Welcome to my free cryptocurrency educational series. Each part builds on the previous ones, so I suggest starting at the beginning and moving through part by part:
Cryptocurrency 101 series (core principles, social justice, blockchain tech, Bitcoin):
- Part 0 Overview of my series, who this is for, why you might consider listening to me, and how easy it is to think you understand crypto when you actually don’t.
- Part 1 Why should I care? What’s in it for me? Why is crypto important (it’s about a lot more than just making money!)?
- Part 2 How crypto actually works, why Bitcoin is valuable (even if it’s just “made up!”), and what you should know about blockchains (the tech behind them and how they could influence the future of our world)
- Part 3 How the blockchain keeps running, where new Bitcoins come from (i.e., how mining works), and concerns about Bitcoin’s environmental impact
- Part 4 How crypto offers autonomy, why it can’t be stopped, and the value of decentralization
- Part 5 How to store and use cryptocurrency, some basic cryptography, how wallets work, identity management, and the future of democracy
- Part 6 Overview of the different types of wallets, which one is best for you, what to be careful of, and why a hardware wallet might be worth the investment
Cryptocurrency 201 series (intermediate principles, Ethereum, NFT’s, DAO’s):
- Part 7 Ethereum (the #2 most popular cryptocurrency, and the one I’m most excited about), smart contracts, dapps, gas (and the high gas fee problem), Proof of Stake (PoS), and Ethereum 2.0
- Part 8 Coins vs. tokens, and some real Ethereum use cases—oracles and DEX’s
- Part 9 Intro to NFT’s (collectibles, research funding & historical significance, and music)
- Part 10 More categories of NFT’s (art, video games, virtual reality)
- Part 11 Wrapping up NFT’s (what you can actually do with them, upsides, downsides, risks)
- Part 12 DAO’s (organizations managed by algorithms, governance tokens, collective ownership, and the “network state”)
Cryptocurrency 301 series (advanced principles, DeFi, reinventing the finance world):
- Part 13 DeFi & CeFi, reinventing banking with peer-to-peer finance, stablecoins, and borrowing & lending
- Part 14 More DeFi (how Uniswap works, plus insurance, payments, derivatives, blockchains, exchanges, liquidity staking, and impermanent loss)
- Part 15 Wrapping up DeFi (why liquidity is important, LP tokens, yield farming, calculating return, yield aggregators, and major risks)
Cryptocurrency 401 series (investing, making money in crypto):
- Part 16 Intro to investing (what could go wrong, where you might fit in, and what kind of investing could be right for you)
- Part 17 Preparing to invest (how much money to put in, how to split it up to mitigate risk, setting up your wallets, buying the coins & tokens you want, and dealing with different blockchains)
- Part 18 More preparing to invest (security, understanding what price targets are realistic, and using “expected return” to choose between opportunities)
- Part 19 Specific investing options (buying and holding, index tokens, leveraged tokens, my list of coins and tokens, mining & staking, and lending)
- Part 20 Higher-risk, higher-reward opportunities (liquidity staking & yield farming, NFT’s, OlympusDAO, and Tomb Finance)
- Part 21 The single investment that’s made me the most money: StrongBlock
- Part 22 Wrapping up my seven categories of investment (including an update on StrongBlock)
- Part 23 How to invest depending on how much money you have (plus, the market dip, where my money is, and how to fit crypto into a larger investing strategy)
- Part 24 Holding coins & tokens vs. yield farming, where I’m putting my money now, big news on StrongBlock, and the future potential of crypto
- Part 25 Staying safe, preparing your taxes, avoiding scams, upgrading your security, and judging new projects
- Part 26 How to decide who to trust in the crypto world, technical analysis & market cycles, and an update on my longish-term portfolio
- Part 27 (in progress) Wrap-up
This is part 21 in my cryptocurrency educational series.
Part 21 Reading Time: 44 minutes
Want to listen to this post instead?
- 1/8: Added a substantial new section to the “concerns” list around halfway down the page.
- 1/10: Added some more on RPC nodes in the “concerns” section, and added a link to how to test the nodes yourself to the “Ponzi” section.
- 1/11: Added a new section: “Summarizing the major pros and cons I see of this opportunity.”
