Hey folks, as always please remember that none of this is financial advice and is for entertainment and educational purposes only. Please make sure you do your own research and find what investments are best for you.

Not all Nodes, just NaaS’s (Nodes as a Service)

About a month or two ago, I made the big mistake of researching Strong Nodes on youtube, and now since then, I swear I can’t stop all these videos of new NaaS projects coming onto my youtube suggestions feed:

If this is new to you, a NaaS or otherwise known as “Nodes as a Service” in general is NOT a utility-based node that does relays (like POKT) or validators of transactions on a blockchain, but instead NaaS nodes are one that usually just spit out NaaS tokens. And don’t get me wrong, there are some NaaS’s that are better and more sustainable than others, but in most cases, you can identify them by a few different indicators:

1) When they promise “lifetime” or “sustainable” passive income:

This one is probably the biggest red flag, because honestly there’s no way that they or any organization/trust/company/business can hold up a guarantee of lifetime passive income. Can they promise that you’ll keep getting their native node token? Sure. Will the native node token be worth anything after a month? Probably not. Anyone can make a platform that continually just spits out token, but the real challenge is adding sustained value to those tokens.

2) Where there’s a lot of Sunk Cost:

When you create a node, you can’t get your tokens back. That’s not to say that anyone is stealing tokens here, but generally if you want to create a NaaS node, the tokens you put in, you have to consider it as sunk cost because you can’t take them out. You’ll “forever” have the node, but the only way to get a return on investment is the interest that the node itself pays out. Take a popular NaaS, Thor Nodes for instance:

If you were to invest 12.5 $THOR to create a Thor node, you would eat up the 12.5 $THOR and be hoping that the .144 $THOR that you earn per day will eventually make up the cost. And just in case if you’re curious about the math, this would be roughly 3 months (or approximately 86.8 days) and this isn’t including the 8% claim tax AND the $20 maintenance fee, meaning that if whatever amount you claim from your node, you would only be receiving 92% of your interest from the claim tax alone, and then an ongoing $20 fee regardless of what the price of $THOR may be.

Therefore assuming that $THOR stays the same price as it is at time of writing (which is $5.99), after the claim tax is assessed, you would essentially be making $0.79 cents worth of $THOR every day, which means every 30 days you would be roughly $23.80. This minus the $20 dollar monthly maintenance fee would come out to a net gain of $3.80, which means that it would take approximately 19.7 months or 591.1 days to make a return on your original 12.5 $THOR investment. Needless to say, this isn’t quite the 87 days they advertise.

3) When there’s Changing rates

I hate to keep putting Thor in the crosshairs here, but if you look at the graphic above, you’ll notice that the earn rates for each type of their node has been significantly reduced a couple of months ago. For instance on a Thor Node you used to be able to earn .33125 $THOR daily, but this was reduced to 0.144 $THOR, or basically a 43% reduction. This is another common feature for many NaaS projects. And although I understand why sometimes rewards reductions are sometimes necessary to ensure the longevity of a project, there are times when rates are changed with little notice, or sometimes none at all. For instance, take the timeline for Zeus Finance, another NaaS project:

• February 28th: 10 $ZEUS gets you 1 Zeus node with provides a daily 5% ROI with a 10% claim tax

• March 27th: 10 $ZEUS gets you 1 Zeus node, a daily 5% ROI and a 30% claim tax

• March 31st: 10 $ZEUS gets you 1 Zeus node, and now a 50% claim tax if you claim in less than 30 days, and a 20% tax if you claim after 30 days

• April 4th: 30 $ZEUS gets you 1 Zeus Node with, a daily 1.6% ROI, and a claim tax of 50% < 30 days, a 20% tax >30 days

• May 9th: 30 $ZEUS gets you 1 Zeus Node with a daily 1.6% ROI, a claim tax of 80% <20 days, and a 15% tax >20 days

• May 10th: 30 $ZEUS gets you 1 Zeus Node with a daily 1.6% ROI, a claim tax of 80% <20 days, and a 15% tax >20 days, plus a $4/month maintenance fee and a “Node Reactivation Fee” which is 20% of node cost + missing fees in case if you didn’t pay your node maintenance fee.

Ok, if that made your head spin, basically if you got a Zeus node before March 27th, you would be expecting to get a complete return on investment in a little more than 22 days, assuming you claimed your rewards and didn’t compound them for a new node.

If you made a Zeus node after May 10th, it would take you approximately 83.5 Days if you take 3 months worth of maintenance fees into account. This significant difference of almost 4x’s the amount of ROI-time was through a series of changes started March 27th, to just May 10th — that’s barely just a month and a half.

To make matters worse, the math above is assuming that the price of $ZEUS were to stay the same. If the price fluctuates…well then that’s a different matter. That leads me to my next indicator…

4) When you see Mountains of Death

So first take a look at all these price charts and think about what you see in common:

In all of these charts associated NaaS tokens, there’s about a 1 month, (maybe a 2 month period if you’re lucky) where you’re able to ride an upside on token price. And then normally once it drops, it keeps dropping. This means that if you’re looking at any NaaS token price chart and it looks like the price is going up a mountain, you my friend, will most likely die on the mountain. I know that’s being a little facetious, but basically in other words, if you buy a Node when the price is high, the “lifetime passive income” ROI that you will be getting, is pegged to that NaaS token price.

