Earnings From Cryptocurrencies: Buying A Lambo With Income From Masternodes – A Dream Or Reality?

Who makes money on cryptocurrencies? Professional traders and market analysts, private investors and miners. There are many opportunities in cryptocurrency market, despite the substantial drop in the overall market capitalization.

Running a masternode is one of the ways of earning cryptocurrency with little effort. It could be said that this method is one of the most impressive in technological terms. There are, however, pitfalls. In this article we are going to take a deeper look at masternodes to answer the following questions:
– What they are?
– How they work?
– What their purpose is?
– How to utilize them?
– and, Whether they are still profitable?

What is a Masternode?

A masternode is a full (cryptocurrency) node which keeps a real-time copy of a whole blockchain network. The founder of the GoByte project, Hisyam Nasir, explains this term as follows:

“A masternode is a kind of exclusive project token, which provides investors with the opportunity to participate in the creation and development of the blockchain network, while receiving passive income.”

The functionality of a masternode is slightly different from that of regular nodes. In addition to storing blockchain and relaying transactions, masternodes have the following functions:

  • increasing the confidentiality of transactions;
  • participating in the voting and management of the network;
  • instantly transferring funds from one address to another;
  • introducing a budgeting system for cryptocurrency – being responsible for allocating funds for its development.

Masternodes are not autonomous – they are always in interaction with other similar nodes, resulting in the formation of a decentralized network. They almost always perform the above tasks, but in different cryptocurrencies there may be some nuances, which will be discussed further.

Masternodes protect the blockchain through a combination of technical features and the so-called “game theory”. On the technical side, the masternode is a dedicated host that contains a complete blockchain copy and is available to provide its network content with minimum delay.

In order to ensure that the system is not used for malicious purposes, there is an additional measure – a mandatory initial investment, a pledge of sorts. This implies that the owner becomes kind of a game participant. The pledge can be withdrawn at any time and it will lead to the masternode being disconnected. The investors receives a daily bonus for running a masternode and thereby contributing to the project’s long-term success.

A long, long time ago, in a faraway galaxy…

The initial factor that influenced the emergence of masternodes was the pseudo-anonymity of the bitcoin blockchain. Its confidentiality algorithm is arranged so that each transaction is depersonalized, but if you find the account holder’s wallet, you can view all the related data: the history of received and transferred funds, potential counter parties, etc.

To improve this mechanism, the concept of “mixing” all monetary transactions arose. It significantly complicates the possibility of tracking. And since the bitcoin creators hadn’t included such technology in the source code, an altcoin called Dash was created.

The new system is supported by two levels. Nodes, which perform the same role as miners, and masternodes, which have the following functions:

  • InstantSend – instant transactions. Already transferred funds cannot be fraudulently reused and require no network confirmation.
  • PrivateSend – the mixing of transactions and, as a consequence, their complete confidentiality.
  • Management processes – masternode owners can participate in voting on the principle of democracy. Voting helps with decisions regarding the future development of the project, including new features, upgrades and updates.

To provide such a system, Dash developers proposed a mechanism for allocating awards for the creation of blocks. Namely, masternodes and miners receive 90% of the award size (45% each), and the remaining 10% are used for project development.

How do masternodes work in the real world today?

Some cryptocurrency projects use masternodes only to attract investors. Others use them for more practical applications. One such example is the Vimana blockchain network, which uses masternodes to launch, navigate and coordinate air drones. The number of ground-based blockchain nodes determines the coverage area of the network within which unmanned aerial vehicles move. Thus, the network can be deployed almost anywhere, where masternodes exist. And, if you connect several otherwise independent networks, it becomes possible to “travel” city to city.

Another project, Syscoin, uses masternodes to increase throughput. The layer of masternodes between the sender and the recipient significantly reduces the messaging delay. In combination with Z-DAG (concurrent transaction processing), the bandwidth is extremely high, and yet secure, and the platform is completely decentralized.

TOP-6 masternodes of 2018

The demand for masternodes is at an average level: some believe that masternodes are good investment opportunities, while others can’t afford the priciest of masternodes. There are also individual users who are repelled by the apparent uselessness of such nodes. Of course, in some cases, masternodes play an important functional role, but more often it is just a way to attract investors.

Actually, the analysis of the currently available projects offering masternodes is a very tedious process. The most popular examples are considered below.

Dash

Dash is an open source platform designed for instant secure payments based on a peer-to-peer network supported by the miners and masternodes. The former receive remuneration for ensuring blockchain security, and the latter – for the network maintenance.

Perhaps, the most difficult aspect of running a Dash masternode is the requirement of having to own 1,000 coins. You can buy DASH on a number of exchanges, including Poloniex and Bittrex, or through the Shapeshift service.

