Dispel myths: masternode and hyperinflation

Masternode equally represent madness, myths and hopes. When you hear from someone about masternode, you will never believe in the word. Opinions are divided on the pros and cons. Here we try to dispel the myths that surround this very interesting topic. Maybe even something to help you.

The System of the blockchain, as you know, consists of several computers — that is, nodes, or node worldwide that store the General Ledger (ledger) and follow consensus.

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As masternode fit into the ecosystem of the blockchain?

The Data that fall in the book are divided into blocks, and the method by which the computers agree to add the blocks in this book, in fact, is called the mechanism of consensus.

The Methods of reaching consensus are different. It may be the work done by the nodes that blockchain remained secure when process the transaction. Nodes charge a fee for that. In the end, the nodes are the computers working at full speed and ensure maximum throughput of the network blockchain. Computers require electricity and maintenance. They are worth the money. The moving parts of the computer often have to be replaced if the nodes operate 24/7. You have to put the latest versions of antivirus software to protect system from intruders. But the nodes take on these risks because they receive remuneration from the community, if the blockchain is running smoothly, quickly and fully. The rewards may be different and depend on the mechanism of consensus, which uses a node to stay synchronized with the other nodes of the blockchain. Let's call them rewards the nod, but for now will consider several options to reach consensus.

Of all the possible mechanisms of consensus are most often used and mentioned two: Proof of Work and Proof of Stake.

You can see the Difference already from the name.

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Proof of Work (POW):

Nodes in a cryptographically secure solve a math problem. Since it is quite difficult to solve by brute force (i.e. by trying all possible combinations), some time must pass before the nodes solve the puzzle and will demand compensation.

The Process of solving this puzzle is called mining.

When manitsa a new block, the miner that first solved the mystery, takes the reward (reward per block and fee in it). This encourages miners to continue mining. At the same time, the complexity of the mathematical problem, combined with limited available computational power prevents deceit and malicious intentions.

To gain control over the entire network, you will need to take control of the most nodes, i.e. 51% of the network.

The Attack on the network would require huge amounts of coordination, energy, equipment (and therefore the loss of mining rewards for this period). So many resources are difficult to collect, if not impossible.

Therefore, blackany using proof of work, protected by the complexity, scale and distribution. Nodes that bottom are rewarded for your contribution.
An example of the blockchain, which uses the mechanism of consensus PoW is .

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Proof of Stake (PoS):

Proof of Stake eliminates the need for massive energy consumption and computing power through the process of staking (i.e., ownership shares and corresponding risk).

What is a stake (participation rate)? It was something someone at risk to gain or lose. It can also be a reward for a competition. Or part of the property in the event as promised and the existing.

Participation in our case translates into the amount of cryptocurrency (native for the particular blockchain), which the individual wants to block for a certain time. The motivation for such participation is that the odds on who will get next block, set proportional share. The higher the rate, the higher the chances of finding the next block, and the higher the probability to get the reward.

The more coins involved in the bet, the higher the reward.

Imagine the following analogy as a savings account in the Bank. The higher the Deposit cash, the greater the percentage coming from them. Or compare with a stock that pays dividends.
Noda is rewarded in the matter, it mines the block or not, regardless of the mechanism of reaching consensus (PoW or PoS).

The mechanisms of PoW and PoS has its disadvantages.

The Most frequently mentioned disadvantage of PoW is that it is gluttonous to resources and not particularly environmentally friendly. The most frequently mentioned disadvantage of PoS is that it overturns the spirit of the blockchain with the community on its head, transforming it into a game of the rich who seek to crack the network, owning 51% of the nodes.

The Counterargument would be that with the advent of pools, anyone can participate in the General pot and buy a node.

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Masternode. What is it?

Masternode are nodes, or nodes, with additional responsibility to the network by owning a large number of coins, but instead rewarded even more and stronger than conventional PoS or PoW node.

Contrary to popular conclusion, masternode are not exclusive for PoS systems. Masternode can work as well in PoW systems, and there are many PoW coins, which implement the hierarchy mastered.
Functionally, the launch of masternode like staking in the PoS system.

Possession of masternode allows you to generate passive income, because the reward is given for the presence of coins in the wallet. In this space many opportunities but also many pitfalls. Despite the fact that could hear beginnerinvestor from promoting a coin man, they say, buy masternode and watch the coins themselves filled purse, experienced experts will say that it is not.

Despite the confusion, which may cause a huge number of all sorts of different mastered, the vast majority of them requires the following:

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• Block a certain amount of coins
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• to perform a certain task with bloccano or ecosystem
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• remuneration

With the right approach staking can be a very fun experience.

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• Participate in the consensus
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• Ensure the network security
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• Make money

How much can you earn masternode?

A quick look at masternodes.online shows the following.

On the website listed 463 masternode coins, which involved 235 554 masternode, the amount of which store coins by more than $ 1 billion.

Coin DASH with a market capitalization of 2.25 billion dollars dominates the market mastered the same as Bitcoin dominates the cryptocurrency.

Every coin has its price, capitalization, trading volume, return on investment (ROI), the number of the node and the number of coins required for participation in rate.

