Is now a good time to buy Telos?
Right before Telos changed to Tiered model, ROI (Return of Investment) was about 600%. Now, after the tiered model has come, ROI has already gone down to less than 100% and just keeps going down even more.
On top of that, the price of Telos has gone up, making setting up a master node more expensive.
Does that mean that it is now too late to buy Telos anymore, that the train left the station and those who didn't catch it, missed it?
the Real ROI
Problem with ROI calculations is that they exist in a vacuum. This is because there are such variables included in real ROI that it makes no sense adding them to general ROI calculations.
How master node ROIs are calculated are based upon simply taking the number of coins you need to lock to set up a master node and then comparing it to the number of coins you are going to receive from that master node.
To see the flaw in this is easiest to notice by showing you Telos node before and after tiered nodes.
Before tiered nodes, each node required 1 000 Telos coins to set up and each node would receive roughly 500 coins a month, making it a whopping 600% ROI, or by other words, in just two months you would have your original investment already doubled.
However, this is completely ignoring the fact that running a master node usually costs something too.
a Cheap hosting solution is usually around 1 Euro a month. Before tiered nodes, price of Telos was somewhat stable at 0.2 cents each. With this price, 500 coins a month meant exactly 1 Euro a month. If your running cost was 1 Euro, and your income was that same 1 Euro worth of Telos coins, then ROI was not 600%, but it was actually 0%, because you will never get any profit.
Take now the Tiered model Nodes that have a much lower ROI of only 100%.
Highest tier node requires you to lock 100 000 Telos coins to set it up, but it should also yield 100 times more coins than lowest 1 000 Telos coin node.
In the current situation, nodes are actually making only 1/3rd of what they used to make compared to the time before tiered nodes.
However, in 100k nodes case, this still means a nice amount of roughly 7.5k telos a month.
Even with using 5 Euros a month for one of the more expensive and better hosting solutions to run your master node - since you can afford it now - you would still be making a nice profit of 40 Euros a month. This of course taking into calculation that price of Telos have about tripled now that tiered nodes are here.
So which is better, 600% ROI with 0 income, or 100% ROI with 40 Euros a month of profit?
ROI with Compound Interest
“ Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” — Albert Einstein
Another thing still missing from this ROI calculation is the compound interest that became possible after a change to a tiered model.
Idea is that since there are now 1k, 3k, 10k, 30k, 100k master nodes, if you start with a 100k master node, then instead of getting 7.5k coins a month, like you normally would in regular, 1-tier node model, you now actually have a chance to accelerate your income already before reaching number of coins to set up your next 100k node.
For after a month of running a 100k master node, you will already have 7.5k coins. This means you can set up additional two 3k nodes and one 1k node to run at the same time as 100k node, and all these nodes will be making more coins to you.
This way next month you would already be gaining close to 8k coins instead of just 7.5k coins. Combine these coins with previous months coins, and you can set up one 10k node, one 3k node, and two 1k nodes, and next month these all will be making you close to 8.5 k of coins.
Combine again, and next month you be making close to 9.5k of coins, and so on you do until less than 10 months later you will already be having enough coins to set up your next 100k node. With this, ROI is not just 100%, but actually about 30% higher.
notice: I am leaving so-called first time reward time out of compound interest calculation, which would affect ROI being lower. This is because similar to traditional ROI calculations, there are factors involved that don't necessarily make sense to add to this calculation since they differ in different situations.
But ROI is still pretty low..
Although we have now got quite much higher ROI, we however still are talking of a close to one year of waiting to get invested money back, not to mention it is even getting longer every day thanks to more nodes being set up.
I would actually base my calculations based upon 50% ROI instead of a current 100% ROI, simply because looks like that is where we are heading at, and that is the ROI after all currently existing coins are locked to master nodes, making it pretty safe calculation.
But is this really such a bad ROI? And why are people still setting up nodes if this ROI is so low?
That is because it isn't.
If you have ever bought stocks, you will know that 10% ROI is already amazing in there. If stock is very stable and it produces just 3% interest a year through a share of profits, it is already considered a good stock. And when you buy stocks with hopes of price going up instead of getting dividends, if it goes up, good, but if it goes down, then you are already losing.
