A master node is one of the many ways to make money in the crypto and block chain world. The prospect of a solid passive income sounds tempting. But is it really that easy to get rich and what do block chain operators get out of it?

Masternode Definition – a short journey through the block chain world

First and foremost, a master node, like any other node, is a server within a decentralized network. Nodes are important because they can process transactions and store the block chain. However, a master node is able to perform tasks that a normal node cannot:

• Processing anonymous and confidential transactions
• Instant Transactions
• Are entitled to participate in governance and have voting rights

The tasks and voting rights of a master node can vary greatly and depend on the respective platform.

Many are wrongly convinced that master nodes are an exclusive Proof of Stake phenomenon. This is because a higher investment in the crypto currency is required for these particular nodes and the operators must own and hold a certain amount of coins. But also Proof of Work systems can use master nodes.

Master nodes should bring more security and scalability for the network through the additional functions. Furthermore, the high investment limit prevents monopolization and centralization, such as through pool mining. The operators of master nodes are regularly rewarded for the additional tasks they perform for the network. The amount and frequency of these rewards vary greatly and depend on the platform chosen. The best known and first block chain platform to introduce master nodes was Dash. Many have tried to copy the success of Dash and its master nodes, so today there are many platforms that rely on these particular nodes.

Spoilt for choice – Detect scams, minimize risks

To be allowed to operate a master node, users often have to make a large investment. Fraudsters are increasingly taking advantage of this fact. As News.Bitcoin and some other platforms explained again a few days ago, most projects with master nodes are currently scamcoins. Therefore, prospective customers should do their research well in advance and consider the following points before deciding to operate a master node:

• What is the ROI (Return of Investment)? Even if a high ROI sounds tempting, too high percentages are not feasible in the long run. A solid value should be between 5 % and 25 %.
• Does the project fulfill a purpose? A crypto currency should always have a task or a goal. If it does not exist or cannot be clearly formulated, it is very likely that it will go nowhere.
• Is there a solid white paper? A white paper is the application folder of the crypto project. Some people do without it and prefer to concentrate on the work itself. This may be true for a few, but for most it is more likely to indicate that there is no concept behind it. If a whitepaper is available, it should be as error-free as possible and the content should be easy to understand.
• Who are the people responsible? Interested parties should find out who is behind the respective project and what references these people have. Have they also worked on other projects and how successful were they? Even if the team introduces itself using only pseudonyms, it is better than having no information at all
• Is there a website? If the company only advertises through forums and word of mouth, it could most likely be a quick scam.
• Is there a GitHub site? Github is a website that hosts the public code repositories for projects and should contain details of current code releases and changes.

Presence, social media and communication. How quickly does the team respond to incoming requests? How active are they in social networks? If a project has no new developments to report over a long period of time, it is usually not a good sign.
Share price development. If the share price rises drastically for no apparent reason, this can mean that the price has been artificially inflated. This can happen, for example, when new users buy a master node. However, this price increase will not be sustainable in the long term. As soon as users realize that their nodes are not making enough profit, they will reject the coins and the price will collapse.

If you follow these points you can easily expose the fraudulent Masternode offers. Nevertheless, it cannot offer an absolute guarantee. As with all investments in this highly volatile market, there is always a certain residual risk. However, a Masternode, if carefully chosen, can generate a solid passive income and help ensure the security of the platform.

Masternodes.pro is a platform that provides up-to-date data on various block chain (What is block chain?) projects that allow the creation of master nodes.

Projects that use master nodes

There are a large number of projects that use master nodes in their networks. Many of these projects are unknown, small and not generally known.

The following projects are examples: Block (BLOCK), Bata (BTA), Crown (CRW), ChainCoin (CHC), Dash (DASH), Diamond (DMD), GoByte, Innova, ION (ION), Monetary Unit (MUE), Neutron (NTRN), PIVX (PIVX), Stratis (STRAT), Tezos (XTZ), Vcash (XVC) and XtraBytes (XBY).

What is necessary to operate a master node?

Once the decision for a block chain platform has been made, the first and biggest obstacle is to have the required minimum number of coins. Each platform determines the number itself. This ensures that the Masternode operator will act in the best interest of the platform. The high usage also prevents the network from being centralized.

If he has the necessary capital, practically anyone can operate a master node. In addition, the following points are also important:

1. You should always buy slightly more than the minimum number of coins. If, for example, 1000 coins of a crypto currency are required, at least 1010 coins should be purchased via an exchange or similar to be able to pay the transaction fees.
2. VPS or another type of server to be connected to the network around the clock. Only an active master node can make a profit. The cost of the server should also be taken into account to make the master node worthwhile.
3. A fixed IP address, a wallet and a node address.

Sufficient storage space for the block chain

Once these points are met, nothing more stands in the way of the master node and a regularly paid passive income.

• Especially with the larger PoS crypto currencies, it is impossible to operate a master node independently due to the high costs.
• To enable investors to participate in staking nevertheless, there are so-called staking pools (or master node pools), where passive income can be generated even with smaller sums. Staking Pools are very similar to the well-known Mining Pools.
• The largest providers of master node pools are currently NodePools, GetNode and StakeCube.
• Apart from the fee model and the minimum holding period, the main differences between the various master pool providers are the staking coins offered.
• However, the largest coins, such as DASH, PIVIX, ZCOIN and Blocknet are offered by almost all providers.
• If you are considering an investment in smaller coins, you are advised to take a close look at the fundamental development of the project.
• Although the high return possibilities may seem attractive, staking gains can easily be cancelled out by price fluctuations.