People usually think that only those who can analyze the market trends or are day traders can make money in the crypto space. But that’s not the case! In the crypto space, until the concept of masternode was first introduced, making money mainly required holding the cryptocurrency itself and hoping for the price to increase. However, relatively stable and regular returns are now a reality with masternode hosting. But let’s first be clear what a masternode is before you can explore how to make money by hosting one.
What is Masternode?
Simply speaking, a masternode is a server on a decentralized network that keeps the full copy of the blockchain in real-time. It has unique functions which makes it different from normal nodes. They include features like doing instant transactions, increasing the privacy of transactions, and direct send.
Masternodes stores all information about the network in wallets that are fully synchronized and 24*7 connected with the blockchain network. Masternodes also validates or rejects new transactions that are added in the process of generating a new block.
Hosting a masternode is often expensive and relatively complex. Hence it’s not open to the usual node operators. However, masternode owners are well rewarded. Eventually, it helps cryptocurrency to develop and grow and simultaneously giving an additional source of income.
Factors to consider before setting up Masternode
Masternodes can be run by anyone for a cryptocurrency. However, there is an entry criterion in place to ensure that the system doesn’t get malicious. The entry barrier is what one needs to collateralize certain units of that particular cryptocurrency to run a masternode.
This is done to avoid any frauds or corruptions by masternode owners. So naturally, it becomes very less likely that a masternode operator will do any fraud because he has a stake in running the whole system.
In order to become a masternode, you must consider the below factors:
- A masternode is an always online computer (ideally — a server) that has a static IP and is running cryptocurrency wallet software that is fully synchronized with the blockchain network.
- Your wallet should possess specific technical parameters: switched on 24/7, the power of the computer, etc.
- To run a masternode you must purchase in a specific amount of coins to deposit into the wallet as collateral (For DASH minimum you need 1000 DASH units and for PIVX minimum you need 10,000 PIVX units). So this minimum units varies from crypto to crypto. This is mostly a much bigger expenditure besides the hardware costs.
The volume of such collateral varies from coin to coin, but it is always a considerable amount of money. The collateral can’t be withdrawn as long as the masternode is running. However, when the user decides to stop supporting the payment network then they can transfer and sell the coins from the wallet.
Running a Shared Masternode is the obvious solution if you can’t afford to run a full masternode because of the high entry barrier. Multiple users can pool in their coins with a defined minimum stake. Once the pool accumulates 100% of the coins needed to run a Masternode, the fee generation model commences. As per users’ percentage of the overall stake, the fees are distributed among the users.
Depending on the network and other aspects, masternodes may be rewarded once per day, or even several times per day. The other factors include the specific coin that is chosen, the price increase in that coin and the particular protocol.
The masternode operator will require to take a look around and find the coins that are offering the most potential ROI monthly. However, one of the most important aspects of that equation is the expected price appreciation of the coin.
How to Host a Masternode
Setting up your own masternode can be quite a complex procedure that would require some familiarity with Linux command line. If this is something that you do not feel completely comfortable with then there are other options available. One of the easier options is to make use of reliable third-party hosting services. However, these will require monthly expenses which could take a good part of your return.
Whichever option you pick, running a masternode can be an attractive alternative to just holding your crypto coins. It will give that added advantage of your money working for you and providing you with cryptocoins while you sleep.
Your server hosting costs should be somewhere into the dozens of dollars depending on which company you go to and what package you choose. Proper due diligence must be carried out before purchasing the Masternode hosted services. You’ll need to do some research and see what route or what package is right for you, but rest assured you have multiple options.
How much Money can Investors make from Masternodes?
Masternodes are very useful for crypto investors because it gives them the opportunity to make a stable passive income. Different cryptocurrencies have different incentive models through which a Masternode operator can earn a decently monthly or weekly income. Different models depend on a few factors:
- Which coin you select
- How that coin assists masternodes
- How much the selected coin appreciates in price in the coming years
If all coins are worth significantly more in the coming ten years, then running masternodes will end up being very profitable for everyone who took the leap with one regardless of which coin you chose. Though, no matter how obvious it seems that the crypto economy has heaps and bounds to grow from here, nothing is guaranteed in the cryptospace.
Masternode operators typically earn anywhere between five percent and 20 percent of a given block reward, depending on which coin is being supported. These rewards help compensate the costs of running masternodes in the first place, while also motivating the creation of further masternodes.
To summarize, it’s evident that masternodes make for a relatively effective passive source of stable income. It attracts users who can’t or chooses not to constantly monitor the state of the cryptospace or trade on crypto exchanges frequently.