When dealing with Cryptos, especially Master node coins, the situation is different. Cryptos are generally speaking considered risky, as in they can go up a lot, but they can go down a lot too, and this is why people are always expecting for such a high ROI to be willing to put anything to them, since while they might gain a lot, they can also lose a lot - and many times in a row.
But naturally, if people think some coin is more stable, they are also willing to invest in it with a lower ROI already.
If you have ever checked DASH nodes ROI, it is less than 7% currently and to set up a node costs 100 thousand.
Yet people still do that. Why?
Because DASH is considered safe and likely to go up. So even if they have to wait 14 years to get their money back, it is considered worth it, just like good stocks are with even lower ROI than that.
How to know if some coin is a safe investment then?
One way to put it is to say that there are basically three risk factors in any master node coin that is not a scam.
First is if price is going to change up or down.
Regarding Telos, I already speculated a bit about this in my previous article in here: https://medium.com/transcendence-blockchain/how-does-tiered-model-of-telos-work-and-affect-things-4c4b63311092
And right now it seems like my speculations might have been right and the way would still be more likely up rather than down, perhaps even a lot up.
And of course, if the value goes up, then that affects the real ROI too. for even if ROI is 50% when you buy your coins, but if then coins value doubles after that, then in practice ROI doubles too.
Second is if the price actually has some real basis. This partially reflects to first risk factor too. For while I speculated in my previous article about 100k nodes and them being very attractive investment after a change to tiered nodes, they alone wouldn't be attractive if the price of Telos wouldn't be good enough.
At this point in time, there is still a lot of expectation value in any cryptocurrency that has a high value, and this is true to Telos too. However, in Telos case, I would say that due to its multiple use cases - both in the making and already in use - the potential for a real usage-based value is really high and there is probably less of expectation value compared to real usage in it than most other coins have.
This one indicating once again in how good a position Telos is.
Third risk is the possibility that you set up a master node today with a high ROI, and tomorrow thousands more notice the same good opportunity and suddenly ROI decreases until your profit from your node is less than your expense to run it is.
And this is where Telos is in a unique position right now, for this risk doesn't exist currently at all, since there simply arent enough coins existing to make enough master nodes to make the profit go below zero. Actually, ROI cannot go below 50% currently even if all the coins get locked to master nodes.
On top of that, even if all future new coins get locked to master nodes, then a year later ROI can at lowest be at 33%, two years later at 25%, and even ten years later, ROI is still close to 10% on 100k nodes, or around 17% when compound interest is taken into play too, for the compound interest effect increases as the ROI gets lower.
Telos Master Nodes are in quite a unique situation
This all creates Telos as a very attractive investment to those who realize this. For instead of having three risk factors, Telos only has two. It is very rare to be able to eliminate one risk factor completely away, and when that happens, any investor would be extremely happy about it.
In addition, even those two remaining risks have been lowered, for in this case, even if the price does go down, even quite a lot, then due to the nature of master nodes and high minimum current ROI cap, investor can even afford quite a big drop in price and still end up making profit. This is not like in Bitcoin kind of coins where even the slightest decrease in price is already a loss.
Similarly, usually coins have only one use case, take for example SIAcoin which is solely betting on their cloud storage to work out. Usually investor have to bet on whether the one single use case is good enough to work out or not, but in Telos case, not only can he bet on multiple already existing use cases to pan out, but he can also trust that even if none of them works out, that one of the future ones do.
To those who don't wish to play with master nodes, Telos, like many other master node coins, offer the staking option. Which means that you buy coins, keep them in your wallet and keep your wallet open, and then magically new coins appear every now and then.
It naturally is not as profitable as running a master node, but especially in current situation where people want to lock their coins to run master nodes, staking can be a surprisingly good option as well.
If you play a lottery ticket and win the main prize, that will naturally be an excellent investment yielding your original investment millions of times back in just a matter of days. Similarly there are plenty of new coins that if you jump in right now will give you a great ROI, simply because they are risky.
But can you find me one where odds are this good and ROI is still this high?
If you can, do tell me, for I want to know about it too.
notice: I used round numbers in this article for easier reading, real ones might be slightly different.
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