What are Masternodes? Crypto Beginner’s Guide
Cryptocurrency has become one of the best investments for the modern digital age. There is always a new opportunity to earn passive income and contribute to projects that help make the world a better place one altcoin at a time. While some people may feel iffy about a digital currency, they must remember that even the dollar and other fiat currencies are backed by nothing too.
There are plenty of methods one can take to earn a couple coins here or there. If you are willing to really invest in cryptocurrency, then you can easily look into the many different projects that offer larger earning incentives. Proof of stake and proof of work are definitely the most well-known methods of earning altcoins.
But not everyone is into the idea of mining cryptocurrency or making small-scale forging contributions. There are other means of earning cryptocurrencies that one can try.
Some of the common proof methods are proof of importance, proof of storage, proof of stake anonymous, delegated proof of stake, proof of stake time, proof of stake velocity, proof of burn, proof of activity, proof of capacity, and proof of checkpoint. But these methods aren’t the only investment strategies for earning a mass amount of cryptocurrency.
You can try a wide variety of earning methods ranging from vlogging/blogging, commenting, buying and hodl, faucet farming, bounties, airdrops, gaming, network support, micro tasks, selling goods and services, affiliate marketing, freelancing, trading and more. But one of the biggest investment methods is running a massive masternode.
With all the ways and methods to earn altcoins, it may leave some feeling a bit overwhelmed. After all, with all the scams running amok in the cryptocurrency industry it can leave many investors feeling jaded. Add in the various price fluctuations in crypto exchanges and you can end up with many investors looking elsewhere for reliable investment.
So how does cryptocurrency manage to stay afloat and attract enough investors to keep the belief in digital altcoins going? Is there a way to really earn a passive income with minimal effort? How can one invest enough into cryptocurrency and know that they will at least get something worthwhile back?
Cryptocurrency definitely comes with many ups and downs but when you take part in the blockchain systems and networks it can be a reliable way to earn some serious altcoin. If you have the extra cash and are willing to take a well thought out dive into cryptocurrency, then read on and learn about a great investment method for a wonderful source of passive income.
Masternodes: Earning Passive Income From Investments and Mining While You Sleep
Many people often hear about masternodes when they learn about the various inner workings of cryptocurrency. But what are masternodes really? Are they some sort of super node or are they something else entirely? Well, a node is basically a device in the blockchain network and is the technology responsible for an altcoin’s ability to function and survive.
However, a masternode works in a slightly different way. It too is a type of device but instead of being a foundation of a blockchain network, a masternode is really a type of cryptocurrency wallet. This digital wallet is known as a full node and contains a copy of the ledger in real-time. This means all transactions that have ever occurred on the blockchain networks will be in that digital wallet.
While nodes are an essential component of any blockchain, masternodes hold a very special set of roles.
A masternode will often have features such as:
- Keeping all transactions on the blockchain private
- Providing an adequate treasury system for cryptocurrency
- Enabling governance and voting for the cryptocurrency, projects, developer team, bonuses, and so on
- Enables instant transactions all along the blockchain preventing any digital hiccups along the various blockchain networks
These massive nodes are often referred to as MN. They are not standalone and often relay information between other nodes and masternodes within the decentralized network.
Getting to Know the Nodes of Cryptocurrency
Now that you have become familiar with masternodes, it is time to get to know its little digital companion – the node. The node in cryptocurrency plays a small but also very important role. It is the backbone of a blockchain and is responsible for relaying transaction information and supporting the blockchain network. They are basically the tiny digital parts that make up a blockchain.
A node can be made active with just about any device that has an IP address. This means your mobile phone, computer, tablet, and even your printer can be a node so long as it is connected to the internet.
Nodes, unlike masternodes, are arranged in binary trees. These binary trees are what provide the basic essence and functionality in blockchain technology. Nodes and masternodes do share a few things in common. Both are run by users to earn a profit and often have to adhere to an altcoin’s consensus protocol before a user/miner/forger is allowed to run the node or masternode.
Miners generally run nodes through a proof of work system. Since each users computer becomes a node, they, in essence, have an equal opportunity to earn transaction fees for processing blocks. Often users require a computer system that has the right hardware and can handle being a node since mining, in general, is hard on a computer.
Nodes can be either a point of communication redistribution or a communication endpoint. Small nodes often don’t have a full copy of a cryptocurrency’s ledger. There are five types of nodes in a blockchain.
Types of nodes:
- Leaf Node
This node is a node with no children linked to it.
- Parent Node
This is a type of node that often has other nodes extending from it like a digital branch.
- Root Node
This is the highest binary node in the entire binary tree.
- Child Node
This type of node is the one that typically branches out from the parent node.
- Sibling Node
This is the type of node that is often sharing the same parent node with other child nodes.
Other important terminologies to remember for nodes are:
A set of nodes that stem from the main root node. This is usually where you will see a combination of leaf, child, sibling, and parent nodes.
This is a set of binary trees compiled of various types of nodes.
This is the connection between the nodes all along the various trees, forests and individual nodes.
The number of child nodes within a binary tree.
How Does a Masternode Work?