Usually when you start the coin with masternode, the majority holders of the coins in the early days already own masternode. And this inevitably leads to the problem of inflation of the coin.

At the simplest level, ROI is calculated as (the reward for masternode node/threshold coins for masternode)*100.

Using this simple formula, it is easy to calculate that ROI will fall together with the increase in masternode in the network.

ROI could range from several percent to tens of thousands percent. ROI, other things being equal, means the percentage of return on your investment per 1 calendar year (365 days).

When the team creates masternode-a coin, it usually has the ICO to raise funds. Then the coin is fed to bid on the stock exchange (Lisitsa).

With the limited number of nod initially, the rewards will be high and the ROI will soar. For this reason, coin notice greedy traders and investors. They quickly jump on the train, hoping to extract maximum profit as soon as possible. After initial costs are covered, masternode holders sell part of their coins to buy more nodes.
The team believes that this success more and more investors are part of the network.

Rising prices falls. First, investors tend to sell their newly-acquired coins to cut costs. Sell orders lead to the fact that the growth gives way to a downward spiral of falling prices. Investors panicked to sell their masternode to reduce losses. The drop goes into a steep dive.

Developers are asking: what's wrong? And their dawns: why, it's hyperinflation. Remuneration and motivation of change to stabilize the system. But the damage was already done. The coin is hanging on sale. The demand goes to the best alternatives on the market.

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Hyperinflation

Inflation is caused just by the appearance of coins. In the scenario of a permanent increase in the circulation of money, high ROI leads to new investors. Because the cycle of creation coins are exponentially increasing, the inflation in the system grows proportionally.

Let's look at hyperinflation in the example.

For example, a coin with masternode has a capitalization of $ 5 million. Suppose the reward is 120% per year, despite the fact that about 80% of the coins closed in masternode.
This leads to an effective annual inflation in 96%. Divide that by 12 months a year and get 8% inflation per month.

8% of 5 million is 400 thousand. So, every month need stuffing $ 400,000 to maintain the prices in the system are stable. If the system gets less money, the price of a coin starts to fall.

It is Unlikely that the project will continue to attract 400 000 dollars a month, with the launch of more mastered. The devaluation will begin to bear fruit much earlier.
How to choose the coin in which to invest?

Very tempting to watch more than 400 masternode coins, promises a 10,000% ROI, and it's hard to resist not to invest in all at once. Many beginners succumb to the promises of the stars from the sky just to burn.

Large and high ROI does not mean good annual return. High ROI guaranteed leads to high inflation and erode any possible profit. More than likely that the price will fall and the coin will soon become a Ghost of its former glory.

A Trusted way to reduce risk would be to find some real controls, such as:

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• Command. Who is behind the coin? Do you have team experience? How it is transparent? Who are the founders? They had some experience before creating this project? If Yes, what is it about this project happened? Active is the team? Open? Try to ensure that this is no ordinary pump'n dump scheme.
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• make Sure that this coin already supports masternode. Because if the coin promises to support masternode after you start trading, the price for it will fly up quickly. This will lead to a drop in ROI.
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• will Learn how the coin mediates masternode. Masternode should provide higher returns compared to conventional mining, or just the job node.
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• ROI. This is not the only criterion that determines the success of an investment, and it is extremely difficult to calculate accurately. Yield and price are always changing.
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• Liquidity. Find, on which exchanges or traded going to be traded coin. As a rule, mastered-coins should not be sought on the most popular exchanges. Popular incommunity masternode exchanges — Graviex, Cryptopia and Cryptobridge. Liquidity, i.e., trading volume on these exchanges is usually not impressive.
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• Wallet. Make sure that the wallet is safe and has a functional user interface. In the case of masternet-coins, wallets interfaces often leave much to be desired. But for safety it is better not to save. Wallets can be loaded with viruses. If you have to upload the wallet, always check it. If possible, run on the virtual machine.

The Essence of investment in masternode is to find the coin before it will become large. Masternode DASH at the start in 2015, worth about $ 3,000, and now more than 200,000 dollars (if you start from prices of $ 200 in September 2018 for the coin).

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Special mention DASH

As one of the ten largest cryptocurrency by market capitalization (approximately 1.62 billion dollars in mid-September 2018), DASH deserves a special mention in the context of this article. This is the only coin that is kept steadily in the top 10 working in the system mastered.

Masternode in DASH carries such tricks, like "send personally," and "send immediately". Most of the coins that operate masternode, when we began a fork of DASH.
So if a new coin is trying to put the "send personally" and "send instantly" feature, consider it a DASH?

Don't forget to ask yourself the question, would you have invested in the coin, if she hadn't had mastered? Do you see any fundamental reason for the existence of this coin? Whether it solves any major problems in the ecosystem? Do you have use of the coin the disadvantages?

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Mistakes to avoid

Do Not buy at the inflated price. This is the easiest way to lose money. This means that the horse already harnessed, and the market bought masternode. If the price is too high, better do further research. Generally, learn what is invested.

Ignoring inflation: has been discussed many times, but the only direction that you can head your investment in a coin with a five-digit ROI is DOWN.
FOMO: if you want to discourage investment in 14 days? Read the paragraph above.