Staking in a masternode pool – A good passive income?

Last Updated on August 11, 2022 by aicrypto

Masternodes are becoming increasingly popular as they offer everyone a passive source of income. However, acquiring individual Masternodes can be very expensive for you, depending on which coin you use.

The higher the stake, the higher the risk of the individual. To minimize this risk and to take advantage of the opportunity of a large community, so-called Masternode Pools were created.

↓ Learn more aboout the StakeCube masternode pool ↓

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A masternode pool always refers to a specific coin. It thus offers everyone the opportunity to profit from the blockchain. This novel system offers you a very high level of security and thus makes the Blockchain even more popular.

The advantage for the individual

A masternode pool offers you many benefits. The biggest benefit lies in the large number of people who gather in a community and pursue a common goal. In this way, people all over the world can pool for a masternode, minimizing the cost per head.

Through this system, people have the opportunity to get a share of a masternode despite a small investment. The risk of the individual is thereby reduced.

What are masternodes?

In somewhat simplified terms, masternodes are the servers in the network of a cryptocurrency. Unlike regular nodes, they perform a number of functions.

The functions can differ depending on the blockchain. Nodes are the nodes in the network of a cryptocurrency and keep the decentralized network of the blockchain running.

Nodes collect new transactions from miners and add new blocks to the blockchain.

Unlike regular nodes, master nodes usually perform other tasks and functions. While Nodes are mostly operated for free, it is the rule for masternodes that the owners are compensated for their services.

The first masternodes were introduced by Dash (DASH). The masternode system is also referred to as “Proof of Service” (PoSe).

  • Masternodes require a certain amount of coins to be deposited in the nodes.

In the case of Dash, this is 1,000 DASH. Only then is a node authorized to execute more advanced functions and be remunerated for it. In principle, the process can be compared to staking, even though the effort is higher.

  • Masternodes must run around the clock and perform various tasks.

In addition to compensation in the form of masternode coins, masternode owners also receive additional rights, such as the ability to participate in voting.

How do Masternodes work?

Dash is probably the most famous masternode cryptocurrency among them. After a masternode owner deposits the 1,000 DASH in the current Dash core wallet, he or she can register the device as a masternode on the network.

After that, the masternode performs a number of special functions, such as instant transactions or anonymous coin transfers.

Users can also participate in votes to develop the blockchain. For their services, they also receive 45% of the Block Rewards generated by the miners.

↓ Deposits and Withdrawals on StakeCube

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Cryptocurrencies that use a masternode

A number of cryptocurrencies use the Masternode system today, and many of them belong to the lesser-known blockchain projects.

A small selection of cryptocurrencies using Masternodes:

  • Dash (DASH)
  • Chaincoin (CHC)
  • DeFiChain (DFI)
  • Syscoin (SYS)
  • Zcoin (XZC)
  • SmartCash (SMART)
  • Blocknet (BLOCK)
  • Diamond (DMD)
  • Nodetrade (MNX)

Advantages of masternodes

Masternodes provide a second layer on top of the blockchain layer and offer various protection and service functions.

  • Like nodes, they enable transactions and provide communication within the network.
  • Furthermore, they provide additional functions that could not be provided by the blockchain itself or would be difficult to provide without burdening the overall network.
  • They also provide an additional layer of security by tasking individual masternodes with monitoring and verifying new blocks.

The Block Rewards that the masternode operators receive for their services provide the incentive to do their job properly and for the good of the network.

Another benefit is that operators must freeze their coins, similar to Proof of Stake. This tightens the overall supply as these coins and tokens are not available to the market. This can have both a price-increasing and stabilizing effect.

Disadvantages of masternodes

The cost to be able to operate a masternode varies depending on the cryptocurrency. In the case of Dash, interested parties would have to spend a smaller fortune to be able to participate.

  • The high requirements lead to centralization tendencies, as can also be observed in proof-of-stake. While the higher centralization often leads to high efficiency, it contradicts the original decentralized blockchain idea.

Cryptocurrencies and projects based on a masternode run the risk of being controlled by a few, large players. Theoretically, a few actors with bad intentions could join forces and manipulate the network.

Reputation mechanisms are designed to ensure that such actions are punished and that the players lose their revenues and frozen crypto assets if they take bad actions.

↓ Integrated Exchange on StakeCube

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Is it worth it for retail investors

Due to the high requirements for operating masternodes, many private investors decide to participate in a masternode pool like StakeCube.

In such a pool, only a small investment is necessary to build a passive income with cryptocurrencies.