We recently asked you to comment on how stocks and cryptocurrencies are different and/or similar. What follows below is a compilation of research based on your answers. There is a lot to cover – we recommend grabbing your favorite beverage, finding a comfortable space, and scrolling at your leisure. Cheers!

Recurring Income

Stocks: 3/5
Masternodes: 5/5

Stocks

Benjamin Graham, the father of value investing, once wrote “The real money in investing will have to be made – as most of it has been in the past – not out of buying and selling, but out of owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value.” There are many ways to receive interest and dividends in the stock market. For a thorough explanation, check out this resource from Investopedia.

Masternodes

In the past year or so we have seen the masternode niche explode and for good reason. Much like rewards paid to miners, those that are willing to hold masternodes are rewarded as well, on a structured and predictable basis. It is worth noting that these rewards tend to decrease in value due to more investors buying masternodes. The rate of decrease/increase varies depending on the price of the token and the amount of masternodes on the network.

Income from Value Growth

Stocks: 2/5
Masternodes: 5/5

Stocks

When considering dividend or “income” stocks, one important factor to consider is by and large these stocks do not increase in value. Put another way, since the company is taking much of their profit and offering dividends, they are not reinvesting it into the company to expand. Ultimately you’re investing in a stable recurring income stream.

Masternodes

Masternodes are a great way to earn recurring income. If we swapped out a few words in the quote above it would sound like we were describing a masternode. While a dividend stock tends to grow at a slow rate, a masternode on the other hand can grow rapidly. If you do your due diligence, you can find a high-quality masternode that allows you to increase the value of your collateral while also providing a recurring income stream.

Sweat Equity

Stocks: 1/5
Masternodes: 2/5

Stocks

Sweat equity is often heard in conversations describing ones contribution in a startup, or an improvement on their real estate property. Essentially you put in the work now for free or below market rates hoping that it will pay off in the form of a buyout or a purchase later. This is common in small businesses where funding is low and they compensate labor with stock.

Masternodes

Investments are often seen as passive but don’t be fooled, you can do your part to help grow the project. When it comes to masternodes, you can supplement your typical Discord chats with creating a marketing campaign, or writing an article on your blog. You have the power to turn your passion for your investment into a vehicle that increases its value.

Accessibility / Availability

Stocks: 2/5
Masternodes: 2/5

Stocks

For many, investing in the stock market is a daunting task. What do I buy? Where do I buy it? Is it safe? These are common questions that deter most would-be investors. If you have been exposed to the market, many of these may seem elementary but the newcomer is absolutely turned off by the experience.

Masternodes

Like stocks, navigating the masternode space can be nebulous. For some of us it comes naturally because we have financial backgrounds or we’ve been here for more than a year, but think about those that have yet to enter the market. The same would-be investors in the stock market not only have to locate where to buy a masternode, they have to first understand that we’re redefining what it means to exchange value.

Security

Stocks: 4/5
Masternodes: 4/5

Stocks

While the United States is currently experiencing its longest Bull Market in history, many are preparing for the coming Bear Market. No one knows when the market will change sentiment but it’s prudent to start planning. Since the stock market is mature and tested, protecting your investment has nothing to do with the security of the funds themselves. The protection comes in the form of hedging your bets against a loss in value of the various investments you have made. Things like Put Options, Bonds, and Real Assets are a few. Diversification here is paramount to stable investment performance long term.

Masternodes

Masternodes differ in a few different ways in this regard. Since the cryptocurrency market is still new, investors have to worry about scammers AND loss in value of their investments constantly. Masternodes are also highly complex to setup and maintain if you’re unfamiliar with Linux, a VPS, and/or command line prompts. If you’re looking up what Linux is right now, you’ll want to check out this article on how to protect your VPS aka masternode investment. Services like GINcoin can help take care of all these worries in a few simple steps.

Flexibility

Stocks: 3/5
Masternodes: 2/5

Stocks

Over the past 20 years or so, globalization has reduced the ability to diversify investments and mitigate risk. While this correlation is becoming tighter and tighter, investment opportunities outside of your home country are abundant. Instead of investing in a broad index fund based on foreign equities, think about honing in on individual companies in the region.

