Not every method of earning money from the cryptocurrency market needs to be hands-on. In fact, passive income is an increasingly important part of the cryptocurrency picture.
One of the passive income makers gaining popularity is by becoming a masternode for your chosen coin. Hosting a masternode can not only be profitable; it also contributes to the overall health of the blockchain you aim to support.
Masternodes differ from standard nodes in several ways, but the most immediate and important are uptime and responsibility. Creating and hosting a masternode can mean a sizable commitment of time and resources. Ultimately, however, blockchains that utilize masternodes incentivize them well, as the broader the masternode network, the better the blockchain ultimately performs.
We’re going to briefly discuss what a masternode is, what purpose it serves in a blockchain, and we will list the top companies for VPS hosting a masternode.
What are Masternodes?
- 1 What are Masternodes?
- 2 Becoming a Masternode
- 3 Masternode Hardware
- 4 Earning Money with Masternodes
- 5 Mastering Masternodes
- 6 Top VPS Providers for Masternode Hosting
- 7 Vultr
- 8 DigitalOcean
- 9 Linode
- 10 VPSDime
- 11 Virpus
- 12 Kimsufi
- 13 VPS Server
- 14 InterServer
- 15 MNX.io
- 16 OVH
- 17 Secured Speed
- 18 VIRMACH
- 19 RamNode
It’s helpful to understand what exactly a masternode does before we get into the nitty-gritty of setting one up. Essentially, a masternode is a full node, or a wallet that is always totally synced with its blockchain.
That last bit is important. The masternode needs to experience almost completely uninterrupted uptime to perform its duties on the blockchain.
Normal nodes support the blockchain and relay transactions. Masternodes, however, aid in keeping the blockchain private; perform instant transactions; play a vital role in governance, including voting; and make it possible for blockchains to maintain budgeting and treasury systems.
It’s worth fleshing those functions out a bit. Similar to a proof-of-stake system, masternodes hold a set amount of currency within the blockchain’s network. This alone supplies a substantial barrier to entry, as the amount of currency can be quite large.
This currency serves as a sort of anchor for the blockchain. A well-stocked masternode network has enough currency locked up to prevent any one wallet from establishing a monopoly on the blockchain and effectively centralizing it.
Masternodes’ increased capabilities regarding privacy and instant transactions are somewhat guaranteed by the amount of cold, hard cash it takes to operate one. Basically, the amount of money spent just to qualify to be a masternode should, theoretically, incentivize the masternode operator to keep their operations honest and running at optimal capacity. This collateral aspect of masternodes also comes into play in governance and voting. In theory, each masternode should be invested enough in the blockchain to ensure their decisions regarding its future are for the blockchain’s own good – or at least not malicious.
Becoming a Masternode
Sounds good – so, how does one set up a masternode and begin earning passive income, while simultaneously protecting and fostering the growth of any given blockchain?
The short answer is – it depends.
The long answer is that each blockchain has its own masternode requirements, although these can usually be broken up into two broad categories – staking and operations.
The first is relatively straightforward, and the amount that needs to be staked varies from blockchain to blockchain. Remember that staking is a way of keeping the masternode operator honest; you’re unlikely to make poor or outright damaging decisions regarding the blockchain if you stand to lose your own money.
On the Dash blockchain, the requirement for staking is 1,000 DASH. As of October 2018, this amounts to more than $162,000.
From just this one example, we can see that the barrier to entry is deliberately set high. Nor is Dash a crazy outlier, though it is on the upper end of the staking spectrum. PIVX requires masternodes to stake 10,000 PIVX, or about $12,000 worth.
If you’ve got enough capital to stake a masternode’s worth of any given cryptocurrency, the next step is making sure you have the operational requirements.
Remember that a masternode has to be up and running 24/7, with no interruptions, in a fully synced state.
Because the hardware requirements for that kind of job can be demanding, there are many server companies who offer virtual private servers. A virtual private server, commonly referred to as a VPS, is a machine run remotely by a masternode user on a third-party’s hardware. The third party provides the capital investment in equipment, while the masternode operator provides the staking money and shares in the return on investment from the masternode itself.
There are legions of different VPS hosts, all with their own technical capabilities and fee structures. Since you’re liable to be staking tens of thousands of dollars’ worth of a given cryptocurrency, it pays to shop around and find the VPS that leaves you with the largest possible share of your masternode passive income.
Earning Money with Masternodes
Which leads us to the all-important question – how much money can one make operating a masternode?