- 1/14: Some minor updates to the Polygon nodes section since I bought a Polygon node myself.
- 1/15: Added some tips to get started.
- 1/19: I moved the final section summarizing categories #6 and 7 to the next post for a better flow.
This is my sixth post specifically about investing in crypto, so I highly recommend you start with the previous ones if you haven’t read them yet:
- Part 16 (“Intro to investing)
- Part 17 (“Preparing to invest”)
- Part 18 (“More preparing to invest”)
- Part 19 (“Specific investing options”)
- Part 20 (“Higher-risk, higher-reward opportunities”)
In Part 20, I explained three higher-risk higher-reward categories of crypto investment. Today, we’re going to finish up the list with one more category.
This is the single crypto investment that’s personally made me the most money (in fact, it’s made me more than all my other crypto investments combined).
Because of the immense opportunity here, this post is going to be a very deep dive, covering what this thing is, what the pros and cons are, and how to decide if it’s right for you.
Three warnings before we begin, just like last time:
- I’m not an investment advisor, and I don’t know your specific situation. These investments will make sense for some people and not others.
- This is not a low-risk investment. You could lose all the money you put in here. So, only invest a limited percentage of your net worth.
- Full disclosure, I’ve very much invested in this.
Here we go!
Category #7: NaaS (nodes as a service, i.e., StrongBlock)
StrongBlock is my trickiest recommendation: It’s been my #1 return on investment in crypto (with returns of around 30%/month that have been consistent for many months); but, I’ve always had some nagging questions about the project in the back of my mind that have prevented me from feeling 100% comfortable recommending it to others. Also, it requires a minimum investment of around $4,000-$7,000 USD, depending on the price of the STRONG token.
Overall, I would classify it as medium-to-high-risk. But, it’s high-reward too: This has consistently been making me a return of over 30% per month for 8 months.
So what is this thing?
StrongBlock operates on a “nodes as a service” model, or NaaS. Although there are other crypto projects out there that claim to deal with “nodes,” StrongBlock is literally the only project I’ve seen that actually builds real Ethereum nodes.
Here’s the StrongBlock project vision as I understand it: The more nodes that a blockchain like Ethereum has, the more secure and resilient that chain becomes. The StrongBlock team believes that the crypto community has been neglecting the importance of creating more nodes and keeping them properly updated; so, their goal is to incentivize people to create as many nodes as possible and keep them running smoothly.
StrongBlock incentivizes node creation in two ways:
- They created technology that allows anyone to create a new virtual Ethereum node with just a few clicks; then, StrongBlock manages it all for you.
- They pay Ethereum node owners a small fee every day as long as their node remains healthy (e.g., the latest security updates are installed, which StrongBlock will automatically do for the virtual nodes it creates). Where does that money come from? From people who pay the fee to create the nodes as I described in #1.
StrongBlock has been running for over a year already, and for most of that time, it’s been focused on Ethereum nodes only. However, their goal has been to support many other blockchains as well, and they recently launched support for Polygon nodes, with Fantom on the horizon as well.
Amazingly, the APR is over 350%, and it’s been returning that consistently since I myself first bought in back in May. It’s important to understand though that you never get your initial 10 STRONG back. Once you buy a node, you’re locked in. At that point, it generates roughly 0.1 STRONG per day, indefinitely, or until StrongBlock falls apart for whatever reason. So, it’ll take you around 110 days to break even, and from then on you make a positive return of 1% of your initial investment every day.
A lot of people in the community compound as well: Once those 0.1 STRONGs add up to 10, they use that to buy another node; then, when the combined output of those two nodes reaches 10 again, they buy a third node, and so on.
I’ll explain the entire process of getting into StrongBlock so you have a better sense of what we’re talking about here:
- To have StrongBlock create a new virtual node for you, it costs 10 STRONG (the ERC-20 token that the StrongBlock team created).
- (Update from April 7, 2022: The token has since updated to STRNGR. Most of the rest of this guide should still be accurate, but replace the word STRONG with STRNGR. As of today, you can only get the new token in one place: from the StrongBlock dapp, click All Nodes, then “Get STRNGR.” That links to Uniswap, which is currently the only legitimate source of STRNGR. Everywhere else advertising it is a scam—be careful out there!)