As of this writing, a masternode will cost about $196,345.

PIVX

PIVX is a platform aimed at reducing transaction fees, accelerating transactions and reducing harm to the environment. To protect the network the Proof-of-Stake (PoS) protocol is used, as well as a special remuneration mechanism that distributes 90% of all awards between masternodes and stake-nodes, and 10% for budget proposals.

PIVX masternodes act as personal savings accounts. 10,000 coins are required to run a masternode. In return, the user is rewarded with interest. Needless to say, masternodes also play a functional role – they transfer transactions across the network, protecting the community from intruders.

Masternode accounts are blocked and that helps protect investments. The more nodes there are, the stronger the network is. In addition, there is no centralized decision-making, since node owners are the network’s voters.

The cost of running a masternode, according to the current exchange rate, is $ 9,412.

Blocknet

Blocknet is a decentralized, blockchain-based exchange created to simplify transactions using tokens, the sale and purchase of which occurs without the use of intermediaries.

To run a Blocknet masternode, a user must own 5,000 coins. The annual return is somewhere between 7-13%. Out of 100% of the allocated remuneration, 70% are assigned to the masternodes and 30% to the token holders.

Setting up of the Blocknet node is done using software provided by developers on the Github page. But the documentation is clearly designed for technically savvy users, and it is difficult to find a simple and reliable step-by-step guide. This prevents newbies from running the Blocknet masternode.

Based on the current price, a Blocknet masternode costs $20,000.

Stakenet

Stakenet (originally known as PoSW) aims to become a large decentralized exchange.

15,000 Stakenet (XSN) coins are required to run a masternode. The Stakenet masternode configuration is rather simple and a detailed guide can be found on their official blog. It is important to note the project’s comfortable configuration and software, as well as network administration capabilities. Compared to other projects, the developers clearly tried to make the masternode creation process as simple as possible.

At the moment, the price for a new node is about $ 2,010.

Zcoin

Zcoin is a currency that seeks to become global due to its confidentiality. Anonymity is provided through the Zerocoin protocol, where ordinary coins can play the role of private coins with completely confidential transactions.

The project positions masternodes as “nodes”, and the official website provides a detailed guide to their configuration. Their software is designed for Linux, and for its use it is desirable to have a competence in the use of the command line and Putty – remote access client.

To buy a Zcoin masternode, to date, $ 9,305 is required.

Gobyte

Gobyte is a Dash-based cryptocurrency, additionally expanded and modified. It emphasizes the anonymity of transactions, their reliability and high speed. It is managed by the masternodes, which account for 50% of the reward for mining.

Nodes require less processing power than mining, while not yielding to the speed and security of transaction processing. To run a masternode a user needs to own at least 1000 GBX – only $840, according to the current rate. This is less than any of the above examples. It is one of the main reasons why Gobyte is one of the most popular options when it comes to investing in masternodes.

How to easily set up a masternode?

Like full-nodes, masternodes can belong to any network member. However, in order to prevent the system from becoming malicious, developers had to introduce a quite expensive entry barrier. To set up a masternode it is necessary to buy a specific number of coins.

This serves as a guarantee that the masternode owner won’t be engaged in fraud or damage the system, because he is a stakeholder.

What is needed to set up a masternode?

1. The minimum number of coins of a particular cryptocurrency. For example, Dash requires 1,000 DASH, while PIVX – 10,000 PIVX.
2. Dedicated IP.
3. VPS or server running 24/7 where the cryptocurrency wallet will be placed (only interruptions of an hour or less are allowed). Any cheap VPS from a stable provider will be ok for this purpose. A dedicated IP usually comes with this service. By the way, hosting specially designed to host masternodes like, for example, masternode.me, can be used as well.
4. Some disk space for blockchain storage.

Perhaps, many readers may be thinking: if I have to spend so much, then what will I eventually earn? It’s time to clarify this matter.

Different cryptocurrencies have varying incentive models. The masternode operator can receive a passive income by helping the network function properly. This method of investment in effect differs little from conventional investments.

At the very beginning, it is important to choose the right cryptocurrency before the masternode set up – to compare the percentage yield of different coins and calculate the ROI carefully. There are quite a lot of algorithms on the market allowing masternode set up, but some of them do not deserve attention because of too little incentive.

Step-by-step instructions on how to set up a masternode using the example of Gobyte (GBX)

1. Make sure you have the latest version of the Windows 10 operating system. This will significantly reduce the risk of errors and malfunctions.
2. Purchase a VPS server, install the Ubuntu operating system and properly configure it (detailed instructions are available in the official project blog).
3. You must have at least 2 GB of RAM, so that the wallet can be compiled and run.
4. Download the PuTTY client, start and connect to the server.
5. Log in as root, update Ubuntu, install all dependencies.
6. Compile the wallet and install it from the source.
7. Download from the official site of GoByte Windows Wallet, install it.
8. Configure the masternode and wallet.

