cryptodailytrading.com

What Are Masternodes? Is It Still Profitable to Run One?

  • Alex Morris
    📚 WikiCoin

    Masternodes explained: what is a masternode, and why is there so much fuss about it? Is running a masternode a good source of passive income?


What Are Masternodes? Is It Still Profitable to Run One?
You may also like:
Contents

A quick take

What is a masternode? Masternodes represent big servers that run on the decentralized network of the currency of your choice. Together with nodes, masternodes create a two-tier system. The modus operandi of masternodes is similar to that of Bitcoin full nodes, but they come with additional features that make them more powerful. Masternode cryptocurrencies represent a good way to earn a passive income while you sleep, but there are caveats.

A history throwback: getting started with Dash  

Initially, there were no masternodes in the Blockchain consensus mechanism. Darkcoin, which was later rebranded to Dash, became the very first cryptocurrency that adopted the masternode model. The full masternode implementation took place in May 2015, resulting in a big price spike. With Dash, masternodes started being utilized for such features as DirectSend and InstaSend.

Source: coinsauce.com


Generally, masternodes fulfill two functions: they help to accelerate the transaction verification and also help to vote on a certain project. Masternodes essentially help tackle on the problem that has been plaguing the Bitcoin network ever since it dipped its toes into the mainstream. Masternodes with higher hardware requirements are able to process more transactions, and it prompted the appearance of the aforementioned InstaSend feature. Bitcoin naysayers are quick to shred the flagship currencies because of its slow transactions (compared to VISA and other established decentralized payment services).

At the same time, the fact that you have to own a sizeable amount of coins proves that you have skin in the game (thus, you are able to have a say in the development of a certain project). That by no means results in a greater centralization - Dash, for instance, has a huge masternode ecosystem (more than 5,000). Subsequently, all these masternodes are able to vote on important matters. However, after cryptocurrencies started gaining popularity, it became much harder for newbies to get involved in that ecosystem.

Lastly, another advantage of masternode coins consists in their ability to be sent anonymously. This pertains to Dash with its ‘PrivateSent’ feature that uses coin mixing. There is a common belief that masternodes are typical coins that are based on the Proof-of-Stake consensus algorithm, but there are also mineable coins.

👉MUST READ Flash, Flash, a Hundred-Yard Dash: Darkcoin's Rapid Makeover Revisited
Flash, Flash, a Hundred-Yard Dash: Darkcoin's Rapid Makeover Revisited

Going back to Bitcoin’s early days

Crypto influencer Brian Colwell, who was behind the #MasternodeMeBro18 tournament, claims than running a masternode is reminiscent of Bitcoin’s pre-peak days when individuals would still be able to profit off Bitcoin mining without being displaced by monopolistic mining companies.  

“I feel like it gives me more control on a daily basis to decide what I want to do with my coins.”

How much does it cost to obtain a masternode?

There is a widespread misconception that masternodes tend to be pricey. It’s true for such major coins as Dash. At the time of writing this article, you have to pay $95,890 in order to obtain a Dash masternode. Moreover, the annual return on investment (ROI) is sitting at 6.94 percent, which is definitely underwhelming. The price of one Dash masternode stands at 1,000 DASH, which means that it would set you back more than $1 mln at the peak of the cryptocurrency space (Dash masternode payouts, however, would still be huge). If you had invested in one particular masternode that was worth around $20,000 back in January 2017, you would get a six-figure yearly income.

Obviously, running your own masternode can be extremely profitable if you choose the right coin. Many coins offer a higher return with significantly less expensive nodes. Take a look at the 5 biggest coins by annual ROI. Numus (NMS) is in first place with an eye-popping 13,101 percent increase!

Coin

Annual ROI

NUMUS (NMS)

13,101.91%

ZIJACOIN (ZIJA)

7,231.46%

MAGNET (MAG)

4,820.43%

KICKSOCCER COIN (KSOC)

3,805.29%

BEACON (BECN)

1,743.81%

GOLD POKER (GPKR)

1,660.11%

Pay attention to the fact that the numbers that are shown on masternode.pro are not necessarily indicative of what coin deserves your investment. You have to perform an in-depth analysis of the whole project in order (the team behind it, its price history, etc.). If the price chart of a given coin reminds a roller coaster, you might not want to invest in this particular coin since even a 100 percent ROI won’t cover the losses. As a rule of thumb, new coins from the bottom of the barrel tend to have a much higher ROI but it will be dwarfed when the price goes up and the risk that is associated with a certain coin goes down – it’s very risky to invest in a coin that started less than a year ago. Other growing pains connected to the number of supported coins include tiny communities and poor technical support.

