The ultimate guide to setting up and participating in a Masternode and generating passive income in cryptocurrencies.
The purpose of this article is twofold. First, it will explain in detail what a masternode is and how it is used to run blockchain networks. We will also see how we can generate passive income with masternodes. Second, the article serves as an explanatory guide to running a masternode.
😎 We hope the content here will help those who are interested in running a masternode, as well as those who are interested in passive income in cryptocurrencies.
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What are Masternodes?
Let's say it in simple words. A masternode is a computer that hosts the entire blockchain ledger of a given cryptocurrency and performs specific functions to support that blockchain network. By launching a masternode, you become a node operator and benefit from the following benefits:
- Passive income – Masternode operators divide rewards into blocks for completing network functions; for instant transactions and private transactions. To do this, they need to stake coins and host the server (I explain in detail later).
- Investment strategy – Masternodes offer the opportunity to hedge the risk of investing in volatile crypto assets. They do this by providing predictable returns to node operators. These rewards are why people run masternodes.
- Governance Rights – People who run nodes for a cryptocurrency often have the right to vote on network decisions, such as overall governance of the project. So, it gives more weight to the people who really want to be part of the project.
The very first masternode was launched by Dash. Today, Dash maintains a 58% market dominance over all other masternodes. It is indeed the largest and also the most profitable. Nevertheless, there are many other masternode projects, such as PIVX and ENERGI, with solid ROI and hundreds, sometimes thousands of mining nodes.
How are masternodes different from other ways to earn cryptocurrency?
This type of passive income differs from cryptocurrency mining, for example, in several ways. On the one hand, the energy required to operate a node is less than that required for mining. Additionally, masternode operators require less hardware and naturally have lower computational costs than bitcoin miners.
The Masternode is also a form of cryptocurrency staking. When you launch your Masternode, you also provide additional services to the network, beyond simple proof of stake as is the case with staking.
Having a Masternode is also a more passive way of investing than trading for example. So, those who don't have the time (or emotional stamina) to trade all day can opt for masternodes.
😎 Overall, masternodes constitute a crypto savings account that single-handedly generates other cryptocurrencies over time. Masternode operators ensure that the network operates optimally, provide services to it, and receive payments for hosting and performing functions. It is in exchange for this work that they receive regular payments.
How do masternodes benefit the network?
Finally, understand that masternodes keep the entire system running smoothly by performing functions and helping to manage the network with voting rights.
The use of masternodes improves the functionality and security of each blockchain network that uses them. Nodes enable advanced transactional privacy, instant transactions and some are even capable of executing smart contracts.
It is based on this work to optimize the network that they receive (well-deserved) rewards.
What do masternode operators do?
Not only are masternode operators actively engaged in the best interests of a crypto network, but they also directly benefit from their work in the form of rewards.
To run masternodes, operators must “hold” a predetermined amount of coins in a dedicated crypto wallet. This stake is maintained in this wallet as long as the person runs the masternode. There is a minimum bet and you can of course deposit more.
The amount a Masternode operator must deposit varies between masternode coins. The periodicity of block rewards (their frequency) also varies between different cryptocurrencies with node programs.
For example, with Dash, the requirement is to stake 1000 Dash coins, currently worth $71 each. So the stake would total $71. This amount, called “collateral,” is held by you in a dedicated wallet that syncs with the blockchain.
Other rooms may have much lower entry tickets. For example, Horizon SecureNode offers the ability to operate a node by staking 42 coins worth around $10 each. So only a stake of $420 is required. And, there are plenty of examples of this type.
But having at least $500 to $1000 may be good starting capital. If you bet less, you win less and this also means that the project is not very substantial.
However, this type of investment is risky and usually represents only a very small portion of the investor's entire portfolio. Understand by this, that it is good not to put your eggs in one basket, eh 😉
In addition to depositing coins, masternode operators must, in most cases, be proficient in certain techniques, as the requirements also include setting up and maintaining dedicated hosting on a Linux server.
It is also this part, purely technical, which means that masternodes are not widely used by all crypto-holders. For example, I tend to prefer shared masternodes to precisely avoid the geeky and technical aspect of masternodes.
That said, it remains a great way to generate even more cryptocurrencies than doing it alone. So, if you are more of a handyman and curious, then there is no reason why you should not give it a try!
However, it is also possible to run a hosted masternode, which is a much simpler process. We go into this topic in more detail later in the article.
How much can you earn by setting up a masternode?
What you earn passively as a Masternode operator depends on many aspects:
- What currency is this?
The appreciation (or depreciation) of the coin over time. It is important to configure a Masternode on a cryptocurrency that will increase in value. Make sure the project is stable and reliable. - What is the frequency of payments?
This is indeed a very good question. Some coins issue them several times a day and others once a day. It's up to you to find the one that suits you best. - How much did you deposit? Yes, it is also important to see the capital that you will need to deposit.