Once again, the short answer is that it depends. Since each blockchain has different masternode requirements, the return on investment can be quite different. Additionally, there are individual costs to consider, including VPN fees or – if you’re operating your own hardware – the hardware’s initial cost and ongoing electrical costs.
Here are some brief guidelines for deciding which blockchain is best for you, as a potential masternode investor:
- Do you believe in the coin’s technology and purpose? As a masternode operator, you’re going to have a direct say in the future of the coin. If you don’t believe it has long-term potential, you’d be better off investing in another blockchain.
- Are the staking costs doable, given the expected return on investment? Some of the coins’ staking costs could produce sticker shock, but remember that masternodes are compensated for their “work.” Spending $100,000 versus $10,000 is a more complicated question than it seems. If the $100,000 investment produces a larger return on investment, it’s ultimately the smarter money plan than the $10,000 investment.
- What are other folks saying? Masternodes exist as a community. What are extant masternodes saying? Are they happy with their returns? Is there competition to become a masternode, and how much do their votes matter given the coin’s governance scheme?
- Is development of the coin active on GitHub or elsewhere? Even stunning returns on investment are a bad bet if the coin looks to be going nowhere.
- Are the hardware requirements outlandish? Can you build a working rig yourself, or will you have to use a VPN? If so, is there a VPN with your technical requirements in your price range?
Operating a masternode can be a lucrative way to enter the cryptocurrency market. Perhaps more importantly, it can be a chance to support a given coin of your choosing in its development. Although the upfront costs can be high, no one expects you to work for free. Check out each coin’s expected return on investment and balance it against your capabilities and upfront costs. Remember that you’ll have a vital role in guiding the coin’s development, so make sure it’s a project you’re comfortable supporting for the long haul.
Overall, masternode operation does not need to be complex, though it is likely to be costly at first. Doing the proper amount of research at the very beginning can shave significant costs – and hassle – off your final investment.
Top VPS Providers for Masternode Hosting
We have collected together all the top hosting companies which offer VPS hosting which is suitable for hosting your masternodes. These companies all have good reputations online so you should be happy with any of them.
Vultr also offers a range of options for VPS servers and related servers with price to suit most requirements.
- 15 datacenters around the world
- Instant deployment
- Infinite operating system combinations
- 100 percent Intel cores
- No long-term contract
- Feature-rich control panel
- Root administrator access
- Powerful API
- Prices starting at $2.50 per month for one CPU, 512 MB memory, 500 GB bandwidth, and 20 GB SSD
- Up to $320 per month for 16 CPU, 65,536 MB memory, 10,000 GB bandwidth, and 400 GB SSD
DigitalOcean offers a range of virtual machines with add-ons, storage, and more.
- Hourly rates available
- Optimized and flexible plans available
- Numerous tutorials and guides
- Prices start at $5 per month for 1 GB memory, one vCPU, 25 GB SSD disk, and 1 TB transfer
- Up to $960 for 192 GB memory, 32 vCPUs, 3,840 GB SSD disk, and 12 TB transfer
Linode prides itself on offering the fastest network and hardware in the industry, including scalable environments.
- 24/7 support team
- Comprehensive guides
- Power API, CLI, and deployment StackScripts
- Longview, Linode Managed, NodeBalancers, and Backups
- 99.99 percent uptime guarantee
- Prices start at $5 per month for 1 GB RAM, one core, 20 GB SSD, 1 TB transfer, 40 Gbps in, and 1,000 Mbps out
- Up to $640 for 80 GB RAM, 20 cores, 1536 GB SSD, 20 TB transfer
With a focus on Linux and the option of Windows support, VPSDime is another popular option.
- Support for popular Linux distros
- Full root access
- Full SSD storage
- Fast network
- Inclusive control panel
- Prices starting at $7 per month for four vCPUs, 6 GB memory, 30 GB SSD, 2 TB traffic, and 10 Gbps Uplink
- Premium VPS starting at $20 per month for one dedicated core, 4 GB memory, 60 GB SSD space, 2 TB traffic, and 10 Gbps Uplink
The SSD-Cache VPS plans are the most basic option from Virpus and enough for the average person.