- It’s important to remember that you can’t get that initial investment back. Once you buy a node, that 10 STRONG is locked in forever.
- You can’t move your node to a different wallet either, so if you’re about to get a Ledger hardware wallet for example, you should probably just wait for it to arrive and create your node on there.
- You can get STRONG tokens in two ways: either on a DEX like Uniswap or on a CEX like KuCoin.
- KuCoin is cheaper given the high Ethereum gas fees right now, but sometimes I just swap my USDC or ETH for STRONG using Matcha (or Uniswap). STRONG hit a high of nearly $1,200 USD back in October, but recently it’s been fluctuating between $400 and $600.
- KuCoin is cheaper because you avoid gas fees, but Uniswap or Matcha are much easier. For the latter, you just need to get your ETH or USDC from your onramp (e.g., Coinbase or Crypto.com) onto your MetaMask, then swap ETH or USDC for STRONG. In contrast, for KuCoin, the steps are: send ETH or USDC from your onramp to KuCoin (or, you could send it in the form of XLM, which is cheaper and faster) –> sell that for USDT in KuCoin –> use USDT to buy STRONG –> withdraw STRONG to MetaMask.
- You’ll also need several hundred US dollars worth of ETH in your MetaMask wallet to pay all the gas fees for creating and maintaining your STRONG node. I would count on at least $200-300 worth of ETH per node you intend to create.
- By the way, there’s a small fee to withdraw from KuCoin, so I always buy 10.05 STRONG on there to cover that. Or, if you want to buy more than one node, you’d buy 20.05, 30.05, 40.05, etc.
- So, how much cheaper is the KuCoin route? If Ethereum gas fees are around 100 gwei or less and STRONG is around $500, you’d probably save roughly $40 doing it that way. If gas fees are closer to 200 gwei, you might save closer to $100 or more.
- In any case, once you have your 10 STRONG per node, send it to your MetaMask or Ledger. Then, visit the StrongBlock dapp and connect your wallet. You’ll see a “Create your node” button. Click that, name your node (the name doesn’t really matter), enter a description (it can just be something like “This is my node”), and approve the transaction in MetaMask. That’s it—you’ve just created a real blockchain node!
- Also, you have to pay a small monthly maintenance fee in ETH to keep your node running. Next to your new node, you’ll see when the fee is due next along with a “Pay Fee” link. Or, if you have a lot of nodes, you can scroll down and hit “Pay All Node Fees” at once (you can even pay 3 months’ worth of fees at once by using the Pay Fee or Pay All Node Fees button three times).
- It’s very important that you set reminders for yourself to pay this each month. If you forget, there’s a 30-day grace period where you can still pay the fee, but then your node will disappear and you’ll completely lose your investment.
- Finally, here’s how the rewards work: Every day, each of your nodes generates 0.1 STRONG. All you have to do is hit the Claim button at any time to claim all that STRONG into your MetaMask wallet. Then, you can use Uniswap, Matcha, or KuCoin to sell that for USDC or ETH.
Note that you can’t just use your accumulating STRONG to create a new node directly—you need to claim the STRONG to your wallet first and then use 10 of it to buy the new node. (Of course, the STRONG you use to create a new node can come from either your node rewards, Uniswap, KuCoin, or some combination of all that.)
One big thing to be aware of here is Ethereum gas fees. At recent rates, it can cost $100-200 USD worth of ETH to create a new node, and $50 or more to pay a node maintenance fee or claim your STRONG.
That means three things:
- Make sure you have enough ETH in your wallet before you begin to pay all the transaction fees. I’d aim to have around 0.1 ETH per node to be safe.
- Check gas prices before doing anything on StrongBlock, whether it’s creating a node, paying a maintenance fee, or claiming rewards. Check historical charts to see where gas fees have been lately and decide what level you want to aim for. For example, over the last few months, I’ve been happy to get a gas fee under 120 gwei, but over the past couple of weeks, I’ve happily been able to execute transactions at 60 or 70.
- Be strategic about when you claim rewards. If you claim every time you reach 1 STRONG, for example, those gas fees will dramatically cut into your profits. Most people seem to wait till they accumulate 10 STRONG or so.
