What is a masternode? How did it become one of the most profitable sources of income in crypto only to get destroyed by scams? Is there a way to make profits in masternodes? And, if yes, how?
Disclaimer: This article about masternodes in the state of investment instruments and not technology. Therefore there is a huge skepticism. Everything that I write is my own opinion and not financial advice.
Hey, guys. My name is Trevor. I am the CEO of https://Midas.Investments and the developer of Midas coin.
I have been in the masternode market almost a year. Firstly, as an investor, then in the role of shared masternode provider and now a masternode coin developer. In a series of articles, I am going to collect my experiences over this time to provide a full guide on how to invest, earn and succeed with masternodes.
Let’s begin with the definition of a masternode.
What is a Masternode?
A masternode is an always on server which secures the network by locking up a significant number of coins as collateral to participate in the consensus protocol for a decentralized network. The coins are “locked up” in the network and while functioning as a masternode the coins can’t be moved. Keep in mind that no one is required to function as a masternode any longer than they desire to. The rewards(ROI) allocated to masternodes are normally significantly higher than staking only but this varies by each cryptocurrency. To run a masternode you are normally required to run a high uptime server(VPS), masternode wallet program on the server and lock up exactly the required collateral amount (e.g. DASH is 1000 Dash coins). There are services(like NodeShare) that make masternode hosting easier for inexperienced users once the collateral amount is obtained for a nominal service fee.
Source: https://www.stakeandnodes.com/what-is-a-masternode
Speaking practically: you buy a required amount of coins, install the masternode and start receiving rewards for helping secure the blockchain. The reward received is based on the blockchain specifications (rewards per block, masternode collateral, block time) and the number of online masternodes on the blockchain.
In this article, I will concentrate on coins offering high ROI masternodes, providing a monthly return of investment of 30% to 200%. This may sound ridiculous and it is.
All masternode coins are forks of Dash or Pivx with changes to its reward distribution. One of the most popular and comprehensive masternode monitoring websites, https://masternodes.online/, has 488 such coins to choose from. Sadly, investors of more than 300 coins within this list got scammed by their developers and value now zero – or near zero.
It started a year ago in October 2017 when crypto was moving to its highest peak. New Dash and Pivx forks appeared claiming a revolution in digital payments. In fact, they did not offer anything new but ridiculously high rewards for holding masternodes. During the following two months, every new coin that offered high ROI masternodes got enormous demand until scam coins appeared.
At the beginning of 2018 the market can be summarised by the following points:
- Every day a new coin appears with anonymous developers, weak whitepaper, no unique idea, and the promise of high ROI, flooding the market with the coin.
- Once the coin hits the exchange, all mined coins are sold on exchange, filling all demand and further driving down the price. Alternatively, developers use their premine to dump the coin before others.
- Developers abandon the project only to create a similar coin with a different design.
The cycle continues and more people lose their money investing in projects that are doomed for failure. This resulted in a lack of trust for masternodes, leading to a lower global market cap.
Still, even in crypto and masternode decadence, some projects can compensate all the losses, providing light at the end of the tunnel.
These evolutionary coins proceed to lead the entire masternode industry forward and develop an ecosystem to make masternodes adoption easier.
By combining project analysis with in-depth knowledge of reward and price structure, you can achieve great results and add masternode investments with potential for long term success to your portfolio.
Project analysis
So, you’ve decided to invest your money into masternodes?
When investing in masternodes, you may want to consider these helpful tips and pointers:
- Do not invest everything in one coin or masternode.
Make sure you diversify your investments. If you decided to invest in different masternode coins, make sure you compare their price history. Price graphs should not correlate in the last couple of months. In another case, you are investing in the market as it is and not in the single project. - Masternode coins have a financial pyramid or Ponzi structure.
Each masternode is generating coins that someone needs to buy. If the project cannot provide a stable source of marketing to attract new buyers to the market or at least ensuring the majority of investors hold their coins, the price will dive. The actual use of currency may work, but only in case of relatively low ROI (less than 300%). - If you purchase on exchanges, set buy orders.
They will be most likely filled. Leave FOMO behind. If you need coins immediately, buy half of your desired amount and leave the rest in a buy order. - Always do your research about the coin before you invest.
You are the only one who is responsible for your investments. Do not trust anyone. - Protect your investments.
If you think a project is excellent, spread the word and make sure everyone knows about it. Just make sure that your opinion is based on facts. Support the developer and believe in the project.
To invest successfully, you will need to analyze projects and coins yourself, and I can help you by showing how and where to start.
Product actual value and faith value
The value of a project can be measured by an impact their product has on the market. Remember, only projects that offer a utility or use for their coin will create a strong ecosystem and demand for their coin. All other currencies have strong competitors in a token sphere with better teams. Still, that does not mean a project with a previously tried-and-tested concept will not provide you with an opportunity to make a successful investment.
