Bitcoin Market Journal has analysed the expected returns of operating a masternode and compared them with expected staking rewards of leading PoS coins to provide insight into which type of digital asset investment method is potentially more lucrative.
You can find the results of our comparative analysis below.
PoS vs. Masternodes
Proof of Stake has become a popular option for investors seeking to maintain a steady stream of income from their holdings.
PoS performs the same functions as Proof of Work (PoW) without the hardware and electricity required to demonstrate proof of work. Both algorithms determine and assign nodes, verify transactions, and create new blocks. The key difference rests in the method of validation. Proof of Stake uses the coins themselves to validate transactions in order to earn the reward. Investors must “stake” their token of choice to allow the data validation process to occur.
Masternodes exist separately from PoS. Although they work to accomplish the same task, masternodes cannot validate transactions alone nor can they create new blocks. It is best to envision Proof of Stake as the core software that then requires an API plug-in to ensure total security to protect the network. Masternodes will work to remove potentially harmful blocks that could jeopardize the network.
Similar to PoS, anyone can run a masternode on a given network, but the barriers to entry are much higher. Users must submit a certain number of tokens as collateral for the network, which can sometimes amount to thousands of dollars.
For example, Zcoin (XZC) requires that users hold at least 1000 tokens, approximately $5,000, to operate a masternode. Compared to the minimum of 1 token for PoS, and it is obvious why few people have the capability to reap the benefits of masternodes. Other factors such as time spent in the same account and access to Virtual Private Servers should be taken into consideration as well.
Masternode vs. PoS Expected Yields
To compare expected masternode returns with PoS staking yields, we have analysed a sample set of leading digital assets.
Our analysis shows that masternodes can potentially deliver a sizeable “ROI” – often greater than that of PoS. Having said that, it is important to note that ROIs vary from asset to asset, and that there are relatively high barriers to entry for running masternodes. Users have to purchase enough tokens for collateral, establish a VPS or server to host the wallet 24/7, dedicate an IP address, and possess enough storage space to save the blockchain.
Assuming all those requirements are met, operating a masternode seem to finish ahead of staking PoS coins as a passive income investment option for digital asset investors.
Related Articles:
- Top 5 Masternode Coins by ROI in 2019
- Best Masternode Hosting Services, Rated and Reviewed for 2019
- Best Staking Coins, Rated and Reviewed for 2019
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