(Passive) income strategies in the crypto market in 2020

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Some projects implement so-called “masternodes” in addition to the Proof of Stake consensus algorithm. This is a specific number of coins in a wallet that qualifies for a validator node. To run a node, one transfers a certain amount of coins in one transaction to another wallet storing the entire (or necessary parts of the) blockchain. A key is generated that enables your node to validate transactions for the network.

Nowadays, there are hundreds of cryptocurrencies making it more and more unlikely to pick a hidden gem and running a cheap masternode today that will be successful in future. Nevertheless, masternodes allow to earn a few percent in the respective cryptocurrency. The higher the return on investment (RoI), the higher the inflation and the coin is supposed to lose value continuously, as more people will earn and have to sell to pay operating costs just as the miners with Bitcoin do.

Source: masternodes.online as of 01/01/2020

Masternodes exist in every price range. The cost of a masternode does not make a cryptocurrency better or worse. But consider: An expensive masternode is potentially more “reliable”, however, a price drop for example as a result of a code bug can be spectacular. After all, trading volume is important: Coins, that are barely traded, are pretty much useless. You can find a comparison on masternodes.online and MasterNodesPro. The YouTubers Altcoin Buzz provide a tutorial for newbies. It may be worthwhile to rent a cheap server, for example an Ubuntu VPS with static external IP address. Cloud and root servers are full-featured, dedicated servers, not just an instance or virtual container on a shared server. When this sounds too complicated, you could purchase a masternode hosting plan such as on Allnodes.

Conclusion

The prices of coins are too volatile than one could talk about a guaranteed income from masternodes in dollar terms. Those that believe in a PoS coin and invest based on its value, should not miss out on passive income by staking and masternodes if applicable. But it is not advisable to invest in a coin for the sole purpose of receiving staking rewards.

Full Nodes store a copy of the blockchain. Even when they make the data available to others, they are usually not rewarded in contrary to miners or validator nodes that register transactions. But there are exceptions. You can find potentially rewarding full nodes of the Top 100 coins in the German crypto ebook „Tips & Tricks for Bitcoin and other cryptocurrencies“ for 10€ on kryptokompass.info that enables you full access to the website’s premium content.

Beware reward calculators for estimating income from nodes or provided resources! Teams tend to publish an open-end calculator on their website or count with irrational numbers in their whitepaper or blog post that are far off the status quo of actual transaction volume and can exceed it a hundred times, so that an investor earns 10 cents instead of a supposed payout of 10 dollars a month while having to pay the rent for the server nonetheless. You may not read about it as people tend to hide losses and misfortunes.

Sentinel Network

The Sentinel Network is still in alpha testing their decentralized virtual private network (dVPN) with the goal to route the user’s internet traffic encrypted and anonymously through the web. Everyone can become a network node and share bandwidth with the community in return of SENT tokens — more or less a monetized alternative to the slow Tor Network. In contrary to Sentinel, Tor, however, is well-known, has got more users and its own browser based on Mozilla Firefox. There are many more blockchain-based projects like Bit Tube, Lethean, Orchid, Substratum and WinQ in the same segment, but they’ve not got more to offer than a browser add-on, a very small community, are still stuck in testing phase and/or stagnate in development.

The difference to a regular virtual private network (VPN) is, that internet traffic is not routed via centralized servers of a service provider but across the servers of the entire community. Expected advantages are unblocked websites and less captcha requests through ordinary IP addresses. The traffic from the user to the VPN or Sentinel Node is encrypted. This may be attractive for illegal streaming but may become a problem for exit nodes due to their visible IP address. A VPN protects users from nearby hackers like for example in public WiFi networks. When the target servers also used a Sentinel Node on their end, the entire connection would be encrypted and invisible to internet providers and governmental organizations. When you want to protect the content of your private e-mails from the data kraken NSA, you should communicate using PGP keys that sender and receiver need to exchange beforehand or can derive from a keyserver. Don’t forget that an effective protection of your private personal data on the servers of your webhosting provider remains key.

BitTorrent

BitTorrent is without doubt the best-known decentralized network for (often illegal) P2P file sharing. 2019, the add-on BitTorrent Speed brought the crypto token BTT to the application μTorrent. The goal is higher download speed due to the possibility of earnings in BTT. More network participants shall be encouraged to keep seeding torrents to other users after they have downloaded a file. The concept is simple: Leechers compete for more bandwidth by seeders via bidding mechanism similar to a tip for transaction mining. The more someone is willing to pay, the higher his download speed will be. People, that are specifically interested in returns from seeding could search on popular websites for torrents where there are few seeders but many leechers. A “discovery of demand“ feature for tracker is planned. Most popular exchanges take care about liquidity by listing BTT. The Team behind BitTorrent also works on decentralized data storage called BTFS.

