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Cryptocurrency is new to a lot of people in the world today and most people shy away from it because it is labeled as: volatile and the new “Wild Wild West” of investing. While this is true, becoming an early adopter in this hot new trend could benefit investors greatly!
Let’s discuss what many people know: the typical mutual fund. A mutual fund by definition is “a pool of money that is collected from many investors to invest in securities like stocks, bonds, money market instruments and other assets.” Generally an average annual return for a mutual fund is roughly 8% to 10% over the course of one year.
Now, let’s discuss how these same mutual fund projects in cryptocurrency work and how these have become the hottest new trend in the cryptocurrency world! In crypto, we describe these projects as “Node Projects”. A node, in the world of digital currency, is a computer that connects to a cryptocurrency network. The node or computer supports the network by validating and relaying transactions across the blockchain**. A node is also a financial product offered by various cryptocurrency projects that pool money together and invest into validator nodes, new start up projects in the crypto community as well as other stable coins such as Ethereum and Bitcoin.
Unlike the typical mutual fund, these projects return a reward every day to the investor. These daily rewards can either be reinvested in the project to increase their daily rewards (compounding) or claim these rewards which are then deposited right into their crypto wallet. Many of the largest projects are offering anywhere from 1% to 2% DAILY. One might find other projects that will initially offer more daily percentage, but likely those ROIs are unstainable and will be decreased as the project continues.
Another positive note to this new-aged mutual fund, is when someone compounds or re-invests their daily reward (token), they will automatically start to receive their daily reward on their new overall investment instead of their initial investment.
For example, Day 1: Tom invests and buys a node for $1,000 at a 1% daily reward. After 24 hours, Tom’s reward is $10. Tom can reinvest (compound) that $10 and the next day Tom will now make $10.10. If Tom continues to compound his daily reward at 1% for 50 days, on day 50, Tom would be making $16.45 a day. If Tom decides he wants to stop compounding, he will only need 60 days to make his initial investment back plus the 50 days of compounding for a total of 110 days. Tom then doesn’t touch his investment for 255 more days (full year from the initial investment), Tom would profit almost $4,200 plus get his initial investment back in 110 days.
Compounding the reward continuously benefits the investor greatly in the early phases of their investment. As mentioned before, they can claim their reward at any point and still continue to generate their daily rewards for the life of the project. The tradeoff of getting rewarded daily is the cost for a node is a sunk cost, meaning once you create your node your initial investment is spent and you can not get that investment back.
In the example of Tom above, if Tom did not compound his interest, it will take Tom 100 days or just over 3 months to get his full return on investment. After one year from his initial investment, Tom would make $2,650 total for the year on his one node.
Currently in the space there are two different kinds of node projects Nodes as a Service (Naas) and DeFi as a Service (Daas)
What is Naas? Nodes as a Service describes projects that offer nodes which support the blockchain they are hosted on. This is the traditional “node”. Projects offer to host these nodes and provide part of their validation rewards to the investor for an upfront investment.
What is Daas? DeFi (decentralized finance) as a Service describes projects that offer nodes which invest treasury funds to generate rewards for their node holders. This could be considered similar to a mutual fund in traditional finance which we have talked about above. These projects benefit from having advanced DeFi members on their staff that can access early projects for high rewards. In turn, most of these rewards are given to the node holders as their rewards.
There are also some other great projects that are in the crypto space for the more risk averse investor. There are projects like El Taco Node, ElTacoNode.com, that offer NFT** (non-fungible tokens) on their website or on a NFT marketplace. Investors can buy up to 3 per wallet out of the 6,500 Taco NFTs and as long as they hold on to the NFT, they will be automatically placed in weekly drawings for free nodes through a lottery type program. Some of the nodes they offer in their weekly prize pool are in excess of $3,500 that will generate over $40.00 in daily income or $14,600 a year. Also, if the buyer decides this project isn’t for them, they are also able to sell their NFT back on the market to recoup their initial investment into the project.
For any additional questions or comments, please feel free to contact us on any of El Taco Node’s social media pages from our link tree below.
**Blockchain: “Blockchain is a database that is shared between a network of computers and stores information electronically. This information is recorded and distributed, but can not be edited, deleted or destroyed. It guarantees the fidelity and security of a data and generates trust without the need for a third party”
**NFT (non-fungible tokens): “An NFT is a digital asset that exists on the blockchain. It represents real-world objects like art, music, videos, or in-game items. Think about an outfit someone purchases on a video game for their character to wear, such as Fortnite. Each outfit is an NFT. They have unique codes and are generally one of a kind or on a very limited run.