This is the game we all play here. At the start of the project, we believe that the project team can create something great according to their whitepaper (if one is available) and then either the coin lives for two months and dies or hits rock bottom and creates a stable flat, leading to a decent product but not industry changing.
However, the first two months of the project can give you some awesome opportunities. So, your goal is to find a projects that offers both an actual value of the product and faith value, or how convinced a community is about the success of the project and coin.
The actual value can be estimated by asking a series of questions:
- How can coin be used?
- What is the stage of development and when you will be able to use a minimum viable product (MVP)?
- What additional demand will it create for a coin?
- How many people will know about a coin after the product release?
- What is a potential income for the product?
- And so on.
The faith value is a far more interesting thing to analyze. In that case, we know that masternodes are a Ponzi scheme and can use that fact as the start of our analysis. It can be roughly calculated by the number of people who think that the project has long term potential, the sell orders on an exchange (showing how many investors hold their rewards – or not), and by the activity in their Discord community, etc.
Usually, the faith correlates with the impact developers put in the project and community. If we compare the masternode market with HYIP projects, the success of a project is based on the marketing actions of the developer.
Here are some questions that can help:
- How many announcements does the developer make per week? What is the reaction of a community?
The optimal number of announcements is one positive news per day. At the start of the project, it could be up to three. - What bounties are taking place right now and how many people are participating?
You can take part in bounties; providing decent returns for participation, usually. - How many people are willing to buy coins through orders?
Those orders are called “buy walls.” If a coin is traded on Crypto-bridge, you can see who put those walls by using one of the Bitshares browsers: https://bts.ai, https://cryptofresh.com, https://xorn.cc (the most convenient in my opinion). You will see many manipulations, but there is a lot of useful information about the project. For example, does the dev supports the coin price by his buy walls. - What marketing channels does a team use?
Bounties, listings (there are more than 40 free listings for masternode coins), advertisement, partnerships, youtube, content creation, etc. If you did not find any, ask developers about marketing campaigns. Marketing is the most critical thing in the first month of a project and developer should explain community what are they doing and what are they expecting to get. In response, this usually results in an active and loyal community.
Team analysis
It is pretty hard to analyze teams in the masternode market. Most of them are anonymous, so cannot check their previous experience or their motives of creating a masternode coin. Every developer wants to make money on his project. The only thing that matters is how he does it. Is it by selling 30 masternodes on pre-sale and then a whole premine after listing on the exchange dumping the price down, or by hard work on marketing, price control, and product management?
A team that offers full transparency brings a stable foundation for a project. You know their names and their actual LinkedIn profiles, they are verified on https://review.kydcoin.io/, the core developer interacts with the community via voice sessions or Youtube videos (I am not referring to Midas coin, I am saying that this is a necessity for offering transparency and for the community to believe in the project).
The team needs to have a developer (the one who codes) and a marketing manager (the one who sells and promotes). However, two people on a team are not enough. There is too much needed to be done to do to make your coin at least viable.
The best way to review the project’s team is to arrange a call with them before investing. Make a list of questions, try to reach the core developer and say that you are willing to invest in their project. If the developer cares about their project, they will most likely accept your call, but be prepared from them to be busy at that very moment. In that case, write down your questions and send via email or private messaging. If the developer answered all your questions (in a call or writing), let everyone know about this. The community of this coin needs to see how the developer reacted. This will either help the coin (if the dev answered all your questions) or help investors (if the dev refused to answer).
What questions to ask?
- What experience does his team have? Ask to show his previous projects or work history.
- Why does he think that his product and coin will succeed?
- What are the marketing campaigns running right now?
- When is the estimated date of the product release?
- And so on.
You still need to calculate how much does one masternode earn and compare it to the price levels, to check the coins specifications and top addresses on explorer, to choose a way for your coins to be hosted (yourself or by third parties)… So there are many things to talk about next.
But, this is enough information for now.
These are the links that might help you make your first steps in to this exciting space:
- https://masternodes.online/ — the best masternodes monitoring website. You can find all masternode coins there and sort them by ROI, volume or price per masternode.
- https://www.stakeandnodes.com/ — an educational website about masternodes. There are some podcasts, the list of potentially scam masternodes and great explanations on how the masternodes work.
- MN Rating — The Google sheet that has a great statistical analysis of all masternode coins on Coinmarketcap.
- https://p.midas.investments/ — Midas.Investments platform that provides you the opportunity to invest any amount of coins in listed projects, so you will not need to buy the whole collateral.
We create a subjective rating on coins presented on the platform. It may help you to start your masternode journey.
Thank you for reading. In the next part, I will talk about the investing process rather than analysis. If you want to see the next part as soon as possible, repost this article to your social media. That would help us a lot to create a great educational content further!
If you have any questions, you can find me on Midas discord: https://discord.gg/UBqEhkm
Make sure to check out Midas coin at https://midas.investments
Have a nice day!