- How much will you earn? (What yield?)
Considering all of the variations above and the volatility of the crypto market, node operators can generally expect to receive between 5% and 20% of each block reward.
Annual returns on investment (ROI) are listed for each coin as shown below. You see the screenshot of the site Masternode.online which lists all masternodes. What's interesting about this site is seeing the volume and ROI (return on investment) of each masternode.
Of course, market volatility can affect these numbers in real time. For example, if you staked 1000 Dash coins for a year, your block return would be around $7000 worth of Dash. It depends on when you look at this article, of course.
So what does setting up a masternode involve?
(Feel free to skip this section if you are reading this article only to learn how to make money with masternodes.)
Each coin project will have its own specific requirements for operating a node on its system and earning passive income. But see below for some of the most basic requirements you can expect if you want to set up a masternode:
- A dedicated IP address so that other node operators can locate you.
- A virtual private server (VPS) and host such as vultr ou Digital Ocean.
- 24 hour uptime is required for most masternodes.
😎 To get an idea of the requirements for setting up a masternode, you can view Energi's full requirements and setup instructions here: https://www.energi.world/masternode-setup/
What I'm showing you with the example of Energi is simply that everything is always explained. Each part that allows masternodes systematically gives a dedicated page which explains step by step how to configure a Masternode.
So, once you have chosen the Masternode that interests you, then to find out exactly how to do it, you have to go to the dedicated page of the site.
Indeed, each Masternode for each cryptocurrency is specific and requires special configurations.
Once you are set up in your chosen network and have staked your coins, your computer begins processing blockchain functions. When blocks are created, you automatically receive your cryptocurrencies directly in your wallet.
What are the steps to set up a Masternode?
In fact, there aren't many very long steps. As a general rule, it's quite quick to set up, especially when you have a good guide.
Also note that each masternode involves steps and its own configuration. That's why here I give you the general steps of masternode configuration. For each crypto, you will have to enter different details but the basis remains the same :)
- Install the cryptocurrency wallet.
- Purchase the amount required to launch the masternode on an exchange platform.
- Send collateral to your wallet
- Subscribe to a VPS ( vultr for example)
- Install and configure the VPS
- Create a new address on your wallet
- Generate the private key of your masternode
- Generate the Txid and index of your crypto collateral
- Launch your masternode
- Collect your cryptocurrencies as rewards.
So here are the 10 main steps to setting up your own masternode. The step that changes in detail is the data that you will enter in the configuration of your VPS.
Some people may think that maintaining their own VPS is beyond their technical capabilities. In this case, there is something called 'Masternodes as a Service' (MNaaS).
What is masternode as a service (MNaaS)?
A MNaaS is a service provider for those who want to run a masternode without having to host and manage their own virtual private server. Basically, it's really for those who don't want to configure or touch anything that resembles a line of code at all.
Stakenet is an example of MNaaS, which sometimes uses its own token to pay for hosting. You can set up the local XSN wallet, add an XSN coin in the cloud to cover transaction fees, and sync the blockchain in minutes.
The minimum stake is 15 XSN, valued today at $000, representing an initial investment of approximately $0,099. The daily fee to run the masternode is around $1 and the cloud balance where transaction fees are taken can also earn XSN.
When it comes to block rewards, 20 XSN coins are given for each new block. 45% of them go to ordinary clients, 45% to masternodes and 10% are allocated to treasury and project development.
Although XSN (Stakenet’s own coin) is currently the only masternode available through their MNaaS, they plan to provide this service to other masternode coins. With their “interchain” blockchain platform, their goal is to turn masternodes into a viable, decentralized business option.
Let's hope it works because we must admit that it is very practical and very simple.
How can you invest in masternodes without setting one up?
In fact, there are 3 ways to invest in masternodes without you having to set one up yourself.
1/ Buy cryptocurrency directly
Obviously, to invest in masternodes, you can set up a Masternode and earn passive income. However, if you are not comfortable with the idea of hosting a server and supporting network features, you can always invest in masternode coins. Yes, it's always faster and simpler than setting up your masternode.
First, do your research on MasterNode.online for a coin available in Masternode that interests you. Then go to CoinRanking.com and search in which exchange platform you can buy this coin.
To do this, simply click on the cryptocurrency of your choice, then click on “Exchanges” and there you will see on which platform you can buy this cryptocurrency.
There, you just need to register on the exchange platform and buy your cryptocurrency. If you don't know how to buy cryptocurrencies on exchange platforms, you can read the Binance tutorial.
2/ Invest in a fund dedicated to masternodes
The second way to benefit from it without setting up your own Masternode is to invest in a third-party “masternode” type fund. These are new “risky” investment vehicles and you may not have heard (much about) them yet. But we'll see more action in these funds as the bull market continues. Rather than investing in a single coin behind a masternode, the fund creates a portfolio of top-performing nodes. It’s really a kind of investment fund specializing in cryptocurrencies based on masternodes.
