How to invest in Masternodes: Part 1

Masternodes are fast becoming one of the more interesting investment opportunities in the cryptocurrency space with their promise of a predictable return amid the wild volatility of other crypto assets. They can however pose problems in set-up, maintenance and security so have been mostly ignored by the retail space in favour of investments with a lower barrier to entry. But this is changing.

The deployment of Masternodes has exploded in the last 18 months, with the active number rising from a couple of thousand to around a quarter of a million. The adoption rate over the same period has grown from 30 networks to nearly 600, a figure that is expected to double during 2019. Masternodes provide stability and security to PoS networks and have become a vital component of the underlying infrastructure. Now we’re seeing fascinating crypto projects spring up to support industries as diverse as aerospace, financial services and supermarkets.

For investors it’s an attractive sector but there are four key hurdles to overcome for those wishing to get started.

1. Knowledge

Masternodes require a base level of technical know-how to set-up and maintain. Significant skill is required, not only in the set-up but also in identifying projects that match your portfolio’s risk profile and which sit at the optimum phase of their emission schedule (number of tokens rewarded versus cost of running nodes).

2. Market saturation

Coupled with this, there is the sheer volume of projects in the market. There are expected to be 1,200 networks in operation by the end of this year, creating a wealth of opportunity but an arduous selection process. Each Masternode network uses slightly different variations in their consensus protocol and rate of return,but performing proper due diligence on all of them is an enormous task now.

3. Cost

Without getting too far into the technical definition of masternodes (ihttps://indx.capital/blog/what-is-a-masternode.html), one of their principal characteristics is that they provide added functionality and governance to the network. To safeguard this, the Masternode owner must deposit a stake, usually in the network’s native token. These stakes can cost around $1,000, but for the higher profile and often more stable projects (i.e Dash), this can be as high as $1.5m in a bull run. All investment is a risk, but finding the risk /rewards horizon is a particular challenge when it comes to Masternodes. A diversified approach minimises risk but significantly increases the cost of staked deposits, particularly when acquiring higher quality projects.

4. Uncertainty

Investors also need to be mindful of the extreme volatility characteristic of cryptocurrencies. After a period of heavy correction following a long bull market many projects lost as much as 99% of their value, leaving some investors in deep losses. However, despite the volatility, the crypto sector is still worth in the region of USD130 billion, despite being only a decade old. Masternodes help to dampen volatility since they are always generating rewards but there are always risks associated with emergent asset classes.

In the next article, we will look at how INDX takes on these barriers and supports both investors and the development of the crypto sector.

INDX is making it simple to invest in the Masternode sector. We want to ensure that everyone can benefit from the digital economy by reducing uncertainty, risk, energy consumption and wasted time. To learn more about INDX, go to https://www.indx.capital/