StrongBlock has been one of the most challenging investment opportunities for me to write about here because it feels too good to be true.
It’s very easy to set up, and it generates completely passive income with no additional work required other than setting up a reminder to pay your maintenance fee every month (again, very important: if you don’t pay that, your node completely disappears after 30 days and you lose all your investment).
On the one hand, StrongBlock is the single best-reward investment opportunity I can recommend to you. $4,000-$7,000 USD is a lot of money to put in one place; but, if you can afford it, I can personally attest to it consistently returning an APR of over 350%. I bought several nodes back in May and I’ve compounded many of those gains into new nodes since then.
To be clear, getting this level of return at this level of consistency is absolutely amazing. Say a node costs $5,000. After just 110 days, you begin earning over $1,500/month in passive income with literally no work required other than paying maintenance fees each month, which takes just a couple of minutes. If you compound into a second node (which would take an additional 110 days after you buy your first node), you’re making $3,000/month, and so on.
Great, right? Yes, and, here are some of the concerns I have with the project:
- The CEO is quite engaged with the community and regularly answers a lot of questions (check here every Saturday or Sunday to see a summary of the weekly discussion). However, when it comes to the core purpose of StrongBlock—the actual technical details of what it’s doing—his answers have been a little more vague than I would like (and their whitepaper hasn’t been updated since 2020, although they’ve been promising a new one is on the way soon).
- For example, it seems that the specific type of node that’s created by StrongBlock is an RPC node, which is a type that I don’t really see discussed in the crypto community, so it’s been hard for me to wrap my head around what exactly that is compared to a typical “full node” that most people create when they make Ethereum nodes.
- Why is no one outside the StrongBlock community saying that what Ethereum needs right now is more RPC nodes? Is the rest of the community simply ignoring this need, or is StrongBlock trying to sell us on a need that doesn’t really exist?
- Again, what are “RPC nodes”? Well, according to this, it could be that “RPC” refers to the communication protocol being used rather than the node type, so maybe StrongBlock nodes are simply regular “full nodes” after all. But if that’s true, after the upgrade to Ethereum 2.0 and the transition from proof-of-work to proof-of-stake, any new Ethereum nodes would require staking 32 ETH (which StrongBlock obviously won’t be doing with the current setup). However, the CEO has said that the plan is for StrongBlock to keep working after the transition to Ethereum 2.0, so they must have some plan in place.
- Is the StrongBlock team selling a service to anyone, or is it more just about trying to support blockchains in general?
- At first, it seemed to me that the goal was to have the community create a lot of Ethereum nodes using the StrongBlock service; then, the team would lease those out to crypto development teams who would use them to support the projects they were developing in some way.
- But, I eventually realized a few things:
- a) If a team is savvy enough to develop in crypto, it shouldn’t be too hard for them to create nodes themselves (even if they didn’t want to set up servers themselves, they could set up virtual services through AWS [Amazon Web Services]).
- b) Would they really need as many nodes as the community has been creating?
- c) There’s nothing at all on StrongBlock’s website speaking to potential customers (e.g., “You can lease nodes from us for X amount of money, contact us here to do that.”).
- That’s fine, and I feel like that goal of leasing nodes to paying customers was likely a misunderstanding in the StrongBlock community that wasn’t explicitly corrected by the StrongBlock team.
- Now, my understanding is that StrongBlock is simply about creating a lot of nodes to bolster the network, and they’re not actually meant to be leased or bought by anyone or any organization.
- Here’s what the founder of StrongBlock said in an AMA (“ask me anything”) on January 8, 2022 in response to a question about this: “As we have been pointing out, in almost every protocol we’ve looked at (native, sidechain, L2), miners get rewarded, nodes do not. We have been looking for revenue opportunities for wholesale buyers of node services. There is not much of a market. Yet. That is why, with StrongChain [a future service they’ve mentioned they’re working on], we want to bake node rewards into the protocol.” That sounds promising, except I’m not sure what he means by “wholesale buyers of node services.”
- The community can be quite toxic whenever anyone asks hard questions (e.g., asking for technical details to make sure that StrongBlock is doing what it says it is and isn’t a Ponzi scheme). But, I can’t fault the project itself for that.