Masternodes

The masternode niche has grown tremendously in the past year. With this growth comes both opportunity and challenges for the novice investor. Before GIN and other 1-Click Masternode Setup services were created, the majority of masternodes were held by those familiar with Linux, servers, VPS’s, etc. Now the barrier to entry is much smaller. Combine that lower barrier to entry with the Cold Staking option offered by projects such as Callisto and what you get is an opportunity to add flexibility to your recurring income stream in the crypto market.

Privacy

Stocks: 2/5
Masternodes: 3/5

Stocks

Data breaches have become what seems to be a very common occurrence these days. Whether it’s a telecom company, a credit rating service, or even a grocery store, these breaches expose customer’s personal information in ways that are irreversible. Many people have had their identities stolen because of the lack of best practices in data protection. One company has said after a breach that the information was not encrypted because there was no legal requirement to do so. It should be no surprise that when this sort of thing happens, the value of a share in that company drops quite a bit and they lose customers.

Masternodes

The use of the blockchain creates an interesting dynamic when we think about the security of our information. On the one hand the use of advanced cryptography and decentralization being used helps safeguard against hacks, but on the other hand information stored on the blockchain is there forever. It will be interesting to see how the blockchain space deals with regulations such as GDPR.

Interest Rates

Stocks: 3/5
Masternodes: 0/5

Stocks

Interest rates do not have a direct correlation to stocks, but there is a ripple effect. When interest rates are increased, it becomes more expensive to borrow money as a business, and as a consumer. If a company is unable to borrow money cheaply they will most likely not continue expansion of their company thereby slowing the share price growth. As a consumer, if credit is more expensive it will be less likely that big purchases will be made and overall growth of consumer demand will slow across the board.

Masternodes

Fortunately the crypto market does not have to deal with interest rates as it is completely independent from the traditional marketplace.

Scalable Growth

Stocks: 3/5
Masternodes: 4/5

Stocks

The goal for all investors is to grow our portfolios. But what happens when we grow our portfolio so big that it’s hard to buy/sell our favorite small cap stocks? Or what if we typically allocate 10% of our portfolio for each stock but now that our portfolio has grown 10x? Are we willing to allocate that same 10% for each stock? This is what it means when we think about scalability.

Masternodes

How do you scale a masternode? You can use the rewards from your first masternode to pay for the next one once you have saved up enough collateral or you can use your rewards to buy shares in a masternode. It turns out the use of compounding interest can grow your masternode pretty quickly. Check out this example here.

Diversification

Stocks: 2/5
Masternodes: 3/5

Stocks

While many of us have heard we should diversify our portfolio, how many actually do? And are we doing it properly? Ideally a diversified portfolio is one that has as many uncorrelated assets as possible. It should have a mixture of sectors, market cap sizes, and asset types. This mixture will also depend on your level of risk.

Masternodes

Diversification in the masternode space is similar to the stock market. You can still choose a variety of sectors (privacy, gambling, protocol, etc), market cap, and ROI. It would be wise not to pick all of the top ROI masternodes out there – chances are high that the ROI will decrease quickly in the short term as ROI chasers move from one masternode to the other. Due diligence here is really important.

Turnaround Time

Stocks: 2/5
Masternodes: 4/5

Stocks

The time it takes a company to change course and improve its failing operation. One of the larger and more recent examples is General Motors. A former giant in the auto industry found itself in bankruptcy in 2009. After a government bailout and reorganization, the company found itself back on top a few years later. Turnarounds can vary from a few months to a few years depending on the size of the company and the severity of the problem.

Masternodes

The duration between initial investment and profitability is typically much shorter for masternodes. Since masternodes offer rewards in predictable periods of time, we’re able to realize profitability (if it’s a good project) quicker than a traditional investment in the stock market. On the other hand, a bad investment in a masternode could turn out to be a much longer turnaround time as you may have to wait for the next bull market.

