Tuesday, July 17th 2018 Cryptocurrency Prices:
What is a Masternode?
A Masternode is a computer running a digital wallet 24/7. Specific wallet settings and configurations must be set in order to turn an ordinary digital wallet into a masternode. Once the masternode is running, it powers the project’s network by processing transactions, mixing coins, and often offers voting rights.
What are the Benefits of a Masternode?
Masternodes help support the network by providing faster transaction times, anonymous transactions, and decentralized operations. Additionally, each project has an additional features to their particular masternode configuration. As incentive for investing in the necessary amount of coins or tokens required for a masternode, configuring, and setting up your masternode, and hosting the masternode, masternodes pay their owners in coin or token rewards, based upon their portion of ownership for each block completed on the blockchain (less masternodes, higher reward per individual owner). Oftentimes, masternode owners are also given voting rights for development and management decisions for the cryptocurrency. The more masternodes are supporting a cryptocurrency, the faster, more stable, and more secure their network is.
What is a VPS?
A VPS is a Virtual Private Server, or virtual machine, which is provided by a web hosting company. Each VPS runs an independent installation of an operating system (OS), Windows or Linux, and typically provides root access to the OS for advanced management and control.
Why is a VPS Required for Masternodes?
A VPS is recommended (and often required) for masternode setup, as you’ll need a dedicated static IP and 99.9% uptime to provide a stable and efficient node for the cryptocurrency’s network. Unlike your home or office PC, a masternode VPS serves one purpose, to securely and efficiently run a masternode. A VPS is online 24/7 and provides dedicated resources for the project’s decentralized network. This allows for a more stable and fluid network for the coin or token. The typical setup is to host a “hot wallet” on the masternode VPS, and a “cold” local wallet on the owner’s personal computer.
What is the Best VPS for a Masternode?
Each masternode requires different OS, hardware, and throughput specs, so you’ll want to check the setup guide for the particular masternode coin or token of interest to you before you purchase a VPS for masternode hosting.
The best VPS for Masternode hosting are as follows:
I personally host several masternodes on DigitalOcean, and have been a customer of both Vultr and Linode in the past for various VPS hosting needs. All three are great options for masternode VPS setup and hosting; here are my reasons for each.
DigitalOcean is very simple to use. Their managing infrastructure is straight forward and allows for instant deployment and efficient scalability. DigitalOcean Droplets can be deployed with the click of a button. Simply deploy a distro or pre-built app, choose your desired droplet size and type, and select one of the 8 datacenter regions. Distributions include Ubuntu, CentOS, Debian, Fedora, CoreOS, and FreeBSD. One-click apps include Discourse, Django, Docker, Dokku, Ghost, GitLab, LAMP, LEMP, Machine Learning, MEAN, MongoDB, MySQL, Node.js, phpMyAdmin, Ruby on Rails, and WordPress.
DigitalOcean pricing is straight forward with the smallest standard droplet beginning at just $5/month (or $0.007/hour). This includes 1GB of memory, 1 virtual CPU, a 25 GB SSD, and up to 1 TB of data transfer each month. Many masternodes require dual core processors and at least 2 GB of RAM, so you’ll want to consider the 4 GB, 2vCPU, 80 GB, 4 TB plan for $20/month ($0.030/hour). This 4GB/dual-core plan is also DigitalOcean’s most popular plan, as it fulfils most hosting needs with adequate hardware. If you find yourself needing a higher memory or CPU allocation, scaling do a larger droplet size can be initiated with a click of the button inside the DigitalOcean management dashboard.
I have found DigitalOcean’s droplets to be the easiest, most efficient and cost-effective VPS hosting solution for masternodes. Again, I personally host several masternodes on DigitalOcean droplets, and highly recommend them.
Pros: Best hardware specs for the money, very simple setup and easy droplet management and scaling.
Cons: Does not accept Bitcoin as payment, no out-of-the-box DDoS protection, automatic backups add 20% to the price.
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Vultr is an outstanding VPS solution as well. They directly compete with DigitalOcean, and the setup, VPS specs, and pricing are nearly identical.
For you crypto-nerds, one unique benefit to Vultr is that they accept Bitcoin as payment. This allows for seamless transactions, and if you’re converting masternode profits to Bitcoin, allows for asset transfer back into the masternode host, so no additional fiat is needed. This essentially makes the masternode self-sufficient in its cryptocurrency earnings. (However, you won’t have Bitcoin anonymity with Vultr, just convenience, as all accounts require funding via credit card with verified billing credentials, prior to being able to fund via BTC.) Vultr also has DDoS protection, and automatic backups, making it a stable option for hosting your masternode. Additionally, in my testing Vultr seemed to consistently have the fastest network response times, giving them another competitive edge.
Vultr has a tiny VPS plan starting at just $2.50/month, however this only includes 512MB of memory, 1 CPU, a 20GB SSD, and 500 GB of bandwidth. This will not be sufficient enough for most masternode requirements. The next plan at $5/month is nearly identical to DigitalOcean’s smallest VPS offering, with 1024MB of RAM, 1 CPU, 25GB SSD, and 1000GB of bandwidth. Jumping up to the most common masternode requirement of 2+ GB RAM and 2 CPU, you’ll also be aligned with DigitalOcean at the $20/month Vultr plan, including 4096 MB of RAM, 2 CPU, a 60 GB SSD and 3000 GB of bandwidth (here the SSD disk size and data transfer are slightly less than DigitalOcean’s $20/month offering – but that is negligible for most masternode setups).
Pros: Fastest VPS provider, accepts Bitcoin as payment, DDoS protection, automatic backups.
