Putting a telescope and a microscope into the business of validating nodes, here's what we found
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Perhaps you have seen the many benefits of running a validator and are considering joining the ranks. And fully aware of the challenges and difficulties will help us fully understand the business of running nodes. In fact, there are many practical problems in running nodes that we need to face and solve.
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Real-world challenges in a telescope
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Finding the right infrastructure and DevOps talent is critical. To run a node, it is necessary to find high-level talents who are proficient in infrastructure and cloud storage facilities. In this regard, it is not enough to only understand the blockchain, and it needs to be supported by all aspects of information technology. People need to find technical engineers with relevant experience in large companies such as AWS, Google Cloud, and Microsoft Azure. Whether they can afford an annual salary of more than US$100,000 per person is also a practical issue.
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It should be known that the lower wages assumed in condition 1 and the 1% entrusted amount of tokens assumed in condition 2 (obtaining 0.5% of the entrusted amount is already quite difficult), are already very optimistic estimates. Under such assumptions, what is the financial status of the nodes?
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Annual income of running a single node under hypothetical conditions
Under the combination of different ATOM prices and commission rates, the annual income of a single node ranges from $6,000+ to $320,000+.
Based on the current ATOM price of about $4, and an average fee rate of 10%, the annual income of a single node is more than $51,000, which looks good.
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Annual profit of running a single node under hypothetical conditions
From the table, we can find that under the conditions of $4 and 10% commission rate, the node lost more than $58,000.
And if you want to really start making a profit, you will find that you need to wait until the token price increases by more than 100% to maintain the same commission rate. However, when the currency price remains unchanged at $4, the commission increases by 100% and is still in a state of loss.
As you can see, it is not that simple to make a profit by running a node.
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rational decision
Since running a node doesn't seem to be very profitable, there are still many reasons for us to invest in it. Under what circumstances can I choose to be a node?
One is the enthusiasm of fans. If you are a fan of the PoS network and want to deeply participate in the operation of the network by running nodes, you can join, provided that this is your hobby and you have other sources of income.
The second is to have sufficient resource support. If you can have a good cooperative relationship with powerful players in the industry such as exchanges and large currency holders, so that the node can be ranked at the top, you can run the node and further consider developing products on this basis.
If you want to run a validator, make sure you already have a primary source of income outside of staking commissions, or at least have a plan in case commissions are not the primary source of income. Otherwise, it is not recommended to start a verification node business.
From the perspective of cost-benefit, we can calculate and compare the benefits between entrusted tokens and running nodes alone to make a choice. In most cases, directly choosing entrusted tokens will greatly save costs. If you are running a node, choosing Node-as-a service provided by a professional service provider to help set up and run the node is another solution.
In general, we should make rational and objective decisions by weighing the benefits and challenges against the available data points.