ROI

Stocks: 2/5
Masternodes: 4/5

Stocks

Return on Investment. The reason every investor is an investor. What can we expect to earn by putting money into the stock market? The average annual return in the S&P 500 is approximately 10%. Some years the returns are higher, some years they’re much lower. Holding long term can calm these ripples, while timing the market will sink your returns.

Masternodes

The beauty of masternodes is the average ROI and the passive income stream.Unlike the stock market, a 10% return is very much on the low end. If we look at the top 10 masternodes by market cap on masternodes.online, the average return is approximately 160%. Where else can you find an “average” return of 160%?

Concentration of Assets

Stocks: 2/5
Masternodes: 2/5

Stocks

We’ve all heard the saying: “don’t put all your eggs in one basket”. If you haven’t, now you have! Essentially we’re talking about the need to diversify. Putting most of your portfolio in the same sector, asset class, or market segment is not a wise move, even in something hot like crypto.

Masternodes

Much like the stock market, investing your entire portfolio or capital in the same project is very risky. Even if the masternode seems solid, if the worst case scenario happens, you have nothing. Instead of picking one project and going all in, try spreading it out across market caps and sectors.

Taxes, Fees, Insurance

Stocks: 1/5
Masternodes: 1/5

Stocks

Depending on how long you hold your shares and your tax bracket (based on income level), you will be taxed accordingly. Fees also vary from platform to platform. If you use a broker your fees will be higher than someone that uses a software like Wealthfront. Regarding insurance, you can’t buy a policy per se, but what you can do is utilize options, diversified assets, etc.

Masternodes

Taxes on your masternode investment will vary depending on the laws in your country, locality, tax bracket, etc. Just know that it will be wise to allocate some of your gains for the purpose of paying the tax man. Fees are applicable here too. There are fees when you buy the masternode’s token on an exchange, their are service charges for hosting your masternode on a platform, or perhaps the monthly fee for your VPS. Fortunately, these fees aren’t hidden. They’re available in plain sight.

Active Involvement

Stocks: 2/5
Masternodes: 2/5

Stocks

Active Involvement sounds like the proper way to outperform the market. But studies show that the majority of actively managed funds underperform typical market indexes like the S&P 500. However, if you’re investing in a particular sector, it may be wise to seek active involvement from an expert in that sector. Remember that investing in a particular sector can be very risky if not part of a broader portfolio.

Masternodes

Masternodes can be a very hands-off operation if you use a masternode setup service. In these scenarios you simply provide enough of the cryptocurrency to pay for their setup fee, hold your collateral in your wallet, and collect your rewards.

Liquidity

Stocks: 2/5
Masternodes: 3/5

Stocks

The stock market tends to be liquid given its maturity. Liquidity is simply the ability to buy/sell at the price you specify with relative ease. Now, not all stocks are liquid – some of them are very thinly traded and become very risky when you don’t have conviction in a long term hold.

Masternodes

The liquidity of the crypto space, including those in the masternode space specifically can be liquid, while some can be very illiquid. On larger exchanges you’ll typically find more opportunities with higher volume. Decentralized exchanges, while more secure than the more popular centralized exchanges, offers less liquidity at the moment due to technology challenges and less usage by most crypto investors.If you’re looking for less risk and ease of buying/selling, choose high-quality projects with high volume.

Scammers

Stocks: 1/5
Masternodes: 4/5

Stocks

From pump & dumps to prophetic gurus, the stock market has it all. While not as rampant as the crypto market, you’ll find all the usual scam tactics. The best defense against these sort of scammers is due diligence and common sense. If they tell you they have a secret formula for always profiting or they offer an exclusive group where you all get in early and then exit before the dump, GET OUT. In fact, don’t even start. You’ll be better off for it.

Masternodes

As luck would have it the masternode space and crypto space at large has all of the same problems as the stock market. I guess the apple doesn’t fall far from the tree? Like the stock market, you’ll find pump & dumps, overpriced trading courses, and exclusive trade groups. The best offense here is a good defense. Before signing up for a too good to be true group, or a polished trading course, make sure to research and ask around.

