Masternodes offer consistent passive income, making them an enticing prospect for investors looking to diversify their portfolios. But then comes the tyranny of choice. There are a rapidly expanding number of Masternode propositions, each with its own pros and cons, and deciding which one should receive time and investment can be daunting.
The first thing to look at is the way Masternodes are set up and run and how they differ from, say, the full nodes running on the Bitcoin network, for example.
Full nodes are free to validate blockchain information wherever and whenever they like. They are free spirits, going where the work is most profitable, and they enjoy returns from the projects they support on an ad hoc basis. The downside of this for a project is that there is no guarantee that there will be enough capacity to provide the real-time data-validation a project needs when it is needed.
How Masternodes are different
Masternodes on the other hand, are monogamous, committed to a specific project. They are essentially a server that keeps a complete, real-time back-up of a project's full blockchain, receiving returns each time a block of transactions is verified. Committing a stake for the privilege of running the node cements the relationship.
This approach means that a project always has capacity and processing power available to ensure information passing through the network is validated.
Both full nodes and Masternodes are paid if they are the first to validate updates to a blockchain, but Masternodes are in a far smaller field of competitors, making it far more likely that they will receive the rewards.
An efficient approach to Masternodes
Given these advantages, why is it important for investors to be careful about selecting the right Masternode to run? After all, if you are going to be enjoying passive income for each successful validation, then surely it's simply a question of supporting as many Masternodes as possible to ensure that your risk is spread.
Here are three reasons why this is an inefficient approach.
Firstly, established, successful projects are far less risky even if the rewards might be lower. Success breeds success and this is where there is the most validation work to do.
At the same time, taking a stake in a Masternode can be an expensive proposition, with some projects charging in the region of USD150,000 for a Masternode stake. There are lower priced options, but selecting a potentially successful early stage project that is using the Masternode approach is as complicated as any form of early stage investment.
Finally, if a project fails to perform strongly, develop its technology or attract users, the value of its tokens is likely to fall. There's no point earning more tokens if they are depreciating faster than you earn them.
Balancing economics, fundamentals and market conditions adds a level of complexity to investment that could deter many.
INDX brings unique perspective
Out proprietary algorithm selects an optimum portfolio of Masternodes, the results of which are then analysed by a panel of technology and traditional investment experts. This gives us a unique perspective across the Masternode sector, a perspective that we intend to use to help spread best practice as the space matures.
As with any financial instrument, investing in Masternodes offers the promise of attractive returns but this is an emerging and highly specialised sector. The INDX token offers investors a simple gateway to Masternode investment, a liquid asset, and a unique way to gain exposure to cryptocurrencies.
INDX is making it simple to invest in the masternode sector. We want to ensure that everyone can benefit from the digital economy by reducing uncertainty, risk, energy consumption and wasted time.