Take the $MEAD token for instance, which is the NaaS token for thetavern.money. If you bought 100 $MEAD at the top of the mountain you would have paid around $10 dollars per MEAD in order to mint one Brewery NFT (one of Tavern’s nodes), which makes the price of that Brewery $1000 dollars. If the price had stayed the same and you didn’t make any token claims until you reach 100% ROI, it would take approximately:

28 Days @ Brewery Tier 1 earning 1% daily ROI (28 % ROI) + 24 days @ Brewery Tier 2 earning 3% daily ROI (72 % ROI) = 52 days to reach 100% ROI, or a total of 57.7 days when you factor in the 10% sell tax.

In case if you’re wondering about what the Tiers are, basically tavern.money is gamifies their nodes where if you hold off on claiming your $MEAD, you can level up your NFT in tiers. Brewery Tier 3, currently the highest tier, earns 4% daily ROI or in other words 4 $MEAD tokens per day. If you claim your $MEAD at any time, it reverts your Brewery back to Tier 1. If you think the math isn’t fair because I’m not accounting for Tier 3’s earning potential, at a Tier 3 rate it would take approximately 25 days to earn 100% ROI, or approximately 27.7 days when you factor in the 10% sell tax.

For simplicity sake, lets say you started out at the highest Tier 3 earning potential and then waited 27.7 days before you claimed and sold your 100 $MEAD that you accrued. Unfortunately your 100 $MEAD tokens would now have depreciated in value by 90% with a price at $0.50 cents per $MEAD. This means that in order to recover your $1000 dollar investment, you would now need to wait 277.77 days with added hope that the value of $MEAD does not depreciate even further.

5) When they use their treasury to run other (legit) nodes

This is probably the one trait that I find most ironical, for when a NaaS project starts to invest in other node projects (usually ones that have actual utility), in a way it’s sort of admitting that the NaaS in of itself is not sustainable. For instance, sorry to throw Zeus Finance again under the bus, but one of their first treasury initiatives was to put money into Yield Nodes so that they could make returns of more than around 200% APY. But this then begs the question — why would I go through the trouble of Zeus Finance if I could simply do Yield Nodes myself?

In my opinion, it’s quite dangerous to invest money into a project that doesn’t offer real profitable ways towards adding value. And if they’re going into other projects that you could do yourself, then essentially all you’re doing is unnecessarily hiring a middle man to do this investing for you. It makes more sense to do your own research and to find and invest into these legit projects yourself.

6) When you find only Hopium in their community

This is probably the one that I find most annoying — and that’s when they completely shut down people who are upset with getting hosed from their nodes and accusing them of spreading FUD. If you were told that you could make ROI in 30 days or less and now it’s taking 300 days…I can understand why people get pissed would want to vent. Blocking/Booting/Banning people that are making these complaints leave you with a group of die-hards that keep telling everyone to double down and buy into another node. Or 10. This is not only disingenuous but straight up irresponsible or misleading. Continuously telling people that they should double down their nodes in hopes that the project will moon will only get people to keep digging into a bigger hole. A good indicator that it’s not all hopium? — if someone in their discord is upset with a tanking price and starts to make valid questions or criticism to the project, see how the rest of the community reacts to that person.

Conclusion

After reading all this if you’re still wanting to get into a NaaS project, I personally would only do so under a few strict conditions:

1. I would only get in if I can get in super early. Honestly, if your favorite youtuber is talking about how they’re making a lot of money off of it, then there’s probably a good chance you’re already way too late. In the case of death mountain, I would need to be in early on that upwards trajectory to ride the wave all the way to the top. My guess is that even super early I still might not be able to make 100% ROI at the top of the mountain, but the hope is that you’ll be able to make 100% ROI before it crashes at the bottom. If you’re lucky enough to do so, at that point everything you make afterwards would be 100% profit.

2. In tandem with the first point, I would make sure you sell off profits as soon as possible, and I would even consider doing so if the difference in the claim tax is minimal. The longer you wait, the longer you are essentially risking that you’ll fall off death mountain. This also means NOT compounding your nodes, because obviously, no gain is actual gain if it’s not realized, and you’ll be farther away from making any profits if you do. If the token drops by 50% in price, it will essentially take you twice as long to make 100% ROI, which means that a difference in 10% claim tax might be worth the hit.

3. Look really closely at their project roadmap: If they use vague terms like “DeFi projects” or if they’re saying that they’re going to expand using marketing, what that means is that the only way they can prop up is by ponzi-ing more people into the project.

Look, I am once again not a financial advisor, but in my opinion, these NaaS projects are super risky and near predatory for people who can be convinced that they can get rich quick. Other nodes that actually foster applicable utility such as POKT, Yield Nodes, or Presearch, may not have the same sexy returns, but in my opinion, there’s a much greater chance you’re not going to fall of death mountain.

That being said, if you have any contrasting opinions, I would love to hear about it in the comments below. Otherwise, thanks for taking the time to read this, and I hope you’ve found it helpful. Also, please be sure to follow me on twitter: https://twitter.com/CryptosWith