Besides staking and mining, masternodes is another way through which you might want to make a passive income in cryptocurrencies. As the name implies, this is a node with extra responsibilities in a crypto network. By crypto network we mean a blockchain in which you are part of, say Bitcoin or Ethereum or Litecoin and now Dash for those who love masternodes. Each has its own custom blockchain or dApp protocols.
If you are running a node for that network, which basically, means being part of the decentralized network and which is done by downloading and running their custom blockchain software on your computer, you can either do so by downloading the network’s blockchain in full or partially. A masternode runs a full copy of the blockchain for that particular crypto but unlike the ordinary node, has extra responsibilities such as relaying block transactions; ensuring privacy of transactions; ensuring instant transactions; participating in governance and voting; and enabling budgeting and treasury system in cryptos. But the tasks to perform also vary from one crypto network to another.
Not all cryptocurrencies have masternodes. For a list of masternode coins or coins that have masternodes, you might want to look at this list.
Which masternode should I run?
When you want to run a masternode with a crypto , basically what you do is find out the most profitable one unless of course you have other intentions like you want to just run a node of a network you are part of; then know the number of coins you would need to deposit to activate the masternode – which varies from one masternode coin to another, then the benefits of running a node – basically all networks reward people running the network’s masternodes regularly, then you may want to look at the computer requirements of running a masternode in that network, and possibly the probability of success of that network.
Actually, you can use masternodes.online or masetrnode.pro or masternode,info to track stats about different masternodes and their Return on Investment and decide from their which masternode to run. You can also use calculators on these websites to estimate how much you would earn running a specific masternode.
Getting started with a masternode: running a masternode
To start, you would need to acquire a machine capable of running the software required. For Dash masternodes, for instance, you would need a CPU of minimum 1 GHZ though the recommended is 2 GHz, RAM of 1 GB though 2 GB is recommended, and storage of 8 GB.
Once you have the hardware, you would need a subscription to a server or VPS, which can be done with DigitalOcean and Vultr at a cost starting at $5 monthly; a dedicated IP address that usually comes with the VPS; then you might want to consider tools such as dashman that help you set up a masternode quite easily.
Setting up a Dash or PIVx masternodes without third party tools requires you to install the software on your machine or on a VPS server. With PIVX, you would need to install a local control wallet that will be used to collect the rewards from running a masternode. Nevertheless, some set up is required when connecting this local wallet to the VPS. Basically, Dash, PIVx or other masternode coins provide set up guidelines on how to set up a masternode on your own. For details on master
With some crypto networks, you would only require to download their wallet and install it, then activate masternodes from a button in their wallet after you have deposited the required coins in the wallet. One-Click masternodes, they are called, because you will not need to do complicated VPS set ups or do the manual codes when setting a node on your machines. A good example in this category is Divi Project, whose One-Click masternode feature allows customers to install the wallet, deposit the coins and start off a masternode in under 1 minute once the software is downloaded.
Running it on a VPS will require you to reload the VPS balance if it gets exhausted, in order to keep masternode running.
Masternode pool sharing and hosting services
Another alternative for running a masternode is the use of masternode hosting services although you would require to find a trusted masternode hosting service before you can trust them with your coins. With these services, you send coins to a wallet you might not have control. Plus it is possible to use masternode pools or shared masternode which allow you to, instead of contributing the initial amount required to set up (for instance 1000 DASH tokens to run a DASH masternode), you can contribute part of it and run the one masternode with other guys who contribute part of the initial capital. You split the rewards with them. For more details on masternode hosting, refer to this guide and for masternode pools or shared masternodes, refer to this guide.