👉MUST READ 7 Best Penny Cryptocurrency to Invest Right Now in 2019
7 Best Penny Cryptocurrency to Invest Right Now in 2019
 
  
What to do if you can’t afford a masternode? Despite the crypto rout, not every beginner-level investor is able to shell out $95k for a Dash masternode. Hence, you can purchase masternode shares but it comes with a big downside: you have to give your coins to a third party.

A brief overview of popular masternode coins

Name of coin

CMC rank

Price (at press time)

Number of coins required for running a masternode

DASH (DASH)  

14

$90.26

1000   

NEUTRON (NTRN)

911

$0.01

25,000

PIVX (PIVX)

91

$0.72

10,000

VITAE (VITAE)

198

$1.26

20,000

DIAMOND (DMD)

427

$1.34

10,000.

Should you invest in masternode coins?

U.Today is not here to give you investment advice, but you should be extra cautious when pouring money into master nodes. The truth is, the lion’s share of masternode coins are nothing more than Dash copycats with little to no utility (they are not being adopted in e-commerce, etc.).

Of course, these coins are not outright scams, and the concept of masternode remains promising, but they showed disastrous results during last year’s crypto winter with even the third best-performing currency appearing in the bloodbath. On the flip side, you can still earn top-dollar regardless of what specific coin you chose in case Bitcoin price shoots up, and the whole market appears in the green. Also, different altcoins are pumping from time to time, and you could take advantage of this volatility. To remain profitable, your masternode has to cover the computation expenses and the inflation rate.   

Generally, the yield from the masternode depends on the following factors:

  • the price of a specific coin when the exchange took place;

  • the frequency of payouts;

  • the cost of running a node (computational expenses and so on);

  • the cost of coins in the long run.  

How to run a DASH masternode?

Disclaimer! These steps presuppose that you’ve already installed Dash Core wallet and bought the required amount of Dash on a cryptocurrency exchange.

Source: docs.dash.org

  1. How to set up a masternode? The first thing that you have to do is to send exactly 1,000 DASH, subtracting the fee (such a hefty transaction may take up to a day in order to be confirmed, but you can speed up this process by using the InstaSend feature).

  2. Once your transaction has been confirmed, you are to grab your public key in order to locate your collateral ID and index.  
    NB! Make sure to use the ‘Coin Control’ option that gives you the ability to choose what input you can choose as your output.

  3. The most challenging thing about configuring your own masternode is getting it hosted. A masternode needs a server to process your transactions (having the required amount of DASH in your wallet is not enough). You can literally use your own server that will run 24/7 in your room, or you can set up a VPS, which requires time and some programming skills. Alternatively, you can use any service (for instance, Node40) for managing your own masternode, but it comes at a big price. For instance, Node40 has an annual fee of 3.3 Dash Digital Price is another service that will help you to set up a masternode in a snap.    

  4. When using Node40, all you have to do is to go through a quick registration process, and then you can use the Node40 setup wizard (it takes only several minutes in order to get your masternode running).

In case you deal with any other masternode coins (ION (ION), ChainCoin (CHC), etc.), the modus operandi will be pretty much the same if you do not want to get your hands dirty while setting up a server by yourself. Those who want to save money can install a VPS themselves. Here’s a detailed guide on Ubuntu VPS Setup. Before that, you have to choose a VPS provider such as Vultr or Digital Ocean.

👉MUST READ Dash Price Prediction 2019-20-25 — How Much Will DASH Cost?
Dash Price Prediction 2019-20-25 — How Much Will DASH Cost?

Pros and cons of running a cryptocurrency masternode

Pros:

  1. The ability to earn passive income.

  2. You get regular payouts (the number of payouts depends on the coin of your choice);

  3. You improve the scalability of the network.

  4. Masternodes able to have a say in the future development of the network.

So, you set up a server and get paid. Sounds like a nice concept, right? However, everything has its ups-and-downs.

Cons:

  1. The sizeable amount of initial investment.

  2. Setting up your own VPS server can be tricky.

  3. Cryptocurrencies prices are rather volatile, and you may end up losing the majority of your investment.   

What the future holds for cryptocurrency masternodes?

