Masternode is a server in the decentralized network used to process transactions and accomplish unique tasks, for example instant transactions or anonymous transfers.
Masternodes partially accomplish the work of Miners, consequently, they get a part of remuneration for each revealed block.
Masternodes also provide a higher level of anonymity as the information about transactions is not public but saved in masternodes only.
Unlike classic cryptocurrencies (for example Bitcoin), the developers of anonymous cryptocurrencies, such as DASH and Zcash, use Masternodes to mix user’s transactions. With such approach, the general security of the network and the anonymity of its transactions hugely depend on the number of the full active nodes that serve the system.
In order to launch Masternode, it’s necessary to possess a certain number of coins used as a pledge during the installation. After that, you should set the dedicated server that should be connected to the internet 24/7. On the server, you should install, launch and sync the wallet of the chosen cryptocurrency. After that, the network will remunerate the work of our masternode from the pool of emission of new extracted coins.
For each network, the number of coins for the creation of Masternode is determined by the system. For example, Dash network requires 1 000 coins that will cost about $500 000 at the Dash rate of $500 per coin.
Not many investors have such funds to create their own Masternode. FluxOn company collects the funds of our investors for the creation of Masternodes and provides to everybody the opportunity to get revenues from such activities.
It should be noted, that Masterncdes have innumerous of advantages over physical Mining. For the creation of Masternode, there´s no need to acquire special equipment. Therefore, it reduces the possible expenses and due to this fact, investors don´t face the problem of obsolete equipment that appears when working in PoW. It is also important to note that, the profitability of Masterncdes can be several times higher than incomes from physical Mining.
Let’s review the example of Masternodes and Mining revenues in 2017.
For the moment of Masternode appearance (January 2017) the price of Dash was $12,26, consequently, 1000 Dash ($12260) or 13.4365 BTC were needed to create a Masternode. For the same amount of money ($12260) we could purchase Mining equipment - AntMiner S9 with the total hash rate (capacity) of 188 Thash/sec.
In a year of work with Dash Masternode, we would have about 1200 coins. According to the prices as for January 2018, we would earn about $1 275 000 or 90.4 BTC, if taking into the account the growth of cryptocurrency price and extracted coins. If the price of Dash would remain invariable regarding BTC, we would have about 16 BTC or $227 000 on the Masternode account.
To simplify, let’s consider the average hash rate (processing power) of the Bitcoin network for 2017 - 9 204 55 Ph/sec. Therefore, we would have mined about 0.0596 BTC per day and finally, we would get about 21 BTC or $306 000. These figures are approximate as they don´t include the running costs except the electricity costs of S0.1/kWh.
Taking into account the growth of the altcoins market and the increasing complexity of the cryptocurrencies extraction, we should make the conclusion that Masternodes are much more flexible and profitable (90.4 BTC compared to 21 BTC).
However, we should note that if cryptocurrency price doesn´t grow, physical Mining with the usage of special equipment can be more profitable (16 BTC compared to 21 BTC). That´s why our company combines these two directions in order to reach the best possible results.
As we have already said, Mining is a relatively new direction with rapidly changing development tendencies. If the profitability of Masternode reduces, we can sell the cryptocurrencies at any moment and create more profitable Masternode. This is the main advantage of Masternode over physical mining where it´s quite difficult to sell the used equipment at the original price.
FluxOn team believes that Masternodes is one of the most promising directions in the crypto-industry within several next years. We are convinced in the practicability and high liquidity of this direction.