Why Most Masternode Coins Are Thought To Be Scams

The masternode craze was started by Dash (DASH) when altcoin introduced a system which required staking amounts of DASH totaling 1,000. At the time the virtual currency was trading for less than a dollar. Consequently the scheme proved popular with both the network and individuals since the latter could make money from running nodes. At the peak of the digital currency market last year one would have needed approximately $1.5 million in order to be in a position of acquiring enough DASH necessary for setting up a masternode.

Following the success of the scheme which made early adopters quite rich, other coins soon joined in on the craze. The problem though is that while Dash has some real world utility, the copycats that have come up don’t have any purpose that they serve besides enriching stakers and early adopters.

Market correction

The correction that has occurred in the digital currency market has seen Dash becoming one of the biggest losers. Towards the end of last year the altcoin reached a record price $1,580 but it has since fallen to around $300 at the time of writing. Other masternode coins have also lost greatly as they are generally mostly profitable when there is a bull market but they decline when the sentiment turns bearish.

It is easy to set up a masternode since all that is required is a virtual private server as well as some basic Linux coding skills. There are also online services which handle the setup as well as the hosting. However it is a risky business as there is the potential of losing 90% of the investment in a few months due to the volatility.

High risk high gains

But like with all risky investments there is also the potential of reaping handsome returns in a bullish market where other traders are piling in. This has been described as the ‘greater fool theory’ where investors buy an asset hoping to find someone else who is willing to pay higher for that asset. The risk with this however is that it is bound to collapse at some point when there is no ‘greater fool’ to sell to.

This comes in the wake of Dash forming a partnership with Rewards.com with a view to promoting the mainstream adoption of the altcoin. When shoppers purchase items they will be able to earn cryptocurrencies as rewards and they can then redeem them by shopping using them consequently boosting adoption.