Not being deterred by the bear market, masternodes are gradually becoming a new trend in the cryptocurrency world.   

It is quite possible that the current definition of masternodes will completely change by 2020. A startup called Eximchain has raised the bar for potential masternodes, requiring them to complete know-your-customer (KYC) and go through a voting process. Basically, this resembles full-fledged elections where members choose among eligible representatives.  

Source: financeandmarkets.com

Meanwhile, a new startup called Kalkulus actually lets users run a masternode without using computation power (Kalkulus will do the job by itself). Colwell explains that a bigger number of nodes translated into a bigger social following.

Cover image via u.today
Subscribe to U.Today on Twitter,and get involved in all top daily crypto news, stories and price predictions!
👓 Recommended articles

Is Litecoin a Good Investment in 2019? Is It Safe to Invest in LTC?


Is Litecoin a Good Investment in 2019? Is It Safe to Invest in LTC?
You may also like:
Contents

Each cryptocurrency has its own positive features and unique peculiarities that allow it to develop and grow steadily. Among all representatives of the market, Litecoin stands alone. The project successfully combines the fundamental factors by which it can claim continued growth in the capitalization rating.

The forecast for 2019 clearly indicates that its most important distinctive details will surely help it move forward, imposing serious competition to the rest of altcoins.


👉MUST READ Zcash (ZEC), Litecoin (LTC), and Dash (DASH) Had Biggest One-Year Increase in Circulating Supply
Zcash (ZEC), Litecoin (LTC), and Dash (DASH) Had Biggest One-Year Increase in Circulating Supply

Features and principles of functioning

Appeared in 2011, the project immediately attracted the attention of users. Its creator, Charlie Lee, has focused on protecting his own cryptocurrency from possible future problems. So, unlike its older brother Bitcoin, Litecoin was initially ready for scalability. LTC cryptocurrency is in permanent operation due to a large number of copies of the program, whose source code was published a week before the start of the plan. The client guarantees security, and its new version has SegWit support.

Litecoin is endowed with a whole list of features.

  • Chain of blocks. This allows you to process a much higher volume of transactions compared to its “big brother”, Bitcoin. It is achieved by increasing the frequency of generation of new blocks, which gives a chance to maintain a larger volume of ongoing operations without modification and, if necessary, change it in the future.

  • Wallet encryption. Encryption allows you to protect yourself from fraudsters. Thanks to this feature, you have to enter a password every time a cryptocurrency is spent. The user also has the ability to view the transactions and account balance. Encryption protects against various viruses that can steal a wallet password and coins.

  • Reward. At the moment, miners get 25 coins for each confirmed block. Following statistics, the number of coins is halved every 4 years.

  • Mining. The mining algorithm of Litecoin is similar to the algorithm of the most famous cryptocurrency, Bitcoin. The main difference lies in the intensive exploitation of RAM during the mining of LTC. Therefore, it is advisable to use ordinary computers with GPU instead of machines with a powerful specialized CPU, for which development becomes quite problematic. The maximum supply of coins is 84 million, and this is almost four times the corresponding number of Bitcoin.

It can also be noted that Litecoin is written in the C ++ programming language. Among the supported operating systems are Windows, Mac OS X and Linux, and many others.

👉MUST READ Top Cryptocurrencies by Mining Revenue in 2019: Bitcoin (BTC), Ethereum (ETH), Zcash (ZEC), Litecoin (LTC), and Bitcoin Cash (BCH)
Top Cryptocurrencies by Mining Revenue in 2019: Bitcoin (BTC), Ethereum (ETH), Zcash (ZEC), Litecoin (LTC), and Bitcoin Cash (BCH)

Relationship to Bitcoin

Despite the strikingly close relationship with Bitcoin, which must be taken into account when analyzing the feasibility of investing in Litecoin for 2019, it is worth noting that the distinctive features of cryptocurrency should be its main development. At the same time, the most important unique features are:

  • More organized, centralized money management

  • High transaction speed

  • Low commission for transactions

  • Ease of making transfers

Charlie Lee stressed that it is Litecoin who is obliged to take the place of the currency that the majority of users will use. At the same time, the existing simplicity, speed and availability of transactions should contribute to the achievement of this goal. In this case, the prospects for the growth of crypto-finance will impress even the most optimistic people.

