A cryptocurrency investment vehicle defined: what is a masternode
I wanted to understand the investment vehicle, so I read some articles about masternode projects and I think that they are a good investment.mSo I will review what I think is a good Formal” definition of a masternode using the usual cryptocurrency terms and then give you a second definition, which uses more universally understood terms.
What is a Masternode? (Formal Definition)
I like the definition in this article below, so I am using it here with full citation.
A Masternode is a server on a decentralized cryptocurrency network; its purpose is to complete tasks for the network that a simple node is not able to accomplish. These tasks can help allow (for example) private or instant transactions on the network. Masternodes typically require a high amount of collateral to be accepted as part of the network. As a reward for their work, they typically receive a portion (%) of the block reward. The payout times vary, some Masternodes pay out once per day, others once per week, etc. If the required collateral is removed from the Masternode wallet, the Masternode will no longer be accepted by the network until properly funded.
This quote is from an excellent article
by @btcdreamz
What is a Masternodes: (common banking terms definition)
Cryptocurrency Masternodes: explained in every day language.
Masternodes are a type of passive investment. I think they are easier to understand if you compare it to a common type of bank account called a certificate of deposit and leave out the technical jargon and technical functions of masternodes. Plus, you don’t have to understand the jargon to understand it as an investment.
In the case of a “Certificate of Deposit” you deposit money into a storage container called an “account”. You agree to keep your money in the “account” and not spend it. The bank uses your money to facilitate other people’s “financial transactions”. The bank agrees to pay you money called “interest” for using your money. You get paid “interest” based on a predetermined percentage. You get paid “interest” based on a predetermined schedule. You make money every day without any work from you. You even make money while your sleeping. This is called a “passive” investment.
In the case of a “Masternode” you purchase a certain amount of a cryptocurrency coin. You deposit this cryptocurrency coin into a container called a “wallet”. You agree to keep your cryptocurrency coin in the “wallet” and not to spend it. The coin blockchain uses your cryptocurrency to facilitate other people’s “financial transactions”. The coin blockchain agrees to pay you money called “rewards”for using your cryptocurrency. You get paid “rewards” based on a predetermined percentage. You get paid “rewards” based on a predetermined schedule. You make money every day without any work from you. You even make money while your sleeping. This is called a “passive” investment.
Conclusion:
As you can see these two types of investments are very similar. This is also why they are popular. Like all investments you could lose all your investment or profit greatly by some 100 or 1000 multiple. This article isn’t investment advice, but a hopefully useful explanation.