Many newcomers to the cryptocurrency market wonder about the reality of building a passive income from running Masternodes. Or investing in Masternode will multiply your account many times.
Hopefully after reading this article of Techtipsnreview, you will have answers about the above!
What is a Masternode?
A masternode is a full node (usually a server or high-configuration computer) that is responsible for arranging and verifying transactions in the blockchain network. As a full node, Masternode also has the function of network governance through voting.
Masternode was initiated and adopted by the Dash (DASH) project in 2014 with the split of miners and Masternode which will make the transaction speed faster.
Nearly 6 years later, the Masternode market has reached a value of more than 1 billion dollars with more than 160 coins adopting Masternode for the blockchain network.
Note: Not every blockchain has a Masternode. You can check Masternodes here.
Masternode Benefits and Risks
Benefit
For Masternode Operators:
- Generate a source of income from receiving rewards if you become a Masternode.
For the project:
- The network becomes more secure, as those chosen as Masternodes need to be carefully selected.
Risk
For the project:
- The network will look more centralized because only a certain number of Masternodes have the power to decide whether a transaction is valid or not.
For Masternode Operators:
- There may be a loss if the Scam project is selected or the row is not exited before the project fails.
- There is a risk of capital loss because the inflation factor of the token will cause the token price to drop.
How to become a Masternode?
Normally, projects that apply Masternode will always have a fixed amount of Masternodes in the network.
If the network is full, you just need to set up and wait until your nodes are elected as Masternodes.
To become a Masternode, there are different requirements for each project, but in general there are some minimum requirements such as:
- Hold a certain amount of coins.
- Server server must be strong enough & static IP.
- Continuous 24/7 operation without interruption for any reason.
After being selected as a Masternode, you will receive a reward (maybe block reward and transaction fee) for verifying the network.
It is this reward that is what many say is a passive income from running a Masternode!
Eg:
TomoChain fixed 150 Masternodes for the entire Tomo blockchain network with a minimum requirement of 250,000 TOMO to become a Masternode.
In addition, you need a powerful enough server with a static IP and this server should not be interrupted.
If so, then in the next epoch, you will be removed from Tomo’s Masternode and have to wait until you can vote again.
When you become a Masternode, you can receive rewards with TOMO.
The difference between Masternode Vs. Staking
Many brothers ask that holding a certain amount of coins is no different from staking? So what is the difference between Masternode and Staking?
In essence, running a Masternode is a form of staking, but it is more difficult to access.
Because of:
- If you staking, just leave the coin in your wallet and receive rewards every day without worrying too much about how technical it is.
- Then, for Masternode, you need: lock a fairly high value coin (not move out of the wallet) and a strong enough server, operating continuously without interruption.
Just holding a high-value coin is a pretty big barrier for the majority.
Thus, a Masternode can be said to be intended for holders who intend to hold the coin for a long time. At the same time, they also want the network to be secure and grow.
Does Masternode make tokens go up in price?
In short: Yes.
Long term: Not sure.
Because, in the beginning, a Masternode will be a great excuse to reduce the supply of that token. According to the theory of supply and demand, the demand stays the same or increases and the supply decreases, surely the price will increase, right?
But why long-term is uncertain, is because for a coin to increase in the long-term needs a lot of factors.
For example the following elements:
Inflation rate
When the Masternode operates for a while, it will produce inflation (rewards for Masternode runners), there are many projects with this very high inflation rate to attract Masternode runners.
Leads to an increase in the amount of tokens if demand for that token is not higher than inflation will cause the token to decrease in price over time.
You can go to Masternode.Online to check the inflation rate of coins using Masternode.
The higher the ROI column, the higher the monthly inflation rate of that token.
Vision and execution of the Dev team
This is very important because if the development team is not able to execute what they say, the project is very likely to fail.
In the past, there have been many Masternode projects that failed badly because the Dev team only drew it but couldn’t execute it.
The project’s ecosystem
The ecosystem is a solid foundation for the intended use of that token. If the ecosystem is used by many people, the demand for that token will increase.
Support community
Community is an important element of any project, not just the one running Masternode.
When you want to run Masternode, you should also carefully check the level of community support for the project.
Should I invest in Masternode Coin or not?
Masternode is the game of people with large capital, rich experience in the market, know how to choose the right coin to run Masternode.
If you are a newcomer or have a small capital, I don’t think you should invest in Masternode.
Instead, you can invest in ICO, IEO or Trade Coin which will be stronger. I am not saying it is easier, but healthier for you, less risky if you have sufficient knowledge.
Epilogue
After reading this article, if you are told by anyone about investing in Masternode, you should avoid touching it because the profit rate is small but the loss is large.
Don’t look at the profit and forget about the risk of losing everything, guys!
If you have any questions, you can comment below the article. Me and the Techtipsnreview team will discuss more with you.
For now, hello and see you again in the upcoming articles.
Source: What is a Masternode? Should invest in Masternode (2020)
– TechtipsnReview