Liability

Stocks: 2/5
Masternodes: 3/5

Stocks

When you invest in a stock, your only concern is the amount of capital you have invested. You are not liable for anything the company is involved with from a debt standpoint. However, if you are investing using margin or leverage, then you may be put in a situation where you could lose more than you invested. In simple terms, if you invest $10 in Company X, your responsibility is the performance of Company X in relation to your investment. The company is responsible for their own operations.

Masternodes

Again, when you invest in a masternode your liability is only your investment. An investment in the project does not create a scenario where you need to concern yourself with the debt, milestones, and day to day operations of the token. With regard to a masternode specifically, you will want to keep an eye on any wallet updates, VPS uptime/downtime, ensuring you have proper funding for your VPS, and a wallet backup from time to time.

Required Capital

Stocks: 3/5
Masternodes: 2/5

Stocks

The term Required Capital is normally associated with federal requirements for lending institutions and entities like banks. In our scenario required capital is the minimum amount needed to complete your investment in the stock. Think of this as the share price. If Company X is on the stock market at $10, you will need at least $10 to purchase that share.

Masternodes

Similarly, the required capital for a masternode is the minimum amount required to purchase the masternode. This may be as little as a couple dollars for a new project or as expensive as $250,000 for something more established. The bottom line here is that risk and required capital tend to be correlated. The more a masternode costs, the more stable and proven it is. Keep in mind there are always exceptions but by and large this is the case.

Transaction Times

Stocks: 2/5
Masternodes: 1/5

Stocks

The act of buying a stock happens instantly, but the hours of operation are much more limited than a cryptocurrency (masternode) market. In a traditional stock market environment, you can trade a specific time frame. For the U.S., you can trade as early as 4am and as late as 8pm. When it comes to transferring fiat between accounts, that can and usually does take a matter of days. In this digital age that’s insane, right?

Masternodes

Masternodes in contrast tend to have much faster transaction times. Due to the Instant Send feature of masternodes, you can receive payment within a minute of it being sent. Not all cryptocurrencies in general have this quick of a payment channel, but that’s the beauty of masternodes!  

Transaction Limits

Stocks: 2/5
Masternodes: 1/5

Stocks

Even though the stock market has been around for quite some time now, there are still limitations placed on how much you may transact in a given day. For example, there are limitations in place that protect the investor from losing too much when trading options like calls and puts. There are also types of orders you can place as an investor that specifies a price that you’re willing to buy or sell the stock.

Masternodes

Masternodes however are a bit different. Any limitations on transactions come by way of technology limitations and/or third party limitations via an exchange. You may come to find that the particular token you’re trading can only handle 10 transactions per second and so you’re ability to send someone a few tokens may take 30 mins to 2 hours to complete. Regarding exchanges, the amount you’re willing to deposit or withdraw depends on the exchange’s jurisdiction (country of residence). Some require KYC and some don’t. In the future we’ll probably see more KYC requirements.

Value Fluctuation

Stocks: 3/5
Masternodes: 5/5

Stocks

Volatility is not something we typically associate with the traditional stock market. Anyone who has spent time trading in any market knows that there is always volatility to be found – although it may not be as prevalent as the crypto markets. If you’re looking for volatility, you can find it in the small cap stocks like bio-pharma or cannabis for example.

Masternodes

Masternodes and the crypto space at large is notorious for volatility. It’s the poster child for volatility! As the market matures and investors with deeper pockets invest in this market, the volatility will subside and we’ll see much calmer waters. In the meantime, learn to remain patient and wise in your investment choices. Not everyone can swim in the chop.

Complexity

Stocks: 3/5
Masternodes: 5/5

Stocks

To many, even today, the stock market is confusing. Most investors rely on someone else to handle their investments, or at the very least help them through the process. It seems the market is constructed in such a way that it deters non-professionals from entering.

Masternodes

If the traditional stock market is daunting, imagine how the masternode space must feel!

Not only are we entering an atmosphere that is highly technical and risky, we’re attempting to redefine what money is and what value transfer looks like. This is a treacherous space indeed for the uninitiated. Remember to always do your due diligence. You will always have your own best interests at heart.