Cons: Slightly less hardware specs for the money, management interface and scaling isn’t quite as easy as DigitalOcean.
Linode comes into the low-cost VPS battle swinging at it’s rivals, DigitalOcean and Vultr, with a comparable $5/month plan ($0.0075/hour) which includes 1GB RAM, 1 CPU core, 20GB SSD, and 1 TB transfer. The cheapest 2-core CPU option is nearly the same as well, with 4GB RAM, 2 CPU cores, 48 GB SSD, and 3 TB transfer.
Linode is very similar to the other VPS services, however, in my opinion, their interface is lacking. Additionally, their offerings and marketing positioning tends to favor the high memory plans, which is targeted at a different market than what is necessary for hosting a masternode.
In my experience I’ve also noticed some latency on Linode VPS, as compared to DigitalOcean and Vultr.
Pros: Similar hardware specs to DigitalOcean and Vultr, great all-around VPS solution.
Cons: Interface isn’t as fluid as the others, some latency issues as compared to its competitors.
Best VPS Option – My Recommendation
As these three main providers all have similar package offerings and pricing, it is difficult to definitively select a clear best VPS option. However, based on my experience I recommend DigitalOcean as the best VPS option for hosting a masternode, especially at the $20/month 2-core level.
The competitive edges Vultr has over DigitalOcean would lead me to select them as my #1 choice for hosting a Linux-based web application (speed, DDoS protection & auto-backups), however with a masternode setup I’d rather have the increased hardware specs and simpler interface of DigitalOcean. It wouldn’t be cost effective for an attacker to DDoS a single masternode, and there is no real node for a backup, as your wallet files should be backed up locally in cold storage, and as a simply sync with the blockchain will get your masternode back up and running on the network if something were to happen. Additinoally the added speed of the network doesn’t offer any direct benefits to hosting a masternode, and won’t affect masternode earnings or payouts in any way.
Linode is a solid player, and I have no issues with them. They would be a fine VPS choice for a masternode or web application, I just think DigitalOcean and Vultr have a slight edge here.
How Do You Setup a Masternode?
While wallet staking is usually performed on an end-user’s local machine, masternodes are typically hosted on a Virtual Private Server (VPS). Each masternode enabled coin has a bit of a different setup, so you’ll need to check the appropriate documentation for the masternode configuration of the particular project you’re interested in.
Here are the setup guides for the most popular Masternodes:
- Dash Masternode Setup
- PIVX Masternode Setup Guide
- Znode Setup Guide
- SmartCash SmartNode Setup Guide
- Blocknet Decentralized Exchange Service Node Setup
- How to Setup Ionomy Masternodes
- PURA Masternode Setup
- Create MedicCoin Masternode
- Zoin Masternode Setup Guide (Zoinodes)
- Bitcoin Green Masternodes
You’ll need to download PuTTY, an SSH client, to interface with your VPS for most masternode installs.
Disclaimer: First off, this is not financial advice, simply a mention of potential masternode ROI. Any cryptocurrencies mentioned in this article are for example only, and I am not, in any way, advising the purchase of these coins or tokens. The crypto-sphere is a crazy wild-west world. Y’all have fun, but be careful out there!
Masternode ROI is a bit difficulty to calculate, as the ROI percentage is tied directly to the price of the cryptocurrency. Oftentimes, when a new masternode enabled cryptocurrency is released (or masternode functionality added to an existing project), you’ll see ROI calculations in the +1,000% range. This, however, is often drastically reduced as more masternode owners quickly come online to support the new project. Once the number of masternodes have leveled out, ROI can be down to single digits. This again, however, is subject to drastic change as the price of the new cryptocurrency can exponentially increase in the coming months as the project is just getting off the ground. LUXcore (LUX), for example, has been in the triple digits and single digits of ROI, simply based upon these variable factors. If a LUXcore masternode earns 7 LUX a day, the daily income could be $70 or $350 (when converted to USD), depending on the trading price of that day.
The value of a cryptocurrency can change very rapidly. This is an extremely volatile market with dramatic swings each way. Masternodes can hedge against some of the risk of day trading, as they earn passive income independent of the daily market fluctuations (similar to mining cryptocurrencies). They also eliminate the emotions of trading cryptocurrencies, as masternode ownership is typically intended for the long-term. Over time, with advancements in the project’s development, and more awareness and adoption of the cryptocurrency, a masternode’s value can rise over time.
In November 2017, one could have purchased the 16,120 LUX required for a masternode for $12,823. Just over 5-months later (in a bear market), that masternode is now worth $170,066 (with the masternode worth peaking in January’s bull market at $746,839 valuation!). Plus, one must factor in the passive coins generated from the masternode over this time, and the valuation of those earnings.
Top 10 Masternode Coins by Marketcap
From digital cash to privacy coins, game tokens to decentralized socially conscious projects, it seems there is a masternode coin for everything.
Here are the top 10 most popular Masternode coins:
- Dash (DASH)
- PIVX (PIVX)
- Zcoin (XZC)
- SmartCash (SMART)
- Blocknet (BLOCK)
- ION (ION)
- PURA (PURA)
- MEDIC Coin (MEDIC)
- ZOIN (ZOI)
- Bitcoin Green (BITG)
Finding the Next Great Masternode
Two of the best resources on the web for finding new masternodes, monitoring masternode ROI, and sorting masternode metrics are:
I use both of these websites, finding the aggregate information provided very helpful as I observe the market and research new masternode projects. I encourage you to always do your own research (DYOR), and carefully vet each and every project prior to investing your hard earned fiat (government backed money) into the cryptocurrency market.