Cloud storage could be provided in a decentralized fashion with the help of blockchain technology when people with sufficient storage space store encrypted data of other users on their hard drives with a consistent internet connection. The algorithm of Storj.io distributes the data as globally as possible to prevent regional outages. Storage Node Operators (SNOs) earn STORJ tokens for their provided resources at fixed conditions. To incentivize storage nodes to stay online as long as possible, the earning amount grows over time holding back a certain amount from the first 15 months of the “trial period” until their graceful exit out of the network. Storj Labs competes with Sia Tech and Opacity for the supremacy of the most demanded cloud storage solution based on blockchain. However, all services still lack (decentralized) apps comparable with the user experience of Google Drive utilities.

as of 23.03.2020

The table above illustrates storage pricing from the customer’s point of view. Someone interested in affordable storage will probably choose the Sia Network or startup Opacity. On the other hand, running a node in the Sia Network is not much attractive. The download of 1 terabyte of data will only earn you a few cents — but 20$ in the Storj Network. The question is, if the team behind Storj.io is capable finding enough partners for their Tardigrade Cloud Storage Service that launched in March 2020 and if these will download chunks of data to make the operation of storage nodes actually worthwhile.

The prerequisites for a storage node are high:

  • 1 Processor Core
  • Minimum 500GB of available disk space
  • Minimum of 2TB of available bandwidth a month
  • Minimum upstream bandwidth of 5 Mbps
  • Minimum download bandwidth of 25 Mpbs
  • Maximum down time of 5 hours a month

The latter may be the biggest obstacle. Outages on broadband connections are often higher than 5 hours a month. Since the majority of returns is held back especially in the first months and as it takes 10 months to be paid full rewards, one can expect to be unfavorably disqualified sooner or later. The home computer is therefore not well suited as a storage node even when Storj.io addresses private hosts.

Let’s investigate if reselling a virtual private server is worthwhile. We’ve got two VPS running, one with 4 cores, 16GB RAM, 4TB HDD and another with 8GB RAM and 1TB HDD, both are entitled to unlimited bandwidth. We noticed that within the last half year during testing phase the minimum bandwidth requirement has not been reached. Income and expenses have been as follows in Q1/2020:

Expenses:

30/12/2019: 15.13$ server rent
01/01/2020: 22.00$ server rent
28/01/2020: 14.85$ server rent
01/02/2020: 22.00$ server rent
26/02/2020: 14.69$ server rent
01/03/2020: 22.00$ server rent
= 110.67$

Income:

04/01/2020: ~197 STORJ @ ~0.103 USD = 20.33$
05/02/2020: ~638 STORJ @ ~0.140 USD = 89.29$
10/03/2020: ~468 STORJ @ ~0.125 USD = 58.54$
= 168.16$

Mind that our servers have been online since August 2019, therefore we have received 50% of the regular earnings. With a mature node of over 10 months runtime we would have got double the amount. The held-back reserve is to cover an uncoordinated exit or disqualification to pay repair bandwidth from other nodes as stated in the table above that share the same data to be distributed to other nodes. So far, there has not been a single file lost in the Storj network and the team based in Atlanta is diligently working on keeping it this way. Otherwise, the service could not justify the high pricing for downloads. Please note that this is just a snapshot in time and not a promise for a sustainable income model. During the testing phase in 2019, we’ve had higher expenses than income despite the team’s “surge payouts”. With the public launch of Tardigrade, we expect a growing demand, though, and hopefully growing profit as well.

Regarding the value of storage tokens, the leading programmer behind the Oyster Protocol spoke out after committing his exit scam:

I advise all of you to get out of crypto. Go educate yourselves about what is happening with Tether. The entire crypto sphere is a giant Ponzi scheme. […] If you want to sell back to a greater fool then you will only find yourself to be that fool. […] If you understand how the storage-peg works then good for you, you realize that current price shocks are ephemeral and that the price of PRL will eventually become bubble-resistant and associated with the fair-market value of storage.

Theta Network

Theta Labs needs bandwidth for video streaming. Caching and validator nodes are rewarded in TFuel, the gas for transactions in the Theta Network. Earnings depend on the shared or, more specifically, uploaded content, but used to be less than a dollar a day. Sliver.tv is a streaming partner of Theta that is also cooperating with the Chromium-based Brave Browser*.

Conclusion

It is still to be seen which platform will deliver the best return on used resources. BitTorrent is one of the largest decentralized networks, but with more participants comes usually more competition thus smaller returns. On the other hand: when a service such as the Sentinel Network not enough users, returns are hardly predictable. The US-american startup for decentralized cloud storage Storj.io could be a hidden gem. It’s always best to DYOR (Do Your Own Research) and run a promising node for trial without heavy expenses or commitments.

Thanks to APIs of major platforms such as YouTube, Twitch and Twitter, it is possible to reward content creators. The Brave Browser* enables the usage of Basic Attention Token that users receive for interacting with subtle, unpersonalized, privacy-preserving advertisements.

The platform Verasity turns promotion upside down: Publishers and promoters purchase VRA/VRAB tokens to reward users for watching their videos or ads. Verasity provides not just a browser plugin but also embeds their VeraWallet into the website, so that users don’t have to switch between multiple apps.

