Recently I've seen an article talking about masternodes and their passive income (blessed be Robert Kiyosaki!) Accidently, the article was written by some masternode hosting service. But who cares? In any case, the little devils of that masternodes' passive income are indeed an interesting thing to talk about. Of course, I could tell you "Always do your own research first!", but if I tell you so -- what will my article worth then? So, it looks like I have to put my tiny research on the table too...
Masternodes are generally associated with the PoS ("proof of stake") "mining" (some call it "forging"). So let's see how PoS mining works. Scientifically, this topic is rather broad, tricky and requires good math skills. Fortunately, in yet another article, I found a great explanation of the idea, not a scientific explanation, but suitable enough if we want to talk about passive income and not about algorithms of blockchain technologies.
Well, in PoS mining every coin is like a lottery ticket. Every time a new block has to be created, the blockchain draws a random ticket -- and the one who holds that ticket becomes "the One" to create (mine/forge/sign) that new block. Naturally, the more tickets/coins you have -- the more are your chances to win a block mining right. Easy.
Generally, the One who mined a new block, gets some compensation for his work. And that's where masternodes' passive income comes from!
Now we can consider at masternode as a "wallet" or "custody" that holds coins-tickets. This "wallet" sits connected to the blockchain and waits for its lucky mining ticket to be drawn.
Again, this is not an exact scientific explanation of all kinds of masternodes, it's only an approximation that matters for passive income.
To get a chance of winning in a lottery you have to buy a lottery ticket first. In other words, you need some coins (a "collateral") to start a masternode. How much -- it depends on the altcoin of your choice. Some can be started with only one coin, others may require hundreds or thousands. Depending on this and the exchange rate your masternode may worth from $0 to $XXX of thousands. And naturally, the more passive income (calculated in US dollars) a node brings -- the more expensive the node is. Unless you somehow get the collateral for free -- you need money to make money...
Well, let's pretend today we've put $70k for a DASH masternode. Will it bring us $365 yearly? No! A DASH masternode will bring us an unpredictable amount of DASH, and nothing else. How much USD/EUR/TRX/ETH/else it will be -- it depends on exchange rate. If DASH is up -- we're lucky. If DASH is down -- we're not. A masternode pays the same crypto it's made of -- and passive income depends on its exchange rate.
Actually, the situation is even a bit more complicated. Let's look at the lifecycle of a typical masternode coin without a definite use case which could justify the coin's existence.
When the coin is born, its devs issue some amount, either through pre-mining, or ICO, or simply selling ready-made masternodes at Bitcointalk. Then the coin goes listed on crypto-exchanges. The owners of first masternodes dump their earnings at the exchanges where the coins are bought by new people willing to launch masternodes too. The price goes up as well as the total number of launched masternodes. Fresh owners use their fresh earnings either to start even more masternodes or dump them to the exchanges too, where fresh fresh owners buy the coin to start new fresh fresh masternodes. And so on. Doesn't it all look familiar? Yup, a good old Ponzi...
Also, it's possible to speculate about what it would be if the total supply of a hypothetical masternode coin were limited.
"So, you mean that masternodes is a useless monkey business?", you minght ask.
No, I don't mean exactly that. As for the theory of blockchain technology masternodes, PoS mining, staking and the like are very interesting. Moreover, I believe it's the future to replace the good old PoW mining. Also it's possible to make money with it if you know how to do it or are simply lucky. But practically, it's not a golden goose by far.