Differences from Bitcoin

Although the Bitcoin code is at the heart of Litecoin, there are still differences, and in some cases significant. One can distinguish the main ones:

  • More efficient use of a computer’s central processor (CPU) than a video card (GPU), which is fundamentally different from the main cryptocurrency.

  • Due to the increased block generation rate, the transaction is rather short-term and takes no more than 150 seconds.

  • The opportunity of mining in wallet in the SOLO mode or a pool.

  • Mining complexity is recalculated much faster than of Bitcoin’s one.

  • The emission is four times the BTC emission and makes up 84 million coins.

Similarities with Bitcoin

On the other hand, there are also some similar features with the main cryptocurrency:

  • Mining is performed in the same way, albeit using different functions.

  • There is no external control due to the decentralized type of network.

  • Both cryptocurrencies have a limited supply of coins.

  • The anonymity of both wallet owners and miners. Complete freedom of disposal of funds on the wallet.

  • A transaction cannot be undone.

Thus, it can be said that differences from Bitcoin make Litecoin a distinctive digital currency capable of expressing itself in the future.

What about disadvantages?

However, negative factors also exist:

  • With the creation of ASIC-miners, it is more difficult for ordinary users to mine cryptocurrency, and power is concentrated in the hands of large companies.

  • The failure of the LitePay service dealt a serious blow to the popularity of the virtual coin. The developers planned to create a system that had different integration with Visa. Despite the active work and the investment of a large amount, the project was not able to start. In the company, no one could explain what the money was spent. The scandal undermined the credibility of the digital coin.

  • Interdictions at the level of state authorities. Many states cannot decide on the status of digital money. Laws are either not released or are in development process. Only a small number of countries have completely legalized cryptocurrencies.

👉MUST READ The Best Litecoin Wallets 2019
The Best Litecoin Wallets 2019

How to invest in Litecoin

The easiest answer is to do it through exchanges.

Most investors and traders purchase Litecoin for US dollars or BTC (Bitcoin). Since different trading platforms have different trading or purchasing power, be sure to check whether your exchange supports transactions in US dollars or BTC for LTC.

LTC logo
‘Litecoin with man using a tablet computer‘ Image by 123rf

As a rule, the best option is to use a large trading platform, such as Binance (where you can exchange BTC for LTC) or Coinbase (to use a credit or debit card in US dollars).

However, since the cryptocurrency market is a large and, moreover, unregulated industry, it should not be viewed as the same type of investment opportunity as shares of stocks, bonds, or other securities. In fact, traders and investors should consider lots of factors when investing (especially given the volatility of digital assets in recent months).

Ways to earn Litecoin

Besides investing, there also other options to get LTC:

  • Mining. Litecoin is still in its heyday, as was once Bitcoin. With the help of the computing power of a personal computer, it is still possible to actually generate new coins.

  • Cloud mining. The client rents the computing power that Litecoin uses to generate the coins. However, this is a controversial decision. After all, this practice means that landlords of personal computers get more profit than the mining of Litecoin itself.

  • Litecoin cranes. Cranes are advertising sites where a user must enter a captcha and receive a small amount. It is difficult to call it a serious earning as for the whole day you can get only a couple of dollars at best.

Comparing all options, we can say that active mining remains the main method of obtaining LTC.

Technical analysis features for 2019

Since the bottom of Litecoin marked by Charlie Lee has already been passed, you can pay attention to the prospects for further development of the project. As of April 17, 2019, the cryptocurrency chart looks the following way:

 Litecoin chart
Image by Tradingview

It is important to pay attention to the level of $80 – it can be considered as an important support zone, consolidating at which can open the way to growth. Given the damage caused by the protracted fall, it is crucial to clarify that before the beginning of the active growth phase Litecoin should (just like other representatives of the cryptocurrency market), go through the recovery stage. As a rule, it is expressed in a prolonged neutral-positive movement.

The first half of 2019, in the wake of the shocks experienced by market participants, may become a consolidation period. The transition to the bullish movement can be supported by plans of entering the industry of Bitcoin ETF, the opening of the Bakkt platform and a number of other events that can attract serious investment flows.

👉MUST READ Forbes: Litecoin (LTC) Price Triples in Q1 2019, Gaining Over 200%
Forbes: Litecoin (LTC) Price Triples in Q1 2019, Gaining Over 200%

Selling coins for the community’s benefit

Charlie Lee, the creator of Litecoin, sold all his LTC to avoid accusations about the impact on the rate of the coin. This action was intended to make Litecoin an even more decentralized currency. And, despite the fact that after the sale of coins, the Litecoin exchange rate fell, in the long term, such a decision by the creator of cryptocurrency can bring him multiple benefits.

