What is the primary reason traditional investors jump on the crypto bandwagon? Financial freedom, diversification, or passive income? All of the above. But, if you were to ask a newbie investor why they put their money in such a volatile market when they could get up to 7% APY by putting their money in the bank account, they would most probably say ‘higher returns.’ Contrary to popular belief, crypto investors are not looking to avoid risk. They are just looking to manage it.
Crypto investors realize that risk is where the reward is. In the high-risk, high-reward game, you can either get your hands dirty or sit on the fence and watch others play. Another thing that’s true about the crypto market is that it’s full of innovators unlocking new realms of income generation.
However, making money in the choppy market is always going to be challenging. It takes years of practice to master technical analysis and fundamental analysis that can help you predict market movement accurately. If you are a pro at speculation, you have many reals to fill your bags, i.e., spot, futures, options, and perps. For others, there are alternatives to generate a steady passive income while keeping the risk at bay. One such alternative is staking.
Understanding The Potential of Staking
If you have been in the crypto space for some time now, you must have heard of the concept called Proof-of-Stake (PoS). It is a consensus mechanism that is necessary to validate transactions before they are stored on the blockchain. The PoS mechanism has validator nodes or miners at its core. But miners have certain limitations. Blockchain networks need additional notes to contribute to the network’s security and expedite transaction validations.
It is these nodes that stake a certain number of specific cryptocurrencies to contribute to the network’s operations. But why would anyone lock in their tokens to contribute to a random network’s capability? The answer is passive income. Those staking their tokens earn a fixed APY, depending on the number of tokens they have staked. While staking also includes a certain level of risk, it certainly is lesser than that in active trading.
Why Masternodes?
Staking might sound like a thrilling concept, but what if I told you that you can get the same returns by putting your money in a bank account? If minimizing risk is your goal, why turn your FIAT into a random cryptocurrency? We are already beyond the hype phase, and people are hardly getting 4-5% returns through staking, i.e. way less than the interest from traditional banks. Staking basically is the same wine in a different bottle. The image below has some of the top cryptocurrency networks and the corresponding APY for staking.
Thus, we need alternatives that enhance your earning significantly. That’s where masternodes fit in. Masternodes are an evolved version of staking with less competition and higher ROI potential. A simple Google search of the term ‘masternodes’ will tell you how Dash single-handedly dominates the masternodes market for now. But a paradigm shift is around the corner with fundamentally strong projects like Morpheus.Network joining the game. To make it even more interesting, Morpheus.Network is offering up to 18% APY to masternode validators.
Here are a few things you need to know about masternodes:
- Unlike mining, you can set up a masternode with your regular PC and hardware.
- As a masternode validator, you are responsible for validating and verifying transactions on the blockchain to ensure fast and efficient consensus.
- In some networks, masternode validators also get voting rights. Thus, you can contribute to critical changes and developments leading to the betterment of the network.
- Masternode validators can re-stake their tokens after the conclusion of the lock-in period to leverage compounding and increase their ROI.
- A lot of newbie investors are still unaware of masternodes and hence it is a goldmine waiting to be discovered.
While it would be wrong to expect the kind of returns you get by trading derivatives, masternodes are a viable option to generate a steady passive income and create generational wealth. Here’s a chart highlighting some of the top masternode programs along with the ROI.
Note: The masternode projects above have been rated on the basis of their market capitalization, community strength, and ROI. These figures may vary with the change in market cap and ROI.
Things To Keep In Mind Before Setting Up a Masternode
While setting up a masternode sounds interesting due to its ROI potential, it does have a certain degree of risk, like any other monetization opportunity within the crypto bandwagon. Here are a few things you should keep in mind to mitigate that risk:
Research the Project: Research the blockchain project you’re interested in thoroughly to understand what you are getting into. Dig deep to learn about the use case, value proposition, and ultimate goal of the network. Finally, go through the project’s social media, community discussions, and technical documents to ensure that it is a legitimate project.
Minimum Investment: Different cryptocurrency networks have different minimum staking requirements. Read the instructions carefully to learn about the amount of cryptocurrency needed to set up a masternode. Make sure you have the required amount of tokens in your wallet to set up a masternode.
Hardware and Hosting: Masternodes need to be operational 24/4. Failing to do so may result in the failure of your masternode. Go for a reliable hosting service or set up a VPS (Virtual Private Server) to ensure that the masternode is fully functional. Your server must have sufficient processing power, memory, and bandwidth for seamless operation
Risk Management: Since you are staking your cryptocurrencies, you must be mindful of the fact that a market fluctuation may directly affect your ROI. So avoid going all in in a single network.
Lock-In Period: Every masternode network has a certain lock-in period. Make sure you have the necessary bandwidth and tokens to keep the node running until the lock-in period.
Wrapping Up
The crypto market offers multiple avenues to generate passive income, and running a masternode is one of them. While masternodes are similar to staking, the potential ROI is higher. If you want to earn more interest than what a traditional financial institution or bank has to offer, it is about time you tried setting a masternode. Happy earning!