Just a few tips

When you run the wallet for the first time, you need to fully synchronize it.
PuTTY is downloaded from this site. After installation, all parameters should stay the same, the default port should be 22.
Note for Windows users: Ctrl + C, Ctrl + V do not work on Linux, Ctrl + Insert and Shift + Insert are used instead.
Do not forget to allow the program to connect to the Internet if the Windows firewall asks.
After wallet creation, you need to refill it with 1000 GBX. To do this, click on the “Receive” tab in the wallet, enter the MN1 label and click on the payment request. Copy the appeared address.

Go to the “Send” tab, paste the copied address, also specify the tag – MN1 and the number -1000 coins. Click “Send”.

Important! To the address of the main node, it is necessary to send exactly 1000 GBX, not one thousandth more or less. The amount should be sent from only one address, not two or three different ones.

Finally, the node is configured – all parameters are given by the link above.
At the end of this procedure, the wallet should be restarted. Click the Masternodes tab, then the “Start” button. You can also start the node directly through VPS by entering the following command:
с: ./gbyte-cli masternode start-alias

What does the masternode status mean?

ENABLED. Everything works in normal mode.
NEW_START_REQUIRED. It is required to stop the work of the node and restart it through the VPS server.
EXPIRED. Masternode could not answer the ping in the allotted time, so it was put in the queue.
To fix the problem, try deleting both the mncache.dat and mnpayments.dat files from the local wallet and server, and then index them again. This is done by the “./gobyted -reindex” command on the VPS, but only after the server is stopped and the previous files are deleted.

In spite of the fact that certain difficulties can arise at all stages of the masternode setup and configuration, in general the process does not apply to particularly difficult ones, so everyone with an average knowledge of server applications will cope with its installation. In case of difficulties, users can always consult the project community manager via Telegram.

Profit from the masternode: the past, present and future

There was a time when bitcoin cost $20,000. There was a time when difficulties with masternode setup and configuration, as well as their high cost seemed quite justified. Masternodes quickly paid off and became a powerful source of passive income.

Now the situation is much worse. Yes, there are platforms that allow you to run a masternode for $20 or less, while they have a sky-high payback – 100-500%. However, most of them are newly created projects and with the increase in the number of nodes, profit, of course, diminishes. Or the project shuts down – something that is happening more and more.

Here’s what one Bitcointalk user wrote about masternodes a year ago:

“While the idea of masternodes is completely valid to improve network stability, value and node availability from a technical perspective. In my opinion it also is a pyramid scheme when the masternode requires a huge initial investment. Starting a masternode when it costs a high initial investment, forces you to buy in big and then freeze your assets (or lose masternode status). This causes scarcity and upward price pressure since you need to buy a lot of coins and hold them.

The new owner of the masternode then gets a daily payout for the services rendered of hosting that masternode. This payout is only interesting if the coin price follows an upward trend and not downward. As long as it holds upward more people will start a masternode causing the trend to continue. Also the total value for the first starters of masternodes increases since they bought in much more cheaply.”

Speaking specifically about Dash: if in 2016 the node launch cost $10,000, now it is almost $200,000. At the same time, the payback is now only 7% per year because of the huge number of masternodes (more than 4700). They blocked 56% of all coins created.

By opening the masternode for Dash coins, you will receive 0.19 coins per day, which is equal to $37. As a passive source of income it is is not the worst option, but in terms of ROI, the situation is rather sad. Investors can make the real profit only if the price of the coin increases substantially.

Popular projects’ masternodes can now only be considered as a long-term investment, since the full return on investment takes an incredibly long time. However, GoByte, as an example, produces an extremely quick return, although the monthly income is quite modest – around $57.

But it’s your call. Not every expert is able to give advice on this issue due to the high volatility and the speculative nature of the market as a whole.

Conclusion: Lambo is unaffordable

To sum it up, it is worth recalling that there are no impeccable projects. In order to decide whether to buy a particular masternode or not, you need to learn how to properly analyze the risks and benefits, as well as quickly recognize potential fraud or unfavorable trends.

The only rule is as follows: the longer you wait and watch the project, the more stable it will be, but by that time the reward for mastenode owners will already be reduced. Generally, cryptocurrency investments depend on your attitude toward potential risks, your overall investment strategy and the awareness that ‘Lambo’ is a fantasy.

In spite of the fact that certain difficulties can arise at all stages of the masternode setup and configuration, in general the process does not apply to particularly difficult ones, so everyone with an average knowledge of server applications will cope with its installation. In case of difficulties, users can always consult the project community manager via Telegram.

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