How to Optimize Masternodes for Maximum Profit

Written by GIN core team and Panama Crypto

9 min readMay 12, 2018

It’s a given fact that cryptocurrencies are the hype of this century. Since they seem to be here to stay, the sensible thing one can do is get in the game. (No, that is not the FOMO talking.) However, this could be the easy part. Crypto is a game that everybody is playing to win, so having the upper hand can make all the difference. How to get the upper hand, you ask? Simple. As the saying goes: information is power.

1. Modern Times call for Modern Technology

If you are tempted to enter the cryptoworld and invest in a project that implements the masternode model, you absolutely need to know what you are getting yourself into. What exactly is a masternode and how does it stand out in the cryptosphere?

As said elsewhere, masternodes are actually servers (computers) on a decentralized network, through which transactions are being run. They can also be thought of as the wallet that keeps the full copy of the blockchain (the transactions ledger) in real-time. But masternodes have to meet specific criteria, depending on the cryptocurrency they are facilitating, with the most important one being the set amount of collateral capital locked in a dedicated wallet. Masternodes anonymize the transfer by locking capital in the form of the cryptocurrency they are helping transact. The locking of capital also guarantees that transactions are validated much faster for cryptocurrencies that support masternodes when compared to those that rely solely on miners.

Until recently, setting up a masternode was bound to give the majority of people a migraine. In order to set up a masternode, you needed to have technical knowledge and the capability of following really intricate guidelines. Apart from this, a masternode also requires a specific amount of coins (the “collateral”), a server or a VPS (Virtual Private Server) installed with Linux (most commonly, but Windows is also available): such as from Vultr, DigitalOcean etc., a dedicated IP address and some storage space to save the blockchain.

The GIN project identified this issue and solved it by creating the GIN platform, which allows anyone to set up a masternode without hindrance. Hours of tiring inputting command lines, configuring VPSs or creating directories were cut down to a mere couple of clicks. At the moment, the platform hosts twelve coins: GIN Coin, Apollon Coin, Zealium Coin, Alqo Coin, LuckyBit Coin, DeviantCoin, Bifrost Coin, Agena Coin, Phore Coin, Bitcoin Green.

2. Adventure Time — Painting your Future in Cryptocolours

Wouldn’t it be awesome if we had someone who could tell us what to do, when to do it and how, so that we never lose, we never fail, never surrender? Honestly, no. Having someone directing your every step is tedious and limited. That’s why you desperately awaited to grow up to be an adult when you were a kid; sure, you’ve got bills to pay now, but can you have cheesecake for breakfast? Yes, you can!

The world of crypto is the perfect setting for one to express personal choices. In fact, it’s a world governed by the idea of doing your due diligence and DYOR. Nobody can coerce you into investing in one coin or another, into buying, selling, or switching between projects and so on. It’s all on you. And the possibilities are endless. Which is why we’re going to try and illustrate the most constructive way to build the yellow brick path towards the ultimate goal: profit.

The internet is teeming with articles on how to invest in altcoins. There’s so much advice on how do research regarding cryptocurrencies, that the great fathers of advisory philosophy would be proud. (That might be untrue, have you seen the internet?) In any case, devising a research plan for a coin should be smooth sailing. One decent guide we found for this is here and it draws the attention to the following:

Fundamentals — core reasons to invest (such as the validity of the problem to be solved)
Marketing and Branding — marketing stance and strategy, visibility
Media Coverage — mentions in reliable outlets
Social Proof — website, social networks etc. and activity in these communities
Team and Technology
Price, Market and Exchanges
Economics
History
Regulation challenges
Infrastructure
Future plans

3. The Good, the Bad and the Ugly — Pros and Cons of Owning a Masternode

To be or not to be the owner of a masternode. That is the question. But while Hamlet did have a genuine dilemma, in cryptocurrency it’s really not that problematic. Be. Be a owner of a masternode. Be an earner of passive income. Be part of the crypto-revolution and the future.

The most obvious and enthralling benefit of a masternode is the passive income it brings. So much so, that we felt it deserved its own paragraph, which you’ll get to read below.

Another pro is that you get to experience the hype of the century and, most likely, the currency that will shape our future. You get to be at the forefront of a technology that is reinventing the concept of money and what you can do with it. You’re an early adopter, a pioneer, an innovator.

The less fun part of owning a masternode is the risk that you’re taking when you decide to lock your coins in said masternode. Let’s say you need 1000 coins to set up a masternode. You buy them at 1$ per coin (so 1000$), set up your masternode and enjoy your passive income for a while. But at one point, you decide you want to sell your coins and move on to another project. Well, the thing is it might be difficult to find a buyer willing to purchase the entire amount from the collateral. While there is someone who wants to buy 100 coins for 1$ or another one willing to pay 10$ for 2 coins, that’s not really helpful. If you don’t want to divide the collateral, so you can still receive rewards from the masternode, you might be forced to sell to the only person on the market that wishes to buy this amount and who is paying no more than 0.5$ per coin. That is 500$ for something that you paid double for. Sure, it could go the other way round, you could get a masternode at 1000$ and sell it for 2000$, but it’s best to keep in mind that you’re taking a risk when you lock your coins in a masternode.