- Most importantly, there’s the issue of sustainability and tokenomics (i.e., the economics of token prices).
- Since some people got in early and now have quite a few nodes, they’re generating a lot of STRONG, and they won’t want to keep compounding it into new nodes forever (i.e., they’ll want to pull out their rewards to sell). Also, it doesn’t seem like there’s a need—even with the importance of the Ethereum blockchain—for new nodes to keep being created forever.
- So, won’t most node owners just begin selling their STRONG instead of putting it into new nodes, and thus push the price of STRONG down?
- Tokenomics in general isn’t my strongest suit, but I can at least partially answer this concern with two points:
- First, this might be addressed by all the partnerships that the StrongBlock team is making with other blockchains. They’ve already announced Polygon and Fantom, and they claim that many more are on the horizon. If we’re able to create Polygon and Fantom nodes in StrongBlock and eventually receive rewards in MATIC and FTM, that should address part of the concern of STRONG declining in value.
- Second, the new Polygon nodes use version 2 of the StrongBlock smart contract. That updated model has the rewards that a node produces decline over time. So, that might help keep the supply of STRONG in check; and, it’s also a good reason to stock up on “version 1” (non-declining) Ethereum nodes before those switch over too.
- Again though, even those two answers don’t 100% address my concern here. Maybe the final piece is that no crypto investment (except maybe Ethereum and Bitcoin) will last more than a few years anyway (but, we can enjoy it while it lasts!). Or, maybe there’s a piece of understanding that I’m missing here about StrongBlock’s sustainability and tokenomics.
- Here’s what the founder of StrongBlock said in an AMA on January 8, 2022 in response to a question about this: “Isn’t every token, including Bitcoin, under ‘high sell pressure’ most of the time? We cannot control price, nor do we even talk about it. What we CAN control is the protocol, adding features, making the protocol more and more sustainable.”
- Finally, taking a step back, given how incredible this opportunity has been for a year now, why aren’t more people investing in it? Don’t get me wrong—it’s certainly popular, and there are many articles and videos created about it. But it still feels like it’s flying a bit under the radar in the mainstream crypto community (the STRONG token is ranked #424 on CoinGecko). It makes me wonder if some people are seeing something negative about it that I’m not.
If I had to boil down my concerns and explain where I stand now, here’s how I might put it:
- It seems very unlikely to me that StrongBlock will be a rug pull scam. They’ve had a year now to do that, and the founder takes the time to do weekly AMA’s with the community.
- I don’t think StrongBlock is a Ponzi scheme either. Yes, of course people who got in earliest benefitted, but that’s true of any investment. I don’t think there’s anything inherent in the project about screwing over new people to reward people who invested earlier.
- There’s still a nagging voice in my head feeling like there are small cracks in my understanding of what exactly StrongBlock does, how the supply of STRONG works, what these RPC nodes are actually doing, etc.
- But, maybe that doesn’t truly matter in the end. I don’t fully understand how a lot of crypto projects work, and StrongBlock has proven itself for many months now. I’ve done amazingly well with it, and my confidence in it has only increased now that they’ve finally released the Polygon nodes that they’ve been promising for a while.
- Again though, I consider this project to be medium-to-high risk. So, if you decide to invest in StrongBlock, please realize that it could implode at any time. It’s done fine since I got in back in May, but back then I was able to buy in when STRONG was $150, so a node was only $1,500 instead of three or four times that. You’ll still get the same percentage return as I got back then, but it’s of course three times riskier to invest $4,500 than $1,500.
Is StrongBlock still a sound investment at today’s price? I would say most likely yes.
I’ve had a lot of concerns about StrongBlock along the way, but most of them have been addressed as I’ve done more research and attended the weekly AMA’s from the founder.
Remember though that once you put 10 STRONG into a node, it’s locked in. There’s no way to get it back, and you can’t move nodes between wallets either. If StrongBlock fails for whatever reason, the STRONG you put in is now useless. And, perhaps more importantly, if the community loses faith in StrongBlock and sends the price of the token way down, you might still make 0.1 STRONG per day, but that STRONG will be worth a lot less.
