Making money on cryptocurrency is not limited to mining, investing, and trading. Running a masternode is another way to earn income from crypto. Learn how to do this and explore the top 10 masternode coins in 2022.
What Is a Masternode in Crypto?
For each blockchain or cryptocurrency, it is beneficial to have several blockchain copies stored on different computers. It serves for maintaining network decentralization and increasing the blockchain security level. Computers that have a copy of blockchain downloaded are called nodes. Among them, there are devices with increased capabilities. They are called masternodes. The main aim of a masternode is to reject the blocks that don't comply with security requirements or are harmful.
To launch an attack on a blockchain, a hacker would need several masternodes. It is not cheap. Additionally, the hacker would need to persuade other masternodes that fraudulent activity is not a fraudulent one. It is almost impossible to do because masternodes confirm blocks from different countries. They collect information about a block and only then do they vote for registering the block in the blockchain.
Masternodes are responsible for data authenticity and the security of their owners` funds. The more masternodes are there, the safer the network is.
The masternode owners receive higher rewards than those of ordinary nodes because their capacity is higher.
Along with awards, masternodes bring their owners income from coins, we can call this income dividends. The masternode owners can use crypto paid as dividends like they would use any cryptocurrency: sell it or keep it in hope that it will grow in price. Another option is to invest in one more masternode device to get more income in the future.
Differences Between Mining and Masternode
Masternodes are not the same as mining. Mining is confirming transactions by solving cryptographic puzzles. Only the miner (or the miners) that managed to confirm a block get a reward. In the case of masternodes, all of them get a reward when a block is confirmed. Also, a masternode owner doesn’t have to invest in expensive mining equipment.
The Pros and Cons of a Masternode
The benefits of a masternode are evident:
- Masternode owners get rewards for participation in the network by ensuring its safety and decentralization.
- Running a masternode is more ecologically friendly than mining.
- There is no need to buy expensive mining equipment.
- Masternodes run on both PoW and PoS networks.
However, there are drawbacks, too. They are mostly connected with the masternode ROI. Running a masternode in a cheap coin’s network might not be profitable. Also, the profit from a masternode depends directly on the number of transactions in the network. So, the network and the platforms where the coins are traded shall not have issues with liquidity.
Profit from a masternode cannot be forecasted more or less accurately because cryptocurrency prices are very volatile.
What to Look for in a Masternode Coin?
When you are choosing a masternode coin to invest in, make sure the coin price is growing. Check whether the coin is traded on the platforms with the appropriate liquidity level. It is better when the coin is growing in popularity. All these factors will influence the ROI of your masternode.
Investing in Masternodes
A quick example will show you how to calculate the potential income from a masternode. Take a network where masternodes are used, for example, the Dash network.
To run a masternode, you would have to have 1,000 DASH coins. When the DASH network was launched, one coin cost 1 USD, so, to run a masternode, you would have to invest 1,000 USD (yes, you need to have a specific amount of coins to be able to run a masternode). Now, when one DASH is more than 100 USD, those who invested in running masternodes in the DASH network earlier, have already earned significantly.
Now though, to start running a masternode in the network, you would need to pay not $100,000 rather than $1,000, which is not affordable for the majority of people. When will the investment pay off? It depends on the number of transactions in the network and the coin’s price fluctuations.
What Are the Best Masternode Coins to Invest In 2024?
The most popular masternode currencies (most of them can be purchased on LetsExchange without any hassle and limitations) are the following.
Dash
Dash is the first coin that started supporting masternodes and paying users fees for running and maintaining the network. This coin is also the most popular among the vast variety of masternode coins.
PIVX
PIVX is another popular coin that supports masternodes to run the network. PIVX is a fork of Dash. It combines the best features of Dash and Bitcoin. The main difference from Dash is that in the PIVX network, all the network participants have a right to vote.
Chaincoin
Chaincoin is a cryptocurrency that runs on the Proof-of-Work algorithm and supports 11 hashing algorithms. The masternodes` network ensures the anonymity of transactions in the Chaincoin network.
SmartCash
Smart Cash or SMART is a decentralized economic system. Its aim is to make its community benefit from the project.
ZCoin
ZCoin is one more decentralized cryptocurrency. The ZCoin project is based on zero-knowledge proof. Users can send and receive coins without disclosing any information about the transaction, even without disclosing what coins belong to them.
ALQO
ALQO is a project that combines financial and commercial blockchain services into one center. The ALQO network is used to store digital data and simplify transactions.
Phore
Prohe doesn`t have any special features. The project is aimed at making transactions maximally confidential.
Syscoin
Syscoin is a platform. It is based on the blockchain and focuses on creating an infrastructure that is required to attract different types of businesses to the blockchain. One of the most significant features of the infrastructure is the so-called Blockmarket. It is a combination of the Syscoin market and a wallet that supports the coin. The Blockmarket enables users to buy and sell coins and send encrypted messages.
Stakenet
Stakenet is the first currency that started using TPoS smart contracts (Trustless Proof-of-Stake Contracts). One of the distinctive features of Stakenet is the Trustless Betting technology. Within it, a special shared key is used. It is provided to the second party for staking purposes.
MNPCoin
MNPCoin utilizes the Proof-of-Stake algorithm. The awards for block confirmation are divided between the masternode holder and the operator in the proportion 60:40 respectively.
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