4. How We Learned to Stop Worrying and Love the Bomb — Masternodes as a Passive Income Source

The GIN team have already treated this subject at length in their Passive Income article. There’s no doubt that you’ll open it in a new tab and read it later, but just in case, here’s a summary.

There are various ways in which one can benefit from a passive income. Some enjoy the revenue from that apartment they rent downtown, some host appliances ads on their cooking blog, some launch masternodes in the easiest way possible: on the GIN platform. Masternodes produce money for their owners, in the form of rewards. Each time a block is mined, a randomly selected masternode will receive a reward for validating transactions, with the algorithm that selects the masternode ensuring the rewards are distributed in a round-robin fashion.

5. The Hitchhiker’s Guide to the Galaxy — ROI Optimisation Manual

As stated before, the world of crypto is all about doing your due diligence. We can give you bullet points and you can scour the internet for guidelines, but remember to always carry with you the words of almighty Oprah: “Follow your instincts. That’s where true wisdom manifests itself.”

5.1 The beginning of a beautiful friendship — How to Choose a Trustworthy Project

73.6% of all statistics are made up. We’ll go ahead and say that 82.4% of all available altcoins might be scams. Let’s be honest, people are crazy about cryptocurrency and there will always be others that try to take advantage of that. The crypto market has been flooded with new coins, so it has become more and more difficult to identify the fraudulent projects. Not only because of the myriad of coins, but also because scammers have mastered the art of disguise.

To decide the projects in which you want to invest, you must first decide what type of investor you want to be. There are two types on investors: those who are aware that they’re investing in a hoax, but go ahead anyway, trying to get a slice of the pie, and the passive income searchers — those who look for secure projects, that seem to have a well established future. It’s everyone’s choice which type they want to be. But once you have made the choice, stand your ground. Being stuck in a cognitive dissonance is not going to help you reach your goals; you don’t get into a cab and say “drive”, you say “take me there”. Defining your goals and methods of reaching them brings them closer.

There are several moments when an investor can hop on board of a cryptotrain, each with its advantages and disadvantages:

Phase 0 — the presale. The stage when the benefits are tremendous, but the risks are equally considerable. The good thing is you can easily and cheaply buy the coin, and you have clear access to masternodes. Your investment has the most chances to pay off. The less positive thing is that you risk being left with a worthless coin, if it doesn’t get on the exchange. If you do decide to buy the coin, our advice is either buy it from the devs (make sure you are really talking to a dev — it’s as easy as checking the Discord username colour, for example), or use an escrow if you’re buying it from somewhere else.
Phase I — right after a coin gets listed on the exchange. A safer stage, but it’s best to always remember that risks never truly go away. At this point, there is no certainty that the project will gain traction among consumers.
Phase II — the stage where the rather seasoned projects reside. Well-established coins, that are yielding profits for their investors. Some could say investing in this sort of projects resembles a banking investment: the rewards are similar. However, it is crucial to keep an eye on the value of the coin, and not only on ROI of the masternodes. If the masternode has a high ROI, but the coin’s value is receding constantly, you’re looking at a loss, not profit.

Besides making a decision regarding the type of investor you want to be, you should always set up from the start your investment strategy, namely the risks you’re willing to take and the moment when you’ll get out. Like in the cab example, set up a goal, otherwise you won’t know how to interpret the market signals or you’ll even miss them entirely.

In order to assess a project, take into consideration:

The team. You’re looking for experienced people, engaged in their project. Look at how the team interacts with the community and at their response time. In general, an anonymous team is a red flag; however, this is not written in stone. Take the example of the GIN project. The legitimacy of the idea, the utility of the product and the overall professionalism of the team vouched for the project, pushing it to develop at high speed. Oh yeah — and no hype.
The product. Out of all the available cryptocurrencies out there, few have a functional product. Make sure you evaluate the validity of the idea proposed and how feasible it is for it to succeed.
Project age. The time the project has been on the market can be an indicator of its legitimacy. Scams have a short lifespan, so older project are safer, albeit more difficult, to invest in.

5.2 Captain’s log, stardate 41153.7 — Relevant Masternode Stats

Evaluating a masternode is a bit different from evaluating a coin.

ROI. The most important of the stats, and the most complex one. To calculate it, one must take into consideration multiple aspects, such as: coin cost, number of masternodes, daily volume, regularity of transactions, project stability etc.
Daily volume. Needless to say a healthy project will have activity daily. And the bigger the amount transacted daily, the better.
Number of existing masternodes. As mentioned above, masternodes receive rewards in a round-robin fashion. The more masternodes created, the less frequent is your reward.
Change in reward percentage. You should be able to find this information in the project’s whitepaper, as all of the masternode supporting coins perform this adjustment after a while, usually after the number of coins locked to masternodes represent a certain amount of the total coin supply.

5.3 Don’t be afraid to dream a little bigger — When to Move on or Switch to Another Project

To put it bluntly, it might be time for you to get out of a project when the reasons you joined are no longer there. As long as the team is obviously putting in the effort, constantly working to deliver and improve the project, you should be good. The easiest way to keep an eye on this is to be an active member of the community. Let the people who support the project be your counselors.