Bottom line, then: If you only have $10,000 USD to invest in crypto, you probably shouldn’t put a full half of that into StrongBlock. It depends on your level of risk tolerance of course, but that just seems too risky to me to have so much locked up in a single opportunity. But, if you have more like $20,000 or more, buying a node (or two or three) might be an excellent higher-risk-higher-reward part of your portfolio.
Just make sure you take profits along the way. Don’t keep compounding nodes forever without ever getting real money out of it. Now that I have a good number of nodes, my strategy has been to wait till I’ve accumulated 20 STRONG and then to put half into a new node and convert half to ETH or USDC.
Another popular strategy is to cash out your initial investment once you accumulate your first 10 STRONG—that way your risk goes down to zero from then on. Then, once you hit 10 again, you can compound that into a second node. You might decide that you’ll keep compounding till you reach, say, 5 nodes, and then begin cashing out half or all of it to ETH or USDC each time you hit 10 or 20 STRONG.
This won’t last forever, though—again, don’t just keep compounding indefinitely. Take some of your STRONG and convert it to ETH or USDC along the way. Then, put that into other projects (e.g., Anchor Protocol, OlympusDAO, or just staking ETH) to diversify your assets; or, pull some of it out to actually buy something in the real world.
Yes, I still have some concerns about StrongBlock because I don’t 100% understand everything behind it; but, to be fair, that’s true of virtually every crypto project. If I had to pick just one higher-risk crypto investment for my portfolio, it would absolutely be this one (assuming you have around $20K USD or more in crypto overall).
I like something that Node Baron wrote on Twitter: “I’ve said this before….but I think it really hits home: People would buy a $300k rental property to make an extra $500-800 a month in passive income after expenses. Why wouldn’t you spend $6k approx. on a $STRONG node to make $1800+ a month in income.“
(It’s a good point, though, to be fair, I have a lot more faith that a rental property will still exist many years from now, whereas I’m not nearly as certain about StrongBlock’s long-term prospects. But, I have faith for the short/medium-term at least, and I find the above analogy intriguing.)
It’s very natural to wonder: Isn’t StrongBlock just a Ponzi scheme?
I won’t claim to have all the answers here by a long shot, but I’ll try my best to answer this.
According to one definition, a Ponzi scheme is “a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.”
Or, another definition: “A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors.”
I would argue that StrongBlong does not meet either of those definitions:
- As far as I can tell, the team behind it is not committing fraud (i.e., “wrongful or criminal deception intended to result in financial or personal gain”). It’s been operating for over a year now and there’s been plenty of time for a rug pull. The CEO is quite open and regularly interacts with the community (though, like I said earlier, I’d still appreciate a little more transparency in a few places).
- It’s not a nonexistent enterprise. You can look up the blockchain addresses of each node you create (and put them into MetaMask to access the Ethereum network through them). They’re real Ethereum nodes (though again, they seem to be the “RPC” type, whose precise functionality I don’t fully understand compared to “full nodes”). The stated purpose of the enterprise is to encourage more nodes to be created to bolster the Ethereum blockchain. As far as I can see, it’s doing that.
- It’s not promising little risk. The team never claims it’s an amazing investment, and I point out throughout this post that I consider this a medium-to-high-risk opportunity.
- The only piece of the Ponzi definition that fits is that earlier investors benefit from the investment of later investors. But that’s the case with virtually any investment. If I buy a stock and then you buy it later, your buying it will push the value up for me. Again, it’s not like this is a scam where there’s no actual business and it’s simply a direct transfer of money from new people to old people. The business here is to create nodes, and that’s what it’s doing. They never claim on the StrongBlock website that their business will make money through these new nodes (though, again, the CEO has said that they’re “looking for revenue opportunities for wholesale buyers of node services,” which I don’t fully understand).
- Finally, because it’s all logged on the public blockchain, you can look up the stats yourself on exactly how the enterprise is operating (e.g., it’s a good sign when the Strong Rewards Pool is not declining sharply, which it was for a little while there, but now it’s been leveling out again). Like I’ve said, I’d appreciate the project team being even more transparent overall, but this is already much better than a lot of other crypto projects.
Did the StrongBlock team just create STRONG out of nothing? Yes. It’s important to remember that, as I explained in Part 2, the entire crypto ecosystem is “made up.” Every coin and token that’s created is only valuable because the community decides it is (which is the same with gold and US dollars, by the way).
