Passive Income and Masternodes

GIN Platform
Apr 13, 2018 · 9 min read

Not all of us work for money only. Some of us enjoy our work and love every minute of our time spent working. But wouldn’t it be great if we could also have a different source of income, one that doesn’t take up much of our time or effort and that brings in a steady and consistent amount of money? That’s why passive income was invented. Well, not exactly. Since it wasn’t invented, just coined as a term to describe a specific type of revenue. But passive income can be the answer to a desire to acquire wealth without much effort. Let’s first take a look at what passive income is.

Ah, the passive income dream — just that in a more luxurious setting, with expensive drinks all around and… ok, maybe the passive income dream looks nothing like this.

What Is Passive Income?

Simply put, passive income represents earnings someone obtains from economic activities of any sort in which that person is not actively involved. In other words, the best type of income. But don’t quote us on that. Though seriously now, who doesn’t want to earn money by not doing much? Typical forms of passive income include:

  • Rental income
  • Interest from savings account
  • A limited partnership
  • Hosting ads on a personal blog
  • Affiliate marketing
  • Royalties
  • Dividend stocks
  • Bonds
  • Peer-to-peer lending platforms

And while with some of these forms of passive income the investment can be quite a serious one, there are many ways of earning large sums of money by investing moderately. Don’t let the word ‘passive’ fool you. The returns you can obtain from passive income can be significant. Just take a look at Warren Buffett.

This is the best photo of Mr Buffet we have been able to find

The third richest man in the U.S. as of 2018, Buffett strongly advises against active investment and suggests passive forms of income such as low-cost index funds. Warren Buffett’s investment philosophy is that of buying low-cost shares that have the potential of becoming far more valuable in the future. This was the case with his acquisition of Coca-Cola stocks in 1988. What Buffett did was ride the 1987 market crash by buying when the prices for the stocks were much lower than their real value. This meant that even though The Coca-Cola Company was very well-known, the price for their stocks was low enough to permit Buffett to buy cheap. Back in 1988 Warren Buffett acquired Coca Cola stocks worth 1 million dollars. Those stocks are now worth $16,660,000,000. Talk about a change in value.

But low-cost index funds are not the only solution, even though they are highly recommended by people such as Warren Buffett (who said he only invests in things he understands) . Real estate rentals, royalties for a song/ picture/ piece of software and many more are viable means of earning passive income. Another option that is becoming more and more popular and profitable is obtaining passive income from masternodes. As with any other type of investment, you should only invest capital you can afford to lose.

“MasterNodes” — Coloured pawns on printed paper, author unknown (soon, in an art gallery near you, you’ll probably get to see something like this)

What Are Masternodes?

Masternodes are an essential part to the functioning of some forms of cryptocurrency, otherwise known as digital money. Now, even if you might not have heard of masternodes, you might have heard of cryptocurrency because of the recent buzz around Bitcoin’s massive price fluctuations.

Cryptocurrencies, digital coins or digital money deserve an article of their own, so we’re only going to give you the basics here. Cryptocurrencies are open-source, digital, decentralized currencies that exist as computer code that no one, including banks or state governments, can control. They represent a growing and flourishing market that has been attracting a growing number of investors as many people see great potential in decentralized money that is out of government’s control. But, most importantly, cryptocurrencies are so appealing due to the fact that they are new on the market and can make someone rich very fast (even though this is not a guarantee). That is because their value can increase rapidly as more and more people want to become crypto holders. So, where do masternodes come in?

Privacy is essential for cryptocurrencies — transactions that are safe, secure, and anonymous are the beating heart of crypto. Therefore, trying to improve on anonymity is a central goal for digital currency creators. This is the reason why cryptocurrencies that support Masternodes were created in the first place, to ensure untraceable, anonymous transactions. By using master nodes as transaction validators, digital money becomes impossible to trace. But how does this work?

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.

Normally, cryptocurrencies such as Bitcoin, that do not support masternodes and rely on miners to validate transactions, have a much lower validation rate. Let’s take a look at an example. You want to send 10 Bitcoin to Bill. A number of other people also want to send or receive money and their transactions are grouped in a block. Your transaction gets added to that block. Now for that block to be validated and for the transaction to take place, a miner needs to mine that block. That is, to solve a complicated mathematical function since Bitcoin’s algorithm is based on a so-called hash function. Here’s a useful definition by BlockGeeks: “In simple terms, hashing means taking an input string of any length and giving out an output of a fixed length. In the context of cryptocurrencies like Bitcoin, the transactions are taken as an input and run through a hashing algorithm which gives an output of a fixed length.” Everyone runs their transactions through the same hashing algorithm, if anyone tampers with the information, the result will be different. Since other miners are also competing for a reward as a result of a correctly validated transaction, they will also obtain their own outputs. If one or two of these outputs differs from the majority of the outputs of all the other miners, then it is incredibly easy to spot a cheater. Now, the problem with validating transactions this way is that it takes much longer to send money since all these transactions have to wait for a miner to mine a block — solve that function. And this can take from a couple of minutes to an hour.