Now that you know how a simple node functions and how a blockchain is formed, you can begin to understand how a masternode essentially works. They often function in a similar fashion to regular nodes only this time they can have a full copy of a blockchain with live updates.
Masternodes are simply using a digital wallet to act as both treasury and live ledgers. Masternodes may perform other tasks beyond regular nodes depending on the type of altcoin you are investing in. Each altcoin can offer its own incentives and other bonuses for running one or more of their masternodes.
Generally, all a user has to do is lock down a certain number of coins that are required to run a masternode. Typically, a set amount of altcoin investment is usually stated by an altcoin when it comes to those who wish to run a masternode. Usually, this can range from 1,000, 5,000, to even 10,000 and more of altcoins kept in storage. Users can expect to earn up to 5 – 20% block rewards.
This means those who run a masternode can expect to get a decent slice of the transaction fees and profits just for running the masternode. The more masternodes you run the more profit you can receive depending on the cryptocurrency and their rules for running a masternode.
To run a masternode you will need to make sure your computer meets the basic requirements for the cryptocurrency you wish to be a part of.
Is a Masternode Proof of Stake or Proof of Work?
Masternodes usually function on the basis of the proof of stake method. This is because masternodes often require users to make a large investment into a particular altcoin. Masternodes also require users to maintain that specified amount in their digital wallet consistently. There are some masternodes that can operate on the basis of proof of work since all a masternode is, is a full node.
Users can have a combination of masternodes and regular nodes thus giving them perks of both proof of stake and proof of work altcoin earning methods. But this can be taxing on a computer system and is very energy intensive since you are doing both mining and forging at the exact same time.
Can You Really Make Money Using a Masternode?
In essence, yes you can make a decent amount of money by running a few masternodes. If you pick the right cryptocurrency to invest in then you have plenty of opportunities to earn a reliable source of income. Not all cryptocurrencies rely on masternodes nor will they offer the same incentives. Some masternodes can be harder to run compared to others.
Since masternodes are mass investments, make sure you do all your research before you start the process of running a masternode. Just like there are many pyramid schemes and pump and dump scams in cryptocurrency, there are also scams involving masternodes. These scams and the high costs of investment often leave many people feeling a bit reluctant to take part in running a masternode.
However, if you choose reliable cryptocurrencies that have a decent following and community then you are more likely to have no problems running a masternode.
Another bonus with running a masternode is you can run multiple masternodes. You can also run different masternodes for different altcoins as well.
How to Host Your Own Masternode
Running a masternode is an investment venture that can be risky but also worth it. How you can run your own masternode is fairly simple. Follow these simple steps to get your masternode up and running. If you are ever confused on how to set up a particular masternode you can always consult the altcoin’s community forums or developer team for some guidance.
1.) Buy the required amount of collateral altcoins. It is advised to purchase a little more than required to account for transaction fees.
2.) Install the cryptocurrency wallet on your server. Some choose to use VPS installed with Linux OS or use Vultr.
3.) Send your purchased altcoins or tokens to your wallet.
4.) Setup a node address within your digital wallet and transfer all of your altcoins to that particular node. Typically, you will need a dedicated IP address to run a masternode.
5.) Setup the masternode
6.) Once you have everything you needed to be configured, you will now be ready to start up the server for the masternode. From this point, you will need a node daemon.
7.) Once you have the server running and the node daemon you are now ready to earn altcoins on your newly acquired masternode. You can repeat these steps to run multiple masternodes. Remember like with any investment it takes a little bit of patience and time to see results.
How Masternodes Can Benefit Many Cryptocurrencies
Masternodes benefit cryptocurrencies because they ensure a cryptocurrencies decentralized feature. Think of each masternode as a server. The more servers for the cryptocurrency the smoother the transactions are. This is also cheaper in the long run for many cryptocurrencies since they won’t have to run their own servers.
This can also make the cryptocurrency secure and anonymous which are the other key components in blockchain technology. Cryptocurrencies such as Dash and PIVX are great first time options to go with when figuring out how to run a masternode for the first time.
There are plenty of smaller altcoins that will allow you to run a masternode, however, they may not be as reliable and can rapidly depreciate in value making your investment worthless.
The Drawbacks of Running a Few Masternodes
As mentioned previously, masternodes are also flooded with scammers. When sifting through potential investment options, any altcoin that offers a return of investment (ROI) of 1000% and above is actually a scam and should be treated with caution. As the old saying goes, if it looks too good to be true it usually is.
If the altcoin doesn’t offer a utility with the masternodes, you should avoid these digital coins as well. While investing in a new altcoin might sound like a good idea, new altcoins have a very high rate of failing which is why many users stick to the tried and true major cryptocurrencies for their investments.
Final Thoughts on Masternodes
As long as you have the tech and cash, masternodes are one of the more reliable options for passive income in cryptocurrency. Depending on the altcoin you choose will determine all the other benefits you may receive. Like with any digital investments always do your research, read all of the fine print, and make sure that what you put in will bring you a solid return of investment.
While it may seem complicated at first, running a masternode or two is not only a great investment but also a great way to make your own contribution. After all, a blockchain network is extensive and to keep it decentralized means many people need to take part in running nodes and masternodes.