Passive Income Strategies with Cryptocurrencies. Part A : MASTERNODES

in cryptocurrency •  2 years ago 

In my continuing attempts to look at the cryptocurrency space with the eye of an investor, I'm searching out ways of generating income.

No, this isn't going to be some spammy attempt to get you to use an affiliate link to any dodgy mining outfit that will rip you off. Instead, this series of articles is my look around the markets to find out if there are ways of generating a passive income with cryptocurrencies. The series will be in 3 parts:

  1. Masternodes
  2. Staking
  3. Lending crytopcurrency to speculators

1). Running a Masternode. Becoming part of the 'infrastructure' of a particular coin. You help secure the network & in return you get some coins...lovely.

Advantages:

  • Nice & passive. Leave your computer running and accumulate $$$
  • Predictable. Often you're able to work out exactly how much income you will generate each month, though obviously the coin will vary in value compared to fiat currencies
  • You own an asset that can appreciate in value. If the price of the underlying currency goes up, your node becomes more valuable. People saw this with DASH & now with PIVX (dammit I didn't jump on that train fast enough). This can be very profitable: You are holding an asset (the currency), which is rising in value. You are receiving a monthly income in a currency that's appreciating in value. And finally you own an asset (the masternode) which is increasing in value.

A made-up scenario
Person A likes a new alt-coin: beer-token. He buys 10,000 at $0.10 each for total investment of $1000.
Person B likes beer-token too. He buys 10,000 and uses them to run a masternode. Total investment $1000.
After a year the coin has doubled in price, brilliant. What are the results?
Person A has an asset now worth $2000, a 100% return
Person B however has done MUCH better. He still owns his coins ($2000), but he's also received a 30% return on his initial investment & earned 3,000 coins over the year ($600), AND his node is now worth twice what it was before. (This is where I get a bit confused, will there be a secondary market for masternodes set up? Because the coin won't need more & more of the things. Will the node be worth more than the price of 10,000 coins? Answers on a postcard please).

Of course if beer-coin started terminally dropping in value, it's likely Person A would be more likely to cut their losses.
After a year, beer-token has just dropped & dropped. It's now worth $0.001. No-one is trading it, or using the network very much.
Person A get's out after the currency drops 30%, he retains $700.
Person B just hold's on... he can't give up his node or monthly earnings (which are worthless at the end of the year). Total wipeout, he's lost his $1000.

Disadvantages:

  • This can be expensive, especially as more people are becoming aware of the potential. For example, running a DASH node requires 1000 DASH (at current price of $75.76 per DASH, that's $76,000!)
  • Risk that the coin you back is a shit-coin & it dies. Worst case: You invest a few $K & lose the lot. You can't lose more than you put in, but there is what investors call the 'opportunity cost'. For example: You choose to invest your $5,000 in a masternode in a network that dies, that means you couldn't invest that $5,000 anywhere else (like the default of simply buying bitcoins)

Currencies currently paying you to run a Masternode:

DASH https://www.dash.org/
Current cost: $75,000 +
Current Monthly Returns of: $518 (just over 8% annual return)
https://dash-news.de/dashtv/ (this shows you your monthly DASH earnings)


PIVX https://pivx.org/
Current Cost: $17,500
Current Monthly Returns: $185 (just over 12% annual return)
http://pivxtv.azurewebsites.net/ (this shows monthly PIVX earnings)


ION https://ionomy.com/
Current Cost: $10,200
Current Monthly Returns: $648 (just over 76% annual return!)
https://masternodes.ionomy.com/

If there more to add to this list, please let me know!

Will Masternodes become an increasingly common way of generating a bit of passive income for the chosen few actually aware of this stuff? There's something very appealing of a laptop sitting quietly in the corner bringing in $500-a-month.

Solutions if you can't afford (or don't want to risk) investing in a full node:

  • gather like-minded friends together to get one together (risks of someone running off with the money I guess)
  • Use a hosted master node service.

Disclaimer: I don't currently own any Masternodes. This article was partly to make me research the field more fully before jumping in.

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@alanfreestone thanks for the article! Does "passive" not include keeping a mining rig running? It seem a tad under represented on Steemit - just a suggestion (unless you don't categorize this under "passive", if so all well and good :3).

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Hi

Thank you for commenting. Yes sure, I'd consider mining passive....but does it meet the 'income' part? AFAIAA it's not currently profitable to mine any coin with normal hardware (i.e without spending thousands on hardware that will become devalued rapidly as the tech advances), after accounting for electricity costs. I had an ETH miner for about 6 months last year & I earned a profit from it, but gradually the difficulty went up & my returns got less & less until I turned the thing off. Of course since the ETH surge I wished I'd kept it running, but I would have got the same benefit simply putting the cost of the rig & 'lectric directly to purchasing ETH in the market. I'd love to be proved wrong though :-) Here's a link to help people compare: https://whattomine.com/coins

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Yes, I would say there is certainly "income" part. Though, this is much better defended by others than myself - though I'll make a couple comments.

