Passive income has quickly become a cornerstone of cryptocurrency investing, with multiple options available to savvy investors looking to hedge their largely speculative bets. This passive income can come in a few different forms, including mining (PoW), staking (PoS), profit-share tokens and masternodes.

Cryptocurrency mining, while a staple of the industry, has suffered from a number of profitability-killing factors. First, as more and more mining farms join these networks, the network weight increases so much that the average amateur miner doesn’t stand much to gain. Additionally, as new ASIC technology is released targeting algorithms that were traditionally immune, coins become more difficult to mine and run further risk of 51% attacks. Together, when considering these factors, mining begins to lose its appeal given its heavy hardware startup costs.

PoS coins are the closest equivalent to traditional dividend-paying equities, which pay out quarterly, yearly or monthly dividends based on the number of shares owned. In the same manner, staking your coins will gain you rewards over time, and more frequently than the aging dividend system.

Profit-share tokens are quietly growing in popularity, with the major cryptocurrency exchanges like KuCoin (KCS) offering daily payouts based on the number of KCS tokens an investor holds. Additionally, more and more projects are beginning to offer a percentage of their monthly, or yearly, earnings as an incentive to long-term investors.

Masternode coins are similarly intriguing investments if you’re willing and able to risk more capital (masternodes require dedicated servers and large initial buy-ins unless you use a masternode pool). Strong masternode projects look to leverage these full nodes to improve upon network functionality, while bad projects generally leverage masternodes for nothing more than incentivizing investors to buy-in, simply creating an inflationary investment vehicle.

Daily volume is also an important factor to consider when choosing a masternode project, as low-volume markets with significant spreads can put investors at risk of disastrous price dumps when masternode holders look to unload their passively-earned coins.

With that in mind, here are five masternode projects with real use cases that should offer interesting investment opportunities to long-term investors.

Syscoin (SYS) | $145M Mkt Cap | Masternode Worth: $27,100 | Interest: 12.53%

Daily Volume: $935K

Number of Active Nodes: 1041

Description: Syscoin is a cryptocurrency which features the world’s first decentralized marketplace directly integrated into the wallet platform. Syscoin recently forked itself to build a number of new elements, including the implementation of an asset infrastructure for broader applications, a zero-confirmation double-spend protected instant settlement scheme (Z-DAG) for faster transactions and a new system of masternodes for a better consensus model.

When asked about the project’s new masternode system, Jagdeep Sidhu, developer of Syscoin and CTO of Blockchain Foundry Inc, told SludgeFeed that Syscoin pursued masternodes to create a preferable network topology that allows the project to leverage Z-DAG, which stands for Zero-Confirmation Directed Acyclical Graph.

This allows for real-time point-of-sale applications through the assets platform on Syscoin, *the first project to use this feature is the payment processor Coinpayments*, through a DAG implementation by providing a interactive protocol targeted around 10 second POS transactions. By creating a fat layer of masternodes in between sender/receiver we will allow for high-throughput network relay with minimal network hops to reduce latency for message packets to arrive to the network participants. This coupled with the fact that there is now parallel execution of ZDAG transactions across the network we will have a very high throughput, statistically secure like proof-of-work and fully decentralized form of asset/token platform that has not yet been seen in the industry to date

Phore (PHR) | $18.8M Mkt Cap | Masternode Worth: $14,000 | Interest: 40.13%

Daily Volume: $333K

Number of Active Nodes: 544

Description: Phore is a young project looking to build out a decentralized ecosystem around its cryptocurrency, including a decentralized marketplace and an advanced and flexible smart contract platform for building decentralized applications (DApps).

According to the Phore website, the project aims to leverage its system of masternodes for various decentralized services and project governance.

Masternodes play a pivotal role on the Phore blockchain, by providing various decentralized services; Instant transactions and Governance. Anyone can run a masternode simply by holding 10,000 Phore as collateral in their wallet. And by doing so, you will receive block rewards for helping provide services to the network. The operators of masternodes can also vote on various budget and development proposals.

Ionomy (ION) | $22.3M Mkt Cap | Masternode Worth: $20,700 | Interest: 27.98%

Daily Volume: $170K

Number of Active Nodes: 531

Description: Ionomy is a blockchain project that integrates financial, gaming, and social platforms to provide both basic investment opportunities through staking and trading as well as advanced opportunities through gaming and social participation. The project is building out a developer ecosystem in an effort to create a large blockchain-based gaming platform.

ION’s masternodes are largely used for transaction-related functionality improvements, but according to its whitepaper, the project plans on leveraging these nodes for additional usages moving forward.

Masternodes validate all public transactions within about 4 seconds by communicating each transaction across all nodes on the network to prevent double spending (Duffield, Schinzel, and Gutierrez, 2014). When private transactions are initiated, masternodes also perform the work necessary to make the transactions hard to trace. The masternode network will be able to perform additional functions as new developments are commissioned and the bounties executed.

PIVX (PIVX) | $170M Mkt Cap | Masternode Worth: $30,000 | Interest: 5.50%

Daily Volume: $1.4M

Number of Active Nodes: 2,152

Description: PIVX leverages a customized Zerocoin Protocol for instantaneous, private transactions and a Proof-of-Stake (PoS) consensus mechanism with a network of masternodes to create a better system of governance.

It’s interesting to note that the PIVX community, which initially only allowed masternode holders to vote, voted to include a more expansive portion of the staking community. (more)

Blocknet (BLOCK) | $96.2M Mkt Cap | Masternode Worth: $92,800 | Interest: 17.33%

Daily Volume: $132K

Number of Active Nodes: 429

Description: Blocknet empowers the passionate communities behind every coin with atomic swaps on a truly decentralized cross-blockchain platform. Blocknet serves as a connector between blockchains, markets, and communities.

Blocknet is building out its masternode system to support the project’s decentralized exchange, as these nodes oversee exchange transactions to facilitate cryptocurrency trading and offer fiat currency gateways.

Final Take

While masternodes require a bit more initial capital than other cryptocurrency investment opportunities, they do offer a way to hedge against long-term, speculative investments. Given that there are hundreds of masternode coins to choose from nowadays, it’s important to pick those that have real use cases. Otherwise, investors will run the risk of buying into nothing more than an inflationary investment vehicles.

The 5 projects mentioned here, while not an all-inclusive list, should provide investors with a good jumping-off point to kickstart their own research into these passive income investment opportunities.

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Disclaimer: The author(s) of this article may have a position in one or more of the securities mentioned above. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.