With InstantSend the waiting period is shortened to around 1 second per validated transaction. And this is all thanks to masternodes. With the added benefit of a masternode, each time a miner mines a cryptocurrency block, the hash algorithm that guarantees information is not tampered with also selects a random masternode as an InstantSend authority which will act as some form of a buffer for future transactions that need speedy validation. This masternode will be able to instantly validate transactions, which will be appended to the final blockchain ledger when the next block is mined by a new miner. This means that even though the transactions validated by the masternode are still pending until a new block is mined, they have nonetheless been registered as validated transactions and have ‘happened’. That is, the money has gone from your wallet to that of Bill, even though this transaction is only considered ‘permanent’ when a new block has been mined and the transaction has been permanently inscribed on the ledger.

This little piggy went to the exchange and got itself the collateral for a MasterNode

Masternodes as a Passive Income Source

Masternodes are a great passive income source as they continue to produce money for their owner, without that owner doing anything at all. Of course, as a masternode owner, you will have to set it up or create it and that will take some time and technical skill. But once the masternode is in place, you can sit back, relax, and enjoy your time as you have a rather predictable and steady flow of cash in the form of a reward. 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.

But before you start accumulating rewards, you have to create the masternode. Let’s first take a look at what you will need to start it up. Supposing you have the technical skill to create your masternode from scratch (familiarity with Linux shell commands), here’s what you’ll need:

  • Specific amount of coins locked: the amount differs from coin to coin (Also known as your “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: these usually come with the VPS/server
  • Storage space to save the blockchain.
So much information, so little time to understand it all. What do we do, brain?

If you do not have the technical knowledge, you can opt for someone else setting up your node for a fee. The fee might not be the biggest issue here. The real problem are the risks involved in giving someone else access to your digital money, without any guarantee that you won’t be robbed of your money. If this sounds like a turn-off, fear not! For we have a solution for all those out there that are not super tech-savvy and that still want to use masternodes as a passive income source.

this is basically us

That solution is the GINcoin Masternode platform which provides users with a turnkey masternode which they can themselves set up, complete with a graphic user interface for ease of use. With a few clicks you can set-up your masternode automatically. At the moment the platform is available for GINcoin and a number of other cryptocurrencies such as Apollon, KrakenCoin, LuckyBit, ALQO, Olympic, Pyro, Kingston. So, if you are not a Linux wizz, then the GIN platform might be the answer in order to quickly and easily generate passive income through masternodes.

Your masternode returns depend on the coin you select for your masternode, the masternode-enabling protocol for that coin, and the appreciation/depreciation in value of that coin in time. Nonetheless, the passive-income benefits for owning a masternode can be quite great if you take into consideration the possibility that many digital coins will be worth much more in a number of 5 to 10 years. And, if you are lucky enough to find a coin that has just been launched, such as GINcoin, then your reward in time can be even bigger, since you can buy cheap and sell dear.

Unrelated picture that looks nice. Something something teamwork.

To sum up, masternodes are a great passive income sources since:

  1. They allow you to free up time for other economic or personal ventures, while your computer is running and accumulating reward money from the validation of transactions.
  2. If you find a newly launched coin that supports masternodes, or one that you think might take off in the future, you can invest a small sum of money in order to reap huge benefits later in time.
  3. You can predict fairly well how much money you will obtain monthly from your masternode, even though there might be slight fluctuations in value for your coin of choice.
  4. You invest in something that is very likely to become extremely valuable in the future, as cryptocurrencies are quickly becoming one of the most profitable assets.
  5. Your return in value is double with masternodes, as you own a cryptocoin and a masternode. Both of these will acquire value in time, as masternodes require a sum of money to set them up and this sum of money increases as the value of the coin goes up.

That being said, what are you waiting for? It is time to set up your masternode and let that passive income flow into your pockets. And if you need any help creating your masternode the GIN Discord Channel offers support every step of the way, getting you properly settled in the masternode environment.

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