So, you want to setup a Masternode (MN), and why not? One of the latest buzz words to hit the crypto scene is obtaining 'passive income' from big crypto players like Cedric Dahl to Richard Heart and from more conventional sages like Robert Kiyosaki, their message is consistent:

“if you want to get rich, you must earn money, or Bitcoin, while you sleep"

In the cryptosphere MN's definitely earn coins while you are away from the screen, but are they a good investment or just another get rich scheme? To answer simply, they are both.

I will elaborate why setting up a MN can either be a great investment or a scheme reminiscent of a Ponzi shortly, I won't be covering what a MN is, as the what has been covered by multiple others but unfortunately not the why or why not.

So firstly to why MN's seem to be quite appealing, a quick peruse through crypto-coinz.com reveals a litany of cheap coins with amazing returns on MN’s, some boasting ROI's (return on investment) of 6,000% annually, gives a clear understanding why investors are quick to jump on board, snatching up the 1,000 – 50,000 coins necessary for a MN. Compare those gains to the typical bank deposit interest rate, floating around 2% annually and it isn’t hard to imagine doing much the same. However in these sites’ listings the actual ROI for investors is a snapshot, and therein lays the deception.

I won’t be mentioning any names, so let us say Coin Hypothetical gets added to a MN site list, with a ROI of 4,000% and an overall value of $2,000. Investor Mr K.E. (Keen and Early) decides to buy one and rocks back on his chair with dreams of a yacht and retiring to the Bahamas, since from his estimates he will have made $78,000 by the end of the year and of course why only stop at one, he has a credit card and it would be silly not to setup a few of these bad boys with these returns. He checks in later to notice that the ROI has decreased slightly due to a MN setup increase, which was to be expected he thinks to himself, slightly disheartened but full of hope he decides to let it be for a few days. A week later, that is 7 nights of sleeping, he does another check in and notices that the ROI is still high, a cool 500% annually, but that his $2,000 MN has lost most of its value and is worth only $300, so he does the math and notices that his $2,000 investment will only yield $1,500 annually. Starting to see the pattern here?

See what Mr K.E. and so many others get blind sighted by here is, the static nature the ROI offers – but we are dealing with a very volatile and very dynamic entity. OK, so why did I label the title with Ponzi and not just say bad investment, I could have come to the conclusion Mr K.E. didn’t do his research and that is no reason to shit on MN’s. Well, the thing is I like MN’s, when executed by good projects with good intentions. And I do see said MN’s as great investment opportunities, early years for Dash and VeChain come to mind. However what I didn’t highlight in my above scenario is a common and insidious trend I have been witnessing. allow me to explain.

I am here because I see this as a threat, a threat to those predisposed to impulsivity, a threat to the actual utility of MN's but worse of all a threat to the crypto community and the movement as a whole. Insert 'well known screaming erratically man with flailing octopus arms on stage' here. Another area of attack, another tale to be told of scams and victims.

There are some great projects out there that utilise MN's, however a vast majority are a well hidden get rich scheme for the coin’s creators, creators that have caught on that by chucking a high ROI in front of anything and I mean anything, money will be made. Unfortunately this is the process I have witnessed over and over:

1. Coin is created, with nothing but a friendly fun name, generic QT wallet and Bitcointalk.org post
2. The setup for initial MN's have ROI's ranging from 6,000 - 5,000%
3. Those with pre-mined coins sell them off at a premium to those seeing the outlandish returns, and needing to get in on the action
4. As the ROI decreases due to the number of MN's increasing, the price drops as the demand slips lower than supply
5. Those with pre-mined coins walk away with the money from the clamouring in, and those with their new MN's have a dropping ROI and a coin losing its value on a daily basis, this results in an exponential loss not a linear one.
6. Rinse and repeat

Maybe the word Ponzi is misplaced, but I believe it is the closest term we have for what is happening here and we need to make a stand against it. Together. We want to encourage the flourishing of Crypto and fight against those hurting the technology and its participants.

Unfortunately steps 1 - 6 are oft repeated, and what I hope for is investors to take the time to investigate and avoid such scenarios. I am not a, what does everyone say? A financial advisor, I simply hope this post can do its part in highlighting a growing problem and inspire fellow investors to take some time out, not allow the FOMO to sink its teeth in, and act with some math and composure behind themselves before putting that hard earned money of yours into a money grab for some greedy, cold, heartless bastards out there.

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Valete