"it's not currently profitable to mine any coin with normal hardware (i.e without spending thousands on hardware that will become devalued rapidly as the tech advances), after accounting for electricity costs. "
Thankfully, this statement is likely not true (note how I took off the AFAIAA - if that was there it would, of course, be true as I would be telling you are mistaken of what you think you are aware of :3). You're likely thinking about ASIC miners in this case (Bitcoin etc.) and you are likely not going to make much profit (or even negative) without super cheap electricity.

GPU mining where it might be more fruitful, and becomes CONSIDERABLY more interesting in the profit department if you resell your equipment (non of these are "specialized hardware (like ASIC miners)" they are ordinary GPUS that have other intended uses) when you want to upgrade. Entry can be had for far less then "thousands of dollars" (see peoples rigs on this forum). My current small mining rig can be assembled (with the same parts) for <1500 USD and I should pull in something that resemebles 250 USD (worth) running it for the next month (using ~65 USD of power per month). It is important to mention (in case a seasoned miner sees this and laughs) I am NOT running the most efficient way possible / set up and may undershooting a tad on how much I expect to earn (I'm actually hoping for 3XXUSD worth - a tad more than 4 ETH and hopefully 6+ DECRED).

Now, with ETH going PoS it may not be the best time to start mining, however there are plenty of things to mine (though ETH is probably the best in terms of $/w).

Anywho - the literature and arguments are plenty on the net. You know, if you are considering trying to generate passive income beyond a 1% savings accounts, CDs, or something with extremely low risk (which you are :3). I would considering a mining (unless consider building and maintaining a rig something that is too "active" which I would totally understand) - especially if you are mentioning running nodes with a 76kUSD just as an entry AND the risks of coins become "shitcoins" (nice part about mining is that you are somewhat flexible!).

Yerp - that's my 2c haha! Good luck with your pursuits. I'm also interested in PoS type income - my intention is to hold a portion of my cryptocurrency that I mine in forms that generate PoSish profit. I'm currently holding some ARK (outside of the what I mine) as I like their ideas and generate a very tiny profit from their the DPoS system. I think I will also consider holding and PoS-ing DECRED as well in the future maybe.

I'll be looking forward to your articles! Right, back to your point - I think your perspective of physically mining would benefit from some research into the profitability (just so you have a working knowledge of the different ways generate income in the cryptosphere) - whether you decide to consider it for yourself or blog about are totally up to you!

Sorry if this is a bit disorganized haha :3

P.S.
I also enjoy actually the doing the hardware thing so for me its ideal as I get gain much more than just passive income (pleasure) from it which definitely influences my enthusiasm. And, I'm still very new to mining (thankfully I have experienced colleague to consult). So yeah take my 2c as my 2c - check the googles (that are backed by figures).

The market cap of ion is 6 BTC and having a node costs almost half that is a joke. You are mostly crazy to enter into that one.you will not be even able to go out, or to recover part of your money.

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yeah, i sold my Ion a while ago & just bought more btc... i don't see the merit of it. A friend is still making good income with a few masternodes of some sh1t-coins, but I feel the risk is too high.

  ·  2 years ago (edited)

Hi Alan! Nice blog, nice posts! Regarding profitable masternode investments, there is a gem cryptocurrency called DMD coins. Scarce, passive income via MN and POS. Severely underrated. Dont want to steal away clicks from your post so will not post any links here. Check my signature/blog if you want. And we havnt made alot of advertisements but were about to. So it might be a profitable investment for your followers. Keep it up and followed!

Great article! This would be a really good time to do a follow-up with the (3) coins you used as examples. I'd be interested to see what the cost of starting a MS now would be for them all and what kind of return is being realized.

Yes, dash is really expensive right now, masternode costs around 500k USD, INSANE , But there is a lot of great coins with afordable price, Criptoreal CRS, has a colateral of 50k CRS, worthing around 2k USD, thats great, the roi anual is around 165%, só Criptoreal Is a great option for who want to setup your own Master node, and earn some return.

One important vector in passive income investing with masternodes is when to invest. Buying a masternode for $1,000 which yields 10% will give an ROI of $100 but if that masternode goes 5x (i.e $5000) and still gives an ROI of 10% that would be $500. Investing in the established ones is safe, but a share of your portfolio can also be focused on low cap http://nodesofvalue.com/low-cap-masternodes-with-potential/ and upcoming masternodes http://nodesofvalue.com/upcoming-masternodes/. The market might not have priced these in to their full potential. Do you own research! #DYOR

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