Stakem & Masternodes

# money
# mining
# crypto
# fintech
# blockchain
null

Stake in the world of Crypto is not something you eat, while a nice steak in itself is rewarding (for some), a stake in the "cryptic sense" is the reward for...well Jimmie Steinbeck, will explain that further down in this week's "Penning Down The Thoughts" drop, where he will take you through the journey what staking and maternodes are, how it began and what it means for the future of finance. Keep reading, get informed, be intrigued and without further ado, enjoy your read.

HOW IT BEGAN

After working with POW mining, Bitcoin, Ether, and other smaller coins, which we mined with GPU or ASIC chip miners, years later, I believe it was at the end of 2015 I got interested in new more energy and hardware-inexpensive protocols in the validation process of blocks on different blockchains.

POS, Proof of Stake, means no use of heavy hardware and energy-swallowing GPU or ASIC chip mining equipment. All you needed was cloud-based server hosting, coins, tokens, and of course, the knowledge to set up masternodes and staking pools. I was still not the most technical guy in the space, but I managed to set up my first nodes in the Dash protocol. 1000 dash coins to start with. That was the easy part, buy with bitcoin on an exchange like Kraken or Bitstamp, which at that point and still today are one of the biggest and most respected exchanges in the world.

Through Bitcoin Talk Denmark Scandinavian most active and best blockchain and crypto assets community on Facebook I started with Jack, the CEO of ARYZE back in 2013, and we made some tests with the community to see if there was a space and market for masternode hosting pool service. And the answers were yes indeed.

I contacted Morten Rongaard an old friend and today CEO of Reality+ a Web3 and metaverse specialist based in London but with deep roots in Denmark and asked him to help me build a platform, and he was in. Casper Spur a community member who has a background in computational mechanics and security and protocol supporter and more than 15 years of experience in the IT industry was the next person I contacted In late 2016/2017 this journey led to starting Stakem, an online cloud-based masternode hosting rewards pool platform.

It exploded, in the first month after announcing this new service where you could earn a lot of money in a short time. The interest we got was crazy. +1000 users in the first month and + 2000 nodes running with 15-20 blockchain protocols. we had days where we earned +3 BTC in various tokens and coins for our users, and we got 5-15 % of the income generated to handle the hosting, payouts, and setting up of the nodes.

This year we learned everything there was to know in this space. We built programs and codes to handle the automated setup of nodes on servers, generated a mass payment process, and started to build Stakem 2.0 a 100 % fully automated staking and masternode pool platform, the world jet to have seen.

FROM THE FIRST CRYPTO WINTER TO NOW

But at the end of 2017, the first really bad crypto winter started out of the blue after ATH was all over the market. About 90 % of the pools and nodes we ran lost up to 100 % of the value. There were new small projects, not like Ethereum that recently changed to POS protocol. Some projects and teams just ran and left us, our users, and others in the communities sitting back with worthless coins and tokens. We went from a successful and fast-growing platform with thousands of users and +5000 running nodes to almost 0 income and a lot of expenses on servicer hosting etc in less than weeks. 

A lot of users including me and others from the team, lost a lot of money that day and the coming month. Personally, the team, Stakem +50 Bitcoins worth of different tokens, and the users all were invested in the same nodes even when we tried to sell as much as we could, the market was not there anymore, and exchanges were delisting tokens so we couldn’t convert into bitcoin or Ether anywhere. Coins and tokens that had lost 50-90 % but still were traded on exchanges and still had community and teams working, we did run all the nodes for more than a year after this event, paying all the running costs from our pocket, just in hope that the market changed and our user got the chance to recover some or all of there loses. 

This never happens. A good example “DASH node” price in 2017 1,7 million$ price today 4,800$. The market wasn’t ready for this business. Later we bought SNODE, which was our biggest competitor in the market I believe after Ether merged to POS protocol and we saw bigger chains feeling the time is ready again to look into a service like Stakem and SNODE.

This time it will be an investment product for institutional investors and infrastructure for blockchains like Concordium, Etherium, Polkadot, Polygon etc. they all need PoS and nodes to validate the traffic on their network. This will be a part of the solutions Penning will provide in the future.

Every company I have been involved in or started the past 12 years has lead to starting Penning. In 2020 together with Claus from DigiShares, we made the first drawings and since then, the team has grown to 12 team members, we made a lot of changes on the way and I’m thrilled to see what it will evolve into over the coming years.

WHAT IS STAKING

Proof of stake (PoS) is a type of consensus algorithm used by some blockchain networks to achieve distributed consensus. In a proof of stake system, the creator of a new block is chosen in a deterministic way, depending on their stake (how many coins they hold) in the network.

In contrast to proof of work (PoW) consensus, which relies on miners solving cryptographic puzzles to validate transactions and create new blocks, proof of stake systems does not require computational power to validate transactions and create new blocks. Instead, the creator of a new block (called a "validator") is chosen based on the amount of cryptocurrency they have staked, or "locked up," as a commitment to the network. Validators are then responsible for validating transactions and creating new blocks and are rewarded for their work with a share of the transaction fees and/or new coins that are created as part of the block reward.

Proof-of-stake systems are designed to be more energy efficient than proof-of-work systems, as they do not require miners to perform computationally intensive tasks to validate transactions and create new blocks. They also tend to be more decentralized, as the probability of being chosen as a validator is proportional to the amount of stake held, rather than the computational power of the miner.

WHAT ARE MASTER OR SERVICE NODES

A masternode is a full node, or computer wallet, that holds a full copy of the blockchain and participates in the consensus process of a cryptocurrency network. Masternodes often perform specific functions or provide additional services beyond those of a regular full node, such as enabling instant transactions, private transactions, and voting on governance issues.

To operate a masternode, a user must typically hold a minimum amount of the cryptocurrency and meet certain technical requirements, such as having a dedicated IP address and meeting minimum hardware specifications. Masternodes are often rewarded for their contributions to the network with a portion of the block reward, in addition to any transaction fees they may earn.

Masternodes can be used in various types of blockchain networks, including those that use proof of work (PoW) and proof of stake (PoS) consensus mechanisms. They are often used to provide additional network services, such as enabling instant transactions or providing privacy features and can also play a role in governance by allowing masternode operators to vote on proposals or changes to the network.

“Penning for the thoughts” is a series compiled by the CEO and Co-Founder of Penning, Jimmie Hansen Steinbeck. A compilation of his vast experience, knowledge, failures, successes, know-how & ideas. Jimmie has spent the last decade (almost since the birth of bitcoin), working in the crypto, blockchain (also known as Web3) space, as an investor, entrepreneur, and expert advisor to numerous crypto companies.