Everything There is to Know When Investing in a Masternode
Obviously, you will not find anything other than enthusiasm and optimism from us here at TheCoinTribune about the future of Bitcoin and cryptocurrency in general. They offer an extraordinary potential from the point of view of a long and even medium term investment.
In this respect, the past decade has given us a chance to glimpse at crypto’s capabilities and it is likely that this is just the beginning. The years to come could prove to be the best for an industry that is still just emerging. Therefore, over a decade after its inception, it still pays to learn and understand Bitcoin, masternodes, decentralised finance (DeFi) or other emerging concepts like staking. It will allow you to be part of a category of investors who will have largely anticipated this ‘finance of tomorrow’ and will most likely reap the benefits before the masses join the party. Even in 2020 you are still considered a pioneer!
However, being part of this movement should not imply that you are taking reckless risks handling new, rather exotic, or even sometimes largely counterintuitive, financial assets. You should instead use this opportunity to make a strong initial investment – the one that will be sure to pay you the best dividends will be that of knowledge!
Today on the Mining Forum we take a look at the key principles which will help you to understand how investing in Bitcoin and masternodes works.
Take advantage of a 5% reduction on any order (machines included!) placed on feel-mining.com with the code TCT.
This article is brought to you in partnership with the company Feel Mining. Crypto investments are risky by nature, so always do your own research and due diligence investing only within your financial means. This article is not investment advice.
Investing in masternodes: distinguishing its value, ROI and profitability
When you the average person invests money into a tracker fund or puts away money in a savings account, you do not necessarily want or need to know the details of the complex financial mechanisms that make it work.
With that in mind, the purpose of today’s article is not therefore to go into technical detail by discussing the blockchain notions of protocol, consensus or governance (but if you do want to know more about this, why not have a look at this article ‘The Masternode Method’).
So that we don’t over-complicate, we’ll put in place a simple rule – to understand the fundamentals of your crypto investment.
What you own, and under what conditions you own it
The essentials in order to understand how you will benefit from your investment
Masternode: the basics
Owning, operating and investing in a masternode refers to familiar concepts. You buy a certain amount of a token (using crypto or fiat money) in order to acquire or join a masternode. This masternode is an essential part of the operation and security of a blockchain.
The quantity of cryptocurrency required varies from one project to another: from a few dozen to a couple of hundred… even thousands of units!
This quantity is specific to each blockchain and it is thanks to this initial investment it is possible to acquire what is called ‘collateral’ (we will discuss this in detail below).
Some masternodes are inaccessible to ordinary folk like us because the initial investment is potentially too big (for example a Dash masternode, which requires an investment of 1000 DASH, or around £55,000 as of November 2020, in collateral).
This is the reason why Feel Mining offers the ‘shared’ masternode (MN) service. The company has its own full MN and allows its customers to benefit from the project’s advantages without having to invest a fortune.
Masternode: understanding using Energi (NRG) as an example
In order to fully understand the parameters that need to be taken into account when deciding to invest in masternodes, let’s take the example of a shared subscription of the Energi project.
As you may know if you visit our website often, I like to sign up to the services we propose in order to know from experience what I am talking about.
So since the beginning of the year (2020) I have had a share of an Energi (NRG) masternode.
As you can see, I have 200 NRG tokens, this being only a fraction of one whole NRG masternode that Feel Mining operates. I paid for these tokens using my Visa credit card directly on the Feel Mining website. Once the payment went through my NRG masternode immediately got to work and started earning me interest.
What is a masternode ‘collateral’?
The best synonym for ‘collateral’ we can find is ‘deposit’. This is the amount of cryptocurrency that you choose to deliberately immobilise in order to operate the masternode. We could also talk about it as ‘ring-fenced capital’.
This so-called collateral definitely belongs to you, even if you delegate the masternode’s management to Feel Mining. However, there are sometimes exceptions to this general rule – the Sinovate masternode, for example, sees its collateral destroyed after a year. This is a measure specific to the Sinovate blockchain aimed at countering inflation.
Regarding my Energi contract, you can see that my collateral is 200 NRG tokens. This figure will never change (apart from if I, for example, decided to add further shares, which is very possible given the current prices).
You can recover this collateral at any time by removing it from the masternode and then requesting its transfer to a private wallet (note that costs are charged if you do this within the first three months of operating the masternode – click here to read the T&Cs in more detail. At the time of writing, these fees were 5%).
Why do I bring this up? Well, with the ‘amazing’ deals popping up weekly offering to chance subscribe to masternode shares for periods of time defined in advance (in some cases 1000 days). You should be wary of such proposals, since they imply that you are not necessarily the owner of your masternode.
At Feel Mining, once your masternode (or share of masternode) has been acquired, all of the collateral definitely belongs to you, and its capital can be returned to you at any time.
The ‘current balance’ tab allows you to view, in two ways, all of the rewards paid out by the masternode:
- either from the first day you signed up – if you employ a ‘HODL’ (long term) strategy in the hope that it will increase in value
- or since the last conversion of your balance into BTC (or whichever other cryptocurrencies are available) – a very practical tool if you want to build a passive and regular income in Bitcoin, as explained in this dedicated article.
What’s a masternode ‘reward’?
Regardless whether you call it reward, dividend or interest… it’s all the same. In return for the immobilisation of the collateral, the network grants you a reward in the form of its token.
On your Feel Mining dashboard, you will see that this reward is credited every few minutes. In all situations, you will have access to your reward amount every 24-hour period. (Good to know: the information is indicative and not guaranteed contractually as it depends on wider parameters over which Feel Mining has no control).