- RAID 10 arrays
- SSD-Caching for low cost and high performance
- Instant activation
- RDNS/PTR management
- Free unmanaged support
- 1 IPv4 address
- XEN virtualization
- Support for multiple operating systems
- Prices starting at $25 per year for two cores, 512 MB RAM, 25 GB SSD-Cache Disk, and 1.5 TB bandwidth
- $5 per month for four cores, 1 GB RAM, 50 GB SSD-Cache Disk, and 3 TB bandwidth
Kimsufi appeals to those with a range of needs, including hosting, training, sandboxes, and storage or remote desktop in addition to VPS servers.
- Highly scalable
- 100 Mbps bandwidth
- Anti-DDos protection
- Detailed monitoring via control panel
- Option of 16 geolocated IPs
- Prices starting at 3.99 Euro per month for one vCore, 2.4 GHz, 2 GB RAM, 10 GB SSD, and local RAID 10
- Up to 14.99 Euro per month for two vCores, 2.4 GHz, 8 GB RAM, 40 GB SSD, and local RAID 10
As the name implies, VPS Server is dedicated to providing VPS servers, and it has 10 locations around the world.
- 24/7 chat support
- Fast Linux and Windows VPS
- Setup in 55 seconds
- 100 percent SSD storage
- Top-class infrastructure
- Feature-rich control panel
- VPS replication
- DDoS protection worldwide
- Private and secure networking
- Prices starting at $4.99 per month for 1 GB memory, 25 GB disk, one core processor, and 1,000 GB transfer
- Up to $39.99 per month for 8 GB memory, 200 GB disk, six core processors, and 6,000 GB transfer
In addition to VPS servers, InterServer also offers web hosting and more.
- Your choice of operating system
- Choose from Los Angeles, California, or Secaucus, New Jersey
- Ability to add Direct Admin or cPanel to Centos VPS
- Instant setup
- Never overloaded
- Full control for admin and root
- Uptime monitoring
- PayPal or credit card payments
- Prices from $6 for Linux and $10 for Windows (monthly) with one core, 1024 MB memory, 25 GB storage, and 1 TB transfer
- Up to $96 for Linux and $160 for Windows with four cores, 16,384 MB memory, 400 GB storage, and 16 TB transfer
This cloud hosting company also offers VPS servers for masternodes.
- Private networking
- Tier-1 network
- 20 GB connectivity for each server
- KVM based instances
- 99.99 percent uptime SLA
- High-performance Intel CPUs
- Hourly pricing available
- Monthly prices starting at $5 for one CPU, 768 MB, 25 GB SSD disk, and 1 TB transfer
- Up to $160 for eight CPUs, 16 GB, 320 GB SSD disk, and 7 TB transfer
Among other web hosting options, you can find VPS servers from OVH.
- 99.95 percent SLA
- 100 Mbps bandwidth with unlimited traffic
- Anti-DDoS protection
- Monthly prices starting at 2.99 Euro for OpenStack KVM, one vCore, 2.4 GHz, 2 GB RAM, 10 GB SSD, and local RAID 10
- Up to 11.99 Euro for two vCores, 2.4 GHz, 8 GB RAM, and 40 GB SSD
Securd Speed prides itself on affordable pricing and being fast and reliable.
- Free and instant setup
- Option of more than one IP address
- Ability to change plan
- Prices starting at $2.75 for 256 MB dedicated RAM, 15 GB SSD RAID storage, 750 GB premium bandwidth, and 1,000 Mbps upload and download
- Up to $32 for two Intel Xeon CPUs, 8 GB dedicated RAM, 60 GB SSD RAID storage, and 2 TB bandwidth
VIRMACH has 11 datacenters and a range of VPS plans to suit most budgets.
- DDoS protection
- RAID 10 SSD
- Dedicated IP
- Available virtual dedicated servers, managed dedicated servers, preconfigured unmanaged servers, and custom options
- Prices starting at $2.25 per month for 512 MB, two vCore CPUs, 20 GB disk space, and 500 GB bandwidth
- Up to $160 for 32 GB RAM, eight vCore CPUs, 500 GB SSD, and 10 TB bandwidth
With RamNode, you can choose from OpenZ container virtualization and KVM full virtualization.
- DDoS protection available
- Three-day refund period
- Additional IPs available
- SSD and HDD servers available
- Prices starting at $3.50 per month (Open VZ) for 256 MB, one core, 40 GB storage, and 1,000 GB bandwidth
- Prices starting at $3 per month (KVM) for 512 MB, 10 GB storage, one core, and 1,000 GB bandwidth
- Up to $80 per month (OpenVZ) for 8192 RAM/512 MB VSwap, four cores, 350 GB storage, and 6,000 GB bandwidth