What is a Masternode?

One unique way of earning cryptocurrency is by running and operating a masternode. However, before I tell you how to do this, it’s important you first understand what a masternode is.

In the cryptoverse, there are several ways you can make profits and earn an impressive amount of money. And the best thing about masternodes is they allow you to choose the exact parameters of your risk/reward ratio.

This unique model was initially introduced because not everyone was able to contribute to a network as a crypto currency miner. In simple terms, a masternode is a cryptocurrency full node or computer wallet that keeps a real time full copy of the blockchain. Just as a Bitcoin full node is always functioning, so are the nodes of other crypto currencies. This ensures the resiliency of the network and increases trust because each node acts as a personal ledger.

However, masternodes are considerably different in their functionality than normal nodes. They are different because they perform several other functions.

Some of the special functions that these nodes perform are:

  1. Increased transaction privacy
  2. Instantaneous transactions
  3. Allow participation in governance and voting
  4. Enable budgeting within the treasury system

While functions can vary from crypto to crypto, these primary attributes are generally found among the vast majority of them. Importantly, these masternodes are not standalone nodes. Instead, they are always communicating with other nodes and make up what is called a decentralized network. Sometimes they are referred to as an MN.

What is Required to Run A Masternode?

The good news is that masternodes can be run by anyone. However, there is an entry barrier in place to try and prevent bad actors from getting involved. This barrier usually involves a commitment or collateralization of a high number of  crypto currency tokens to enable someone to run a masternode.

The idea here is to help ensure that a masternode operator doesn’t purposely corrupt the system. By requiring operators to have their assets at risk, it helps to eliminate malicious intentions. And so naturally, it becomes less likely that a masternode operator will harm the system because he has a stake in making it run properly. Should an operator ever try to cheat the system, he will be exposed, and his holdings devalued.

Now that we have gone over the concept of a masternode, let’s see whats required to set one up.

  1. A pre-specified number of crypto tokens. These amounts vary from crypto to crypto. (For example, Dash requires 1000 Dash. PIVX requires 10,000.)
  2. A VPS or hosting server for the wallet.
  3. A dedicated IP address.
  4. Adequate server storage to record the blockchain.

How much does a Masternode Cost?

Invariably, one of the first questions will be – How much will this cost?

Secondly, how much can a masternode earn?

Masternodes are very useful for crypto investors because running a masternode incentivizes the owner. Consider it a monthly interest payment on your crypto holdings. Also known as “smart” passive income, there are different models by which a masternode operator can earn monthly income. Monthly expenditures for masternodes can run from $10 to $200, depending on the specific coin. Annual ROI can range anywhere from 2.5% to 38%. Given the wide variance in these ranges, being properly informed is critical to building wealth. 

Note: Not all masternodes are worth running because the annual ROIs can be unimpressive. Also, be wary of cryptos that offer very high ROIs to operate a node. These can be prone to wild fluctuations in price and end up costing you more money than they are worth.

How to Identify the Best Masternode

The American Crypto Association real time chart provides up to date statistics on all available crypto masternodes.

In conclusion, for those who have the desire to operate a masternode, but neither the time or technical skills needed to do so, we recommend you read about our list of trusted masternode operators.

For other unique ways to profit from crypto currencies, here are a couple of handpicked topics you should read about next:  

The Hottest Crypto Airdrops

The Most Lucrative Cryptos to Stake for Q4, 2018

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