The video streaming network DLive* combines both models to offer a platform that is all about community interaction. In 2020, the project moved from the Lino to the Tron blockchain. Since then, their dApp is part of the BitTorrent ecosystem.

Airdrops are or rather have been a great way to collect some tokens for free. An entire free token distribution is the exception today, since in the past few years, tokensales have proven to be an attractive crowdfunding opportunity. With the few ICOs today, projects use airdrops primarily as marketing strategy to (artifically) increase their community, as one has to follow a project on various channels in order to receive a few tokens in return. That way, projects with weak concepts still can reach a decent community size.

Free airdrops are often part of a referral system promoted by influencers or in the hodgepodge of posts in the oldest crypto forum Bitcointalk. When a team distributes their tokens solely by interaction on social media channels without having a real product, it is to be expected that the token will have little to no value. Some teams use a disposable token just to gather personal data of a target group by stipulating a Know Your Customer (KYC) process in the pretext of fulfilling anti-money laundering (AML) requirements. These are nothing but snowball setups, where money will not flow to the participants but into the pockets of the initiators when they sell the aggregated data to third parties. Be extremely cautious to whom you give your personal information as data is the next generation currency.

Some projects are handing their tokens to stakeholders of a coin (of the underlying blockchain). An example is BitTorrent, whose team distributes BTT tokens to TRX holders based on monthly snapshots of the Tron blockchain. The ratio is so small, though, that a buy and sale of TRX on the 11th of each month is not worth it regarding the amount of receivable BTT tokens.

In general, making oneself eligible for an airdrop as a tokenholder through a short-term investment outside of the top 10 coins is very risky due to the lack of liquidity as the “Mega-Airdrop” from TrueDeck has shown. The 2:1 increase of the circulating supply caused the token to lose 80% of its price within hours. If you cannot free yourself from getting into a coin for the eligibility of a secondary coin by airdrop or hard fork, you should rather park your balance on a cooperating exchange to sell right after the snapshot. Use a block explorer to determine the block height such as Ethstats.net for Ethereum. When you hold your coins in a private wallet, it would take too long to transfer the coins to an exchange after the snapshot to sell.

An Airdrop must not be confused with a Hard Fork of a blockchain, when it is not initiated for a new blockchain but to solve a code bug for example. In that case, the protocol may be substantially modified, but there is no new coin issued. A token swap is not the same like an airdrop, too, even though stakeholders receive coins for their tokens on a new blockchain, but the former tokens are declaredly worthless, since the new coins function as the new medium of exchange in the network.

A token faucet is used on websites to give away coins and tokens for free or in exchange of completing tasks or polls by a user. Payouts can be initiated above a certain threshold using platforms like FaucetHub or CoinPot that require the user to register an account. Passive income looks different. The promotion of 5,000 Satoshis per task often turns out to be three nulls less on average.

Who should give away money for free? The only rational would be a share of income from advertisements, but since most people use adblockers nowadays, earnings have shrunken substantially. When this was even further divided by a share to the website visitors, operators of a faucet cannot give away more than a few cents a day “for free”, not to mention the risk that people use automated bots behind multiple accounts with different IPs in an endless milking fashion. Some websites block access to their faucets when an adblocker is detected. And even more are just scam sites encouraging people to click silly captchas on ad-polluted pages without paying a penny or even worse, smuggling malware to the user’s PC. The time of Gavin Andresen’s 5 BTC faucet is over. The very most of faucet websites is a pure waste of time!

When your intention is to avoid a connection between your wallets but you need a little gas like Ether in another wallet for a token transaction, you can use wallets with Atomic Swap functionality or an inbuilt exchange service. Remember that you remain pseudonymous only as long as there is no outgoing transaction from your wallet to a platform where you are registered via KYC. Alternatively, there are fee- and trust-based mixing services. Do not give your private e-mail address to an anonymization service provider and especially not to a faucet operator unless you want to be flooded with spam mails.

Source: mohamed_hassan, Pixabay

Beside compelling ways of passive income, there is still the traditional model: time for money. Although many people dream of fincancial freedom in the future by investing in cryptocurrencies, for the time being it may be worthwhile getting started with active engagement:

Coinbase* is one of the first platforms offering “payed learning”. You can participate in a quiz after watching episodes about cryptocurrencies on Coinbase Earn*. Every correct answer earns you a few dollars in the concerning cryptocurrency. Some projects even offer giveaways on their platforms as to be found here.

Many, if not all blockchain projects are desperately looking for IT experts. Coders familiar with blockchain technology have got the agony of choice in jobs making the dream come true to work as digital nomad on the beach of Bali switching from cocktail to touchpad to cocktail. But when you started learning to programme today, beware that the garden-variety of coders may be replaced in future by artificial intelligence that they (or rather their colleagues) have created. Better try to get your foot into the door today as a translator, moderator, founder or something similar in the blockchain space or beyond.

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