Investment legend Warren Buffet once said, “If you don’t find a way to make money while you sleep, you will work until you die.” And whether you like it or not, when it comes to the crypto space, one way you can easily generate passive income “while you sleep” is through hosting a masternode.
If you’re new to space, don’t worry. We will explain to you what masternodes are and how you can use them to generate passive income.
What is a Masternode?
A Masternode is a server that performs various service functions on a blockchain.
Masternode is a full blockchain wallet that runs online at a fixed static IP address.
The Masternode pioneering initiative Dash created a two-tier network. The first tier consists of miners and regular users, while the second tier consists of Masternodes. These special servers provide advanced services to the network.
Masternode holders will receive block rewards for providing special services to the network.
Anyone can run a Masternode, but in order to do so, users must prove that they own a specified amount of cryptocurrency. This is to prevent so-called “Sybil attacks” on the network.
Is Masternode like PoS?
If we just look at the steadily generated profits of the Masternode, it is easy to see that it is quite similar to PoS. But in fact they have a lot of differences:
- The reward for Masternode is not fixed like PoS, it depends on the ability to run the computer running the masternode. If that computer runs unstable, then the masternode may lose the opportunity to receive the reward and that reward goes to another masternode. The reward for PoS is block generation, while the masternode reward is not for creating blocks but for providing service infrastructure for value-added services. Block generation on Dash is done by PoW (Proof of Work) miners.
- Running masternode is very secure, meaning there is no need to open a wallet for computers running on the network. What does that mean? With the PoS mechanism, you have to leave the wallet open for the machine to run continuously. As for the masternode, it uses a mechanism called cold wallet hot wallet. A hot wallet is actually a virtual wallet that doesn’t need money in it, this wallet works on a computer running masternode, which runs 24/7 with an Internet connection. A cold wallet is a Dash wallet containing 1000 dashes running on a normal computer, only needing to connect to the network when there is work, and it is only used to start the masternode or conduct voting for projects. And if you don’t need to use those things, the user can unplug it from the computer or turn off the personal computer.
- PoS has a fixed interest rate algorithm, and the reward for masternode depends on factors, in addition to factors such as stable running as mentioned above, that reward is more or less (fast or slow) depends on number of active masternodes. Normally the masternode reward is reduced by 7% per year, but the Dash price also goes up so that doesn’t matter. But the amount for the reward is only 45% of the value of the block creation reward and if there are more masternodes, within a certain period of time (eg 1 month) the reward for each masternode will be less. Usually masternodes queue to receive rewards, so the more masternodes there are, the longer the queue and the longer it takes to receive rewards.
- Technically a masternode is not an ordinary node, it provides other important services to the Dash network that are now PrivateSend, InstantSend, and Decentralized Governance – ie decentralized governance. so that the community can vote on certain decisions like funding projects or finding consensus on certain issues. The masternode later became a platform that allows Dash to add many important services that will be available in the next Evolution version. We can imagine Dash’s network of masternodes like servers or data centers of companies like Amazon, Google, Facebook, etc. It will be the foundation for tier 3 and tier 4 networks to grow. later on Dash.
- Another important difference is that Dash’s masternode-based governance is unique. People who invest in masternodes have the right to vote on important decisions of this ecosystem. As for coins that use PoS without a masternode, he can only profit, not vote. However, profit in coins is not guaranteed if the coin depreciates. Only when voting to participate in important decisions to help reinvest to ensure the coin’s sustainable development, will the profit earned be sustainable.
- The final difference is that PoS has no conditions on the amount you hold, while with a masternode the stake is fixed, and when the price of Dash is as high as it is today, this deposit is also very expensive. But this is a unique mechanism that helps Dash always keep its price with less volatility like other coins.
How much money can Masternodes make?
This depends on a few factors:
- Which coin do you choose?
- How does that coin facilitate masternode
- How much will your chosen coin grow in value in the coming years?
So there is no one-size-fits-all answer as every project will behave differently. Some will be more profitable while some will be less. But considering the third condition, everyone running masternodes will benefit if the entire crypto market continues to grow.
If all coins increase in value significantly after ten years, running masternodes will be very profitable regardless of which cryptocurrency you have chosen. Even so, there is no guarantee that the cryptocurrency market will experience such leaps and bounds.
However, masternode operators typically win between 5 and 20% of a given block reward, depending on which cryptocurrencies are supported. These rewards help offset the cost of running the first masternode while also inspiring the creation of more masternodes.
How to own a Masternode
If you want to run your own masternode, you will need to start getting familiar with the Linux command line. Also, if you pay for the services of professionals, you can always find reliable third-party server providers and hire their services.
You’ll need to do some research and see which plan is right for you, but rest assured you have plenty of options. Choose the most reputable providers because their service quality is always commensurate with the price.
Cryptocurrencies based on Masternode
There are many projects that use masternodes in their network, but there are also many smaller projects that are not widely known in the ecosystem.
Some notable Masternode coins include:
- Block (BLOCK)
- Bata (BTA)
- Crown (CRW)
- ChainCoin (CHC)
- Dash (DASH)
- Diamond (DMD)
- ION (ION)
- Monetary Unit (MUE)
- Neutrons (NTRN)
- PIVX (PIVX)
- Vcash (XVC)
- XtraBytes (XBY)
As one of the top 10 cryptocurrencies, Dash is clearly the largest and most popular cryptocurrency to rely on masternodes in its decentralized network.
A Dash masternode performs specialized tasks, like “PrivateSend” and “InstantSend”. But what makes masternodes on the DASH network so interesting is that masternode operators are the ones who vote on financial and management decisions. That’s a big privilege that miners don’t have.
But it costs you: running a DASH masternode means you need to lock up 1,000 DASH for the lifetime of your operation. And with one DASH worth around US$1,180 at the time of writing, that’s a lot of money.
Stratis (STRAT) is a powerful and flexible platform designed to meet the needs of financial services businesses and institutions that want to develop, test or deploy applications on blockchain. .
By purchasing this module, developers at companies large and small can learn how to get up and running masternodes. And this could be crucial in making masternodes popular in the years to come.
As announced by the Stratis team:
“Masternode technology implements an additional verification feature that requires the node operator to provide 250,000 Strats held in a tracked address on the blockchain. This requirement helps incentivize the provision of the appropriate resources required to operate the network.”
PIVX is an emerging cryptocurrency project that uses central masternode technology. Users of this network must send 10,000 PIVX to the respective address to be rewarded with a masternode.
And, like with the Dash project, PIVX masternode operators have voting privileges in the governance of the PIVX platform as a whole.
However, there are some technical burdens. For example, with a PIVX masternode you should have your server running 24/7 and you will need a dedicated IP address, not every address is ideal for everyone.
The PIVX team itself is clearing out masternodes on the network as “commodity options,” which can be sold as a commodity of value in the future.
Follow the Twitter page | Subscribe to Telegram channel | Follow the Facebook page