With the current state of the crypto market, you may start thinking of earning passive income through cryptocurrency. If so, well, you are not alone. There’s a lot of people out there just like you, looking for ways to do it.
In this article, we will be learning how to earn passive income through masternodes.
However, before, we start, we first need to understand what is masternode and then move on to share the tips and method of earning passive income with them. Hence, let’s get started.
Table of Contents
What’s a Masternode?
Masternodes are similar to a server which takes part in a decentralized network. They participate in the network activities and ensure that is done with full consensus. Generally, they are similar to nodes but can participate in the network. For example, masternodes can help the network to validate private or direct transactions.
List of some of the tasks that the masternode has to perform:
- Transactions completion
- Improving the transactions privacy
- Ensuring that the treasury system and budgeting works as intended
- Governance and voting
Masternodes, when compared to simple nodes, are complex in the way they are run. They are also expensive and can take a good investment to be up and running. However, there is a clear incentive in running these masternodes as they are awarded block reward percentage depending on the level of their participation.
How Much Can you Earn from a Masternode?
Now that you know what a masternode is, you might be wondering how much you can earn if you decide to host a masternode? Well, the answer is not as simple as putting up a number. Your earning depends heavily on the coin that you choose and also the price of the coin at a given time.
As a masternode operator, your main job would be to find coins that are profitable quickly, but, more importantly thatn that, you should be choosing projects wisely and carefully with good fundamentals. What we mean by this, is that you should carefully do your own due diligence, such as looking into the team behind the projects, evaluate the sentiment on their own community (joining their discord and/or telegram channels), among other things in order to get a good understanding of it. If you choose the right project, you can start earning passive income with good ROI returns.
Masternodes, most of the time, works through staking(Proof-of-Stake) which means that you will eventually see an increase in your holdings and potentially profit after you do staking for an extended period. However, the actual gain will depend on the fiat returns which can swing wildly considering that crypto market is extremely volatile.
So, basically, your earning depends on three factors.
- The coin your select
- How that coin works under the masternode concept
- How the coin is going to perform in the future.
- The liquidity of the coin (very important)
The last point is very relevant and we see investors overlook it all the time. Many of these coins don’t really have a lot of trading volume, and you should always take that into consideration, because if you want to liquidate your earnings in order to cash out or simply trade them for other cryptos, you may find that the trading volume is simply too low to quickly absorb your coins.
We recommend checking out Masertnodes.online which gives a good statistics including other information such as price, minimum coin required to start a masternode and their trading volume.
Proof-of-Stake, but not Always
So, why do we need masternodes in the first place? Masternodes are extremely useful for coins that use Proof-of-Stake(PoS) consensus method. But that doesn’t always mean that masternode use Proof-of-Stake(PoS) all the time. Some coins use Proof-of-Work(PoW) and also supports masternode creation.
Masternode prefers Proof-of-Stake(PoS) most of the time because it is efficient and enables you to earn and participate by just staking coins, without huge hardware support.
How to Host a Masternode?
Running or hosting a masternode is not beginner-friendly. You need to have some technical knowledge on how to use Linux commands and how hosting works. But, don’t that dishearten you from starting your masternode as you can easily hire experts who can do the heavy lifting for you. All you need to do is hire a reliable provider and let them do the non-sensitive work.
If you are curious about where to get started, you will find a complete guide on creating masternode for the coin you are interested in. We recommend using Vultr as your hosting service provider. They provide good masternode hosting and will cost you only $10 per month per VPS. Also, it is a good idea to avoid regular hosting services as they provide a closed environment where customization is not possible.
Examples of Masternode Projects
Even though you should do your own research, you can find below some popular projects with masternodes that you may want to take a look into. Once again, we stress the importance of doing your own due diligence before committing your funds into any particular projects.
Things to Know Before you Start to Operate a Masternode
Before you get started, we think you should know about a few things. Let’s list them below.
- Staking: Staking is the cornerstone of how much money you will make. Of Course, it also depends on the coin you choose. To start staking, you need a minimum number of coins in your wallet. For example, DASH requires 1000 units to get started. If you manage to have 1000 units, you can begin your mining operation aka run the masternode for profit. But, that comes with a substantial initial cost. Considering that at the time of writing, the price of one DASH is $60, you need to invest $60,000 even to get started. But that’s the minimum cost you need to incur to build the trust the network needs. As an investor, you should know the risks and should calculate the ROI beforehand.
- Hosting: To make profits, you need a hosting that can handle 24/7 operations and should also not cost you a bomb. We have already suggested you a hosting above. You will also find other hosting if you do a quick search. In short, choose a hosting that maintains your operations otherwise it will result in a loss.
- Technical Expertise: Usually, the setup process of a masternode requires some technical background. This means that you’ll need to install, run and configure some scripts and you should be comfortable working with UNIX environments (not always). However, you’ll usually find plenty of support and documentation, that will walk you through the whole process. And if the project has a good community (it should be), you’ll find all the assistance you need there (or even get someone to set up the masternode for you).
Masternodes present a good opportunity to earn passive income. However, the initial cost and expertise required to run it can be too much for many crypto traders or enthusiasts out there.
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