“For a currency to really be … a worldwide decentralized currency, you can’t have … a real leader who’s trying to control things, so to make it more decentralized, eventually I would step away,” said Charlie Lee.

Litecoin showed its record maximum at the moment in December 2017, when one coin cost $374. After its creator sold all of its assets, the price of the altcoin plummeted, and Lee was subjected to unflattering criticism from users. Many experts also called this move frankly unsuccessful. However, such an ambiguous act can really become the basis for creating the most decentralized digital currency.

In any case, this suggests that Litecoin has a strong developer, strategist, and leader who has a clear motivation and strategy for action. Charlie Lee is engaged in the development of his project, regardless of the value of the currency, and it definitely has a good effect on loyalty to its product from users.

Litecoin forecast for 2019: What analysts say

In the first six weeks of 2019, LTC’s rate went up to a new high, where it is currently trading at around $79.

From August 8, the miners' remuneration will fall from 25 to 12.5 LTC. The reduction in mining income will lead to a weakening of interest in mining of the cryptocurrency. In this situation, the fall in the supply of coins is expected to be approximately double.

According to analysts, the rate of LTC will rise approximately until the beginning of August, when the project will reduce the reward for the mining of coins. At the moment, the cryptocurrency is in 6th place in the rating of the largest digital assets – its rate exceeds $75 with a market capitalization slightly above $ 4.8 billion.

Tom Lee, CEO of Fundstrat Global, is confident that by the end of the year, the rate of the coin may grow by 640%.

Forbes logo
‘Forbes website homepage‘ Image by 123rf

Forbes analyst Billy Bambro said that the 6th largest market capitalization of Litecoin cryptocurrency (LTC) will be ahead of XRP by the end of the year and will take 3rd place.

Although cryptocurrency prices are still far from its previous highs, LTC has managed to double its rate since the beginning of 2019.

Bambro believes LTC pricing is a response to the active efforts of the Litecoin Foundation and developers to improve coin security and privacy, in addition to choosing several well-known partners.

The eToro analyst team, led by Mati Greenspan, conducted a serious study of Litecoin. According to its report, the current cost of LTC is significantly underestimated.

The experts note that Litecoin has good network scalability compared to Bitcoin, fast and low-cost transactions and ongoing technological improvements by the Charlie Lee team: atomic swap, Lightning Network, SegWit.

Thus, when making an analytical forecast for Litecoin for 2019, experts take into account all the factors that contribute and increase the popularity of a crypto asset in the future, and also expand its attractiveness in the eyes of investors and the public.

These include:

  • Litecoin functionality → recognition of real practical use

  • Litecoin's technical superiority → faster transaction speed, lower cost, and easy scalability using Segwit and Lightning Network technologies

  • Litecoin decentralization and representativeness → high user confidence and excellent online rating

Among the factors that led to the growth of Litecoin are Microsoft’s plans to create a platform for decentralized processing and storage of digital identification data based on blockchain technology. And Litecoin has become one of those ecosystems that the company considers potentially suitable as the basis of this large-scale project.

These and other advantages of the Litecoin network find a positive response in Litecoin’s forecasts for 2019, and analysts predict a permanent increase in the price of  the cryptocurrency in the May-July period.

👉MUST READ Litecoin Price Prediction — How Much Will LTC Cost in 2019-20-25?
Litecoin Price Prediction — How Much Will LTC Cost in 2019-20-25?

So, what is the decision?

Over the years, Litecoin consistently follows Bitcoin, keeping a little distance from it. The stability of the project is complemented by an important advantage – the coin appeared much earlier than other coins in the capitalization rating. The presence of history allows you to create a “safety cushion” in the form of trust, which is still rare on the cryptocurrency market. Accordingly, Litecoin may well be considered as a good option for investment.

All in all, Litecoin is worth investing in. The top management of the project is actively working on improvements that allow maintaining high positions of “digital silver” in the capitalization rating. In addition, it is likely that in the near future the bear market will completely end, passing the green light to the bulls. This makes investing in the cryptocurrency promising.

Cover image via
Join our Telegram channel to get news even faster!
👓 Recommended articles