The following is a guest post by Brandon Kostinuk, the communications lead at Vanbex Group, a digital currency and blockchain-related professional services firm based in Vancouver, B.C.
Co-founder maintains blockchain-based service is a healthy investment option within niche area of industry
Investment at the top-end, multi-million dollar pinnacle of the digital currency and blockchain industry is not accessible to most cryptocurrency enthusiasts.
However, blockchain-related company Node40, which offers a full-service node hosting and management platform for incentivized blockchains, is effectively turning a cryptocurrency network into a passive revenue stream for savvy investors.
Currently, the New York-based company works exclusively with Dash, the world’s seventh most valuable cryptocurrency with a market capitalization of approximately $61.4 million.
Over a 12-month period, Node40 co-founder Perry Woodin says triple-digit percentage gains were achieved for those investors shrewd, or lucky, enough to get in at the right moment. And even then, some pretty substantial returns were seen with those that invested amid an upswing in Dash’s value.
Node40 focuses on allowing users to generate passive revenue via ownership of nodes on an incentivized blockchain, such as Dash’s. A blockchain is a decentralized or distributed network that offers peer-to-peer exchange and management. There is no centralizing authority other than the computer code establishing the protocol.
In Dash’s masternode network, the cryptocurrency’s additional tier of incentivized nodes, owners receive a part of Dash’s block reward for setting up and owning a designated server or node.
Node40 helps investors get set up with a masternode, which requires a collateral of 1,000 Dash, plus any associated month-to-month or yearly costs with Node40. Hosting and management, from the deployment phase through to setup and administration, is all handled and managed within Node40’s platform, providing features such as Dash’s masternode voting and robust data analysis.
It is designed to be a hassle- and worry-free investment opportunity that simultaneously helps strengthen a blockchain network.
Essentially, Woodin says, if you’re running a masternode, you’re generating new Dash. This is an added boost to the investment as the valuation of Dash strengthens.
“If looking at a pure valuation change over 12 months, we had a node showing over 190 percent return on investment,” he says.
Once the masternode collateral is factored in, that figure jumps up to 216 percent, because the investor also generated new Dash over that 12-month period, which was also increasing in value.
But, Woodin warns, the chance of generating such returns requires investing at the right moment.
“It varies pretty wildly based upon when somebody bought that initial collateral because a lot of these people are not savvy investors, so they tend to chase things as they are going up in value and they pay a premium for it,” he says.
“But if you’re somebody who knows what you are doing then we’re seeing valuation changes that are well over 300 percent.”
Not quite a 300 percent return, but still exceptional, was the gain by one investor who raked in a return of 246 percent after the yearly costs of Node40’s services were factored in.
The investor setup their masternode in January 2015 when Dash was priced at US $1.60. From an initial investment of $1,600, the user generated $5,674.77 in total over a 12-month period. This is with Dash’s valuation change and the Dash reward for running the node both factored in.
Even users that bought in when Dash was already on its upward climb generated decent returns.
One investor who purchased a masternode at a rate of $4.75 in April 2015 generated a 68 percent return over a 12-month period, after costs. Their collateral valuation change itself was a gain of 47 percent.
Node40 supplied a range of accounts — all publicly available data — where masternodes were set up as far back as late-2014, leading up to July 2015.
The range among the accounts, across a 12-month period, was a 62 percent gain at the lowest point to 246 percent in returns on investment at the top end, which was previously discussed.
Those figures are quite significant. They measure up with some of the top-performing five-star mutual funds in Canada and the U.S.
Consider the Mackenzie Ivy Foreign Equity Fund, listed on Money Reporter’s recommended batch Canada’s top mutual funds. The conservative fund places emphasis on global stocks.
When considering growth of a $10,000 investment, the year-to-date return for the Mackenzie foreign equity fund sits at 1.77 percent.
Globe and Mail’s Globefund reported triple-digit percentage returns over a one-year span for just the top ten five-star mutual funds. Those returns range from 100.53 percent to the top-performer, Horizons AlphaPro Enhanced Inc Gold, with a one-year return on investment of 704.21 percent.
Examining the Vanguard 500 Index Fund, which seeks to provide investment results corresponding to the price and yield performance of the S&P 500 Index, the difficulty in attaining triple-digit percentage gains, even with stock in some of the largest American corporations, is clear.
The S&P 500 Index is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The year-to-date on the growth of a $10,000 investment in Vanguard’s 500 Index Fund was 7.34 percent with the three-year return at 10.79 percent.
Drawing in such comparables is illustrative of the investment potential that Node40’s paradigm presents.
Node40 users — essentially, Dash investors — are worldwide, says Woodin. However, when the company first set out in 2015, their users were mostly based across the Atlantic.
“The first year was entirely Europe, maybe a couple of customers in the U.S.,” says Woodin. But, over the past 12 months, there has been a shift to New Zealand and Australia.
“I don’t think Dash is going to be unique in this investment opportunity however,” says Woodin. “I think we are going to see this as something that’s very common as different applications find their niche.”
Woodin has said in previous interviews he and partner Sean Ryan are expanding to other incentivized blockchains.
Overall, blockchain investment is on the decline in 2016. Last year, a new record was set for venture capital (VC) funding in the Bitcoin and blockchain ecosystem, with many big-name players soaking up the headlines.
In the first half of 2016, US $160.7 million has been invested in this space globally.
In 2015, the same period saw US $374 million raised, more than double the current tally, with an overall total of US $488 million raised throughout the year.
Such grand figures can cloud the opportunities that exist in the blockchain space. There should be a mindfulness that investment in smaller-scale or niche areas of the industry exist, and they exist with healthy returns for investors keen enough to notice.