI every month along with the level of expected appreciation of the coin’s price. There are several authoritarian sites such as Masternode.pro that supplies users with all the required information.

The selection process thus depends on two main factors, the monthly ROI and the price appreciation of the token. Comparison sites such as masternodes.pro help users to select coins with the most attractive returns. Below is a screen grab from the site, showing coins with the most annual ROI.

Some pro tips for Calculating ROI: Eventhough most authoritarian sites like Masternodes.Pro and Masternodes.online provide updated ROI for a list of masternode coins; it is still advised to be aware of the different factors that govern ROI calculations. They are as follows:
         I.            The block reward or other incentive schemes of the selected token.
       II.            The price at which the token was bought
     III.            The total cost of hosting masternodes
    IV.            The total number of masternodes operating
      V.            The time taken to set up masternodes
    VI.            The price level at which the mined tokens are sold
   VII.            Any Tax implications depending on the region
 VIII.            The final price at which the bond is sold

As evidenced above, JIYO Coin has the annual returns at the time of writing, with 2,728.51%, followed by PURE and CatoCoin. The “MN Worth” category shows us the current market prices, while the “Required” panel shows us the minimum amount of tokens to be held for each coin. For JIYO Coin, therefore, a host needs to hold 20,000 JIYO tokens

As evidenced by the slide above, this roughly means that a user would thus earn 1493 NMs which roughly equals $268. However, other factors such as the predicted direction of JIY over the course of the year should also be considered.  Coins with thin Volumes should immediately raise a red flag.

A List Of Coins To Consider For Masternode Hosting

As mentioned before, masternode hosting requires advanced knowledge about a variety of factors including the monthly ROI and thus Potential Hosts or masternode operators should keep themselves updated. That being said, the following is a list of masternode coins which are proven for earning passive income.

 

  1. BLOCKNET (BLOCK)
ROI (annual): 15.71% / 2323 days
Paid rewards for masternodes: 1,009.4000 BLOCK
AVG masternode reward frequency: 7h 48m 21s
Active masternodes: 469
Supply: 5,251,480 BLOCK
Coins locked: 2,345,000 BLOCK (44.65%)
Required coins for masternode: 5,000 BLOCK
Masternode worth: $61,265.50 / 7.37345 BTC

 

Blocknet aims to be a decentralized exchange, facilitating transactions between tokens without the involvement of any financial intermediary. Blocknet Masternodes are called “service nodes” with all other resources available on their Github page. Total annual returns are estimated somewhere between 7% to 13% which is split in a 7:3 ratio between masternode hosts and simple stakers.

 

  1. StakeNet: 
ROI (annual): 41.13% / 887 days
Paid rewards for masternodes: 18,709.3800 XSN
AVG masternode reward frequency: 18h 57m
Active masternodes: 1,107
Supply: 70,524,264 XSN
Coins locked: 16,605,000 XSN
Required coins for masternode: 15,000 XSN
Masternode worth: $4,589.60 / 0.55335 BTC

 

 

Stakenet is a relatively new cryptocurrency created after the PoSW token swap event on May 1. Setting up masternodes for Stakenet is relatively easy, with a step-by-step guide provided by their medium blog. The setting up process is streamlined, with only entry-level knowledge required for software configuration and network administration.

 

  1. Dash:

ROI (annual): 7.23% / 5048 days
Paid rewards for masternodes: 912.8226 DASH
AVG masternode reward frequency: 8d 8h 42m 41s
Active masternodes: 4,608
Supply: 8,213,652 DASH
Coins locked: 4,608,000 DASH (56.10%)
Required coins for masternode: 1,000 DASH
Masternode worth: $249,615.00 / 30.10061 BTC

 

 

Dash has been around for a long time, and became one of the first cryptocurrencies to implement a masternode system. Masternode Hosting involving Dash can be a costly affair as compared to other entries on the list, with figures reaching as high as a million Dollars to set up a masternode at a point in 2017. For Dash, 45% of the block reward (roughly 7 Dash Tokens per month) goes to the masternode. Block rewards are reduced by 7% every 380 days. Setting up a Dash Masternode hosting does require a certain level of skill and technical knowhow, regarding Virtual private servers and Configuration File Edits.

  1. Pivx: 
ROI (annual): 7.53% / 4847 days
Paid rewards for masternodes: 3,656.0000 PIVX
AVG masternode reward frequency: 1d 29m 2s
Active masternodes: 1,771
Supply: 56,839,256 PIVX
Coins locked: 17,710,000 PIVX (31.16%)
Required coins for masternode: 10,000 PIVX
Masternode worth: $18,232.40 / 2.20460 BTC

 

PIVX is a project featured in both lists of good PoS staking coins as well as masternode coins.  They aim at providing faster transactions with a high-level of privacy. Setting up a PIVX masternode is relatively easy, considering that the server needs to be running on Linux or Raspberry Pi and should have a unique IP address on the internet.

 

  1. Zcoin:

ROI (annual): 27.72% / 1317 days
Paid rewards for masternodes: 2,595.0000 XZC
AVG masternode reward frequency: 19d 18h 2m 5s
Active masternodes: 3,417
Supply: 5,261,584 XZC
Coins locked: 3,417,000 XZC (64.94%)
Required coins for masternode: 1,000 XZC
Masternode worth: $16,243.50 / 1.95685 BTC

 

 

Zcoin is another privacy-focused cryptocurrency employing its own version of a protocol entitled “ Zerocoin”. Zcoin masternodes are referred to as Znodes, with detailed guides available on their website. A rudimentary knowledge of the use of command lines and Putty is all that is needed.

 

**All masternode information compiled from Masternodes.pro and Masternodes.online as of 7/25/2018.

 

Certain Drawbacks of Masternode Hosting

Even though masternode hosting is great for income generation; the system also comes with its own set of drawbacks which users should look out for. Three of the most common issues plaguing masternode security include,

 

  • Revenue generation gradually decreases for a particular coin with the addition of more masternodes on to the network.
  • Decent ROI is hard to get if an investor enters the market when the price is in the red and consequently plummets.
  • Weekly hosted masternodes are very much susceptible to Dos attacks and other security breaches.

Final Thoughts:

Considering the current landscape of the global cryptocurrency investment market, masternode hosting can be considered as the best alternative for generating a constant stream of passive income. Incentive models differ between cryptocurrencies depending on a variety of factors. Thus, a potential masternode host or operator has to conduct detailed market research before making a decision. Factors such as the potential percentage yield against the investment which includes ROI calculations are crucial for making well-informed decisions. Thus, masternode hosting can be likened to a form of superior hodling, where users have to HODL large amounts of tokens for a chance to earn block reward payouts.