For example, INDX is a fund and you can research them by reading the INDX white paper.
or any investment, find projects that fit your risk tolerance.
3/ Participate in a shared masternode
I have already talked to you about it and even several times on this blog. I admit that I am a big user of shared masternodes. So, I'm not going to give you a long overview here, but acacia simply consists of participating in a Masternode with several other people.
This therefore allows you to be able to participate in masternodes without having to place all the necessary deposit. I remind you that for example for a Dash Masternode, you need the equivalent of $70 and very clearly, not everyone can afford it, we agree.
Likewise, as for certain cryptos like ZCash, it will be possible to do mining rather than masternodes.
In addition to accessibility, shared masternodes allow you extreme ease. You don't need to subscribe to a VPN or VPS, or do any Masternode configuration. Yes, none. You automatically receive your cryptocurrency rewards in your wallet.
In exchange for this service, you pay a small commission to the sites. There are two major reliable platforms for doing shared Masternode: Westake et Just-Mining.
It’s indeed so much simpler than setting up masternodes yourself.
How do I know which masternode is right for me?
Let's quickly examine all the parameters listed on specialized sites such as Masternodes.online:
- The name of the room
- Price - the current price of the coin on exchanges
- Change – how the price has changed in the last 24 hours (green is up, red is down)
- Volume – How many dollars were exchanged in the last 24 hours
- Capitalization boursière – the number of coins in circulation x the price of the coin
- ROI – the annual return on investment or the amount of expected gains over one year
- Knots – how many nodes are running on a particular network
- required – how many parts must be wetted to make a knot work
- Minimum value – What is the minimum investment to operate a node (number of coins x current price)
NOTE: While researching this article, I saw that the number of masternodes for some coins was significantly below on the Masternodes.online website. When considering setting up or investing in the masternodes, you can also check in the coin's blockchain explorer how many nodes a given network has.
Explorer will always have the most recent information. It's also a great way to view activities in real time. If you want to set up a Masternode, then you will still need to learn about crypto.
What to consider in a masternode?
- Liquidity – check the number of exchanges offered by the node. On MasterNodes.online, simply click on the coin and an image similar to the one below will appear. At the bottom left you will see “markets”. These are your trade-in choices to purchase this coin. Also, note what exchanges are there. Are you familiar with them? If you think some exchanges are questionable, look at their adjusted volume and history on CoinMarketCap.
- The team and the project behind the piece. Go to the official website and see the white paper. View the charted history of the coin on CoinMarketCap. The project's Discord, Twitter or Telegram accounts are a good starting point to get feedback from the community. Forums full of unanswered questions, criticism and casual discussions can indicate a lack of serious potential.
- When you start, watch the price – you may be able to choose a later auction order to get a more favorable price. If you suspect a downtrend, perhaps wait before purchasing your stake.
- The number of nodes – this can give you information about the longevity of the project. Normally, the longer the project lasts, the more nodes it will have. But the markets also have their say. Sometimes nodes are also left idle by their operators.
- Low volume parts – may indicate low interest in the project, a new project or minimal activity. Masternodes without an available market cap – usually denoted with a “?”, this may indicate limited liquidity as trading information may not have been available. This is not a very good sign in general. And, perhaps it would be good not to try to configure a masternode on this project.
- High return on investment but low volumes – this may indicate manipulation. Very clearly, be wary of these projects with returns that are much too good to be true.
- Platform administrators asking for your private keys – your private keys are in a local wallet and are for your eyes only.
Conclusion on setting up a Masternode
With the bull market currently in full swing and cryptocurrencies becoming ever more popular, we could see a lot more interest in masternodes in 2020 and beyond.
Currently, there are around 250 masternodes across 000 blockchain networks. In 600, we expect these numbers to increase or even double.
In 2018, masternodes had somewhat of a bad reputation for being associated with fraudulent projects. A bit like with ICOs, it was feverish and of course, a lot of vicious guys took the opportunity to cause trouble. This reputation is slowly crumbling as more developed coins emerge and crypto investors gain more and more knowledge.
Additionally, many of these masternodes have been operating for over a year, lending some credibility to projects that survived the crypto winter. For example, even if the cryptocurrency D
In the future, we may also see masternodes playing a role in the crypto commodities market, which is an exciting new investment arena.
We hope this article helped you explain everything about masternodes and ways to profit from them. Be sure to join Twitter for more on all things crypto.
If you discovered Masternodes because you were interested in passive income or earning interest; know that there are other things that may please you.
For example, there is the staking which might be of great interest to you. Feel free to read information about it on this blog 😉
Of course I remind you here that this is an article for informational purposes only. This is not investment advice.