In my case, the NRG masternode has allowed me to passively collect 0.1992 NRG in the past 24 hours.
The equivalent in fiat currency appears under the NRG figure, in this case it is £0.39 (€0.43) at the current operating daily rate.
What is ROI?
Among the frequently asked questions, ones concerning ROI are particularly poignant.
ROI stands for ‘return on investment’ and is expressed in percentages where it varies from one project to another. In the case of the NRG blockchain, the rate is currently set at 39.2%.
This percentage will simply result in the total cumulative amount of rewards in the cryptocurrency in which you have invested over a one year period. It is important to note that this will NOT represent the amount of interest in fiat currency that you originally invested (paid) with.
For example: you bought a collateral of 200 NRG on 4th April 2020 at a price of £485.35 (€556.28), according to market price on the day.
A year later, on 4th April 2021, you will get your 200 NRG + (39.2% of 200) which equals 278.4 NRG.
On the other hand, the price of the NRG token is constantly fluctuating, so therefore it is very unlikely that you will end up with £485.35 + (39.2% of £485.35) = £675.61. Unless by some stroke of improbable statistical luck, this amount will most certainly differ in terms of pounds and will depend on the value of the NRG token on 4th April 2021.
Everything is a question of strategy, you can:
- either regularly convert your rewards into BTC, as mentioned a moment ago
- or keep your rewards, thereby increasing your capital
Price fluctuations – an important parameter
It is essential that before embarking on the fascinating adventure of crypto investment you understand that you will be sailing in tumultuous waters, towards a piece of land that is yet to be fully discovered.
A beautiful image to simply remind you that uncertainty reigns supreme and that your potential gains (or losses) will not only be restricted by the proposed ROI.
As of October 2020 the price of the NRG Token stands at £1.06 and has seen around a 36% decrease since April.
By April 2021, nothing and no one can know what price NRG will have reached… or fallen to
Will it be worth £4? £40? Maybe just £0.04? Anything is possible yet nothing is certain. It’s range has seen it reach highs over £7 as recently as June 2019, but equally saw it bottom out a year earlier to a low of £0.18 in September 2018!
The only certainty is that by 4th April 2021 I will have 278 NRG instead of the 200 invested.
If these 278 tokens are worth less than my £485 initial investment, I will only have to wait a little longer until the next bull run!
If, however, NRG in the meantime has rallied to its all time high, well in that case I’d have well over £2,000 in my pocket, in other words a capital appreciation of over 400% in fiat terms.
Are there any service fees?
In its business model, Feel Mining is paid by its customers’ rewards. This is an interesting approach as in order for the company to earn just a little money, it must do everything to make its customers earn a lot!
Furthermore, when you subscribe to a masternode offer on the site, you should not be surprised by the difference between the formal value of your quantity of tokens and the proposed price.
There is a cost to running a masternode which requires skills, time, energy, as well as logistical and even physical assets (such as server management and physical storage, performance management, maintenance, H24 monitoring and so forth). These are generally beyond the reach of the individual and usually reserved for experienced professionals who can take care of such things.
Therefore, this is the added value that Feel Mining can contribute to your investment, meaning you only have to worry about your investment strategy, which can be selected in the ergonomic and secure environment that they have created.
Understanding the Bitcoin’s profitability
If the purpose of this Mining Column is particularly devoted to the presentation of masternode mechanics from an investment perspective, it is impossible to conclude with anything else but the mother of digital currencies, Bitcoin!
You probably know by now that the Bitcoin network doesn’t use masternodes, but it is possible for miners to collaborate together – there is no additional benefit in the same way you would be rewarded with Dash.
As for Bitcoin, and in addition to buying it outright with a trading or holding perspective, an implementation of a mining strategy would be the only way for an investor to have recurring income in BTC.
Other articles in the column go into detail about these different strategies which you can refer to:
- You can buy and operate (or have Feel Mining operate) dedicated machines, thus benefiting from them. The company takes care of everything from the buying and setting up to the daily running of the mining machines
- You can subscribe to a cloud mining contract. In other words, you can ask to benefit from some of Feel Mining’s Bitcoin mining firepower for your own benefit
These two approaches are both the simplest and most profitable that can quickly set up a Bitcoin investment plan.
A word from Chloé, Feel Mining’s CEO
“In this lockdown era we find ourselves in, many people are browsing the web and some are discovering the world of cryptocurrency. This is the reason why we decided to extend our chat opening times to 9am – 11pm, in order to meet their expectations.
Strangely this lockdown has created a longing for contact and discussion. This human bond – which is no longer possible at the moment for us, but at any cost transcends the barriers of lockdown!
So we decided to be even more present because we are LUCKY to be able to continue to work from behind our computer screens.
Thanks to many hours of discussion, an obvious observation has been highlighted: there is far too much confusion between the different terms in this rapidly growing ecosystem, which almost has its own language! Misunderstandings can arise, which means it’s difficult to answer coherently.
We therefore thought that going through the lexical fundamentals would be of great help. Explaining terms and processes with more accessible words will make everything more transparent in an environment that can sometimes seem opaque.
I hope that thanks to this article, the notions of ROI, collateral and rewards now are terms you feel comfortable with!”
Make sure to take advantage of 5% off any order (including machines!) placed on feel-mining.com using the code TCT.
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Aventurier dans l'âme, j'ai decouvert le bitcoin lors d'un voyage au Japon, ce sujet m'a tout de suite passionné et je voulais ecrire dessus, on ne peut passer à cote de l'or des millenials !
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.