In this case:
- The StrongBlock team saw a need: that the growing Ethereum blockchain would benefit from more nodes.
- So, they created a brand new token, STRONG, and they gave it out to people who create and properly maintain nodes.
- Because people believe in that enterprise, they buy STRONG and thus STRONG rises in value.
- (Many people of course only buy STRONG because of the high ROI, but I have to imagine that a core group of people, including the original buyers, believed in the mission of bolstering the Ethereum blockchain.)
However, as I wrote earlier, I don’t imagine this model will last forever.
At some point, the world will have enough nodes, even across other blockchains. By then, no one will want to compound their earned STRONG into new nodes. They’ll simply sell all the STRONG that their nodes are producing, and that will drive the price of STRONG down.
So, barring something else like a sudden hack, I imagine that’s how the StrongBlock project will eventually die. The question is: How long will it last until then? I have no idea. But, there are a lot of blockchains out there, and if StrongBlock can secure partnerships with them, each new one should prolong the life of the project.
Again, as I said earlier, tokenomics are not my strong suit. I might very well be missing something in all this. If so, I’d certainly appreciate you sharing other perspectives in the comments.
Summarizing the major pros and cons I see of this opportunity
On balance, (1) this is in many ways an amazing opportunity, and, (2) it’s not at all a given to me that you should invest in StrongBlock. Here are some of the major pros and cons I see:
- You can earn around 30% return per month in largely passive, consistent income (and, this has been the case for over a year).
- There’s almost certainly not going to be a rug pull (it seems to me that they would have done it by now if they were going to).
- The market cap makes sense and there’s a limited supply of STRONG.
- Compared to other high-return projects, this is easier to use and understand. You don’t have to worry about things like impermanent loss or picking the right pool.
- You get to be a good crypto citizen and support the Ethereum blockchain (and other blockchains in the future).
- In other words, I think part of the answer to “isn’t StrongBlock just a scheme to funnel money from new people to old people” needs to be “no, because it’s aiming to do something for the good of the world.”
- The stated mission of the project is not to make money but to incentivize the creation of nodes, which will strengthen the public blockchain that we all use (and yes, that sounds too purely altruistic, which probably isn’t quite accurate; I’m sure the team was also very much motivated by making money on this venture).
- It’s possible that this could turn out like OlympusDAO’s “Olympus Pro” service where they came up with a novel service paradigm that they then sell to partners.
- Maybe StrongBlock ends up becoming the most common way that nodes are incentivized across all blockchains.
- The sustainability model and tokenomics here are very confusing—StrongBlock in its current form doesn’t seem to be sustainable long-term. If their only source of funding is new nodes, it means that every node has 10 STRONG put into it, but every node produces around 30 STRONG over the course of a year.
- Where is all that STRONG coming from? From other nodes being produced. Therefore, when other nodes stop being produced, the game is up, right?
- Maybe, and maybe that’s ok (i.e., that this is a limited-time opportunity). I don’t think this point makes it a Ponzi scheme, but it does make it dependent on continual growth (which blockchains will likely be having if they become the foundation of Web3, the next iteration of the Internet—a lot of nodes will be needed to keep it stable and not vulnerable to attack from large actors like China).
- One thing to note is that, to be accurate, it’s not that 100% of the 10 STRONG put into a node goes back as rewards to other node owners. Right on the node creation page, it lays out where your money goes: 10% to future use, 30% to the STRONG liquidity and mining pools, and 60% into the node rewards pool. So, only 60% of the 10 STRONG is directly translated into rewards for other node owners—which actually seems worse to me because it means that 10 goes in but only 6 is set aside to refill the pool of STRONG that all the other nodes are spitting out every day.
- So, while I wouldn’t call StrongBlock a Ponzi scheme in the sense of scamming people, I would call it unsustainable in the long-term with its current model. The team does keep alluding to other income sources (e.g., leasing nodes to crypto projects), but I’m unclear on what that even means or if it would be desired. They’ve also said that they’re looking into other opportunities such as creating a StrongBlock blockchain. The team has done some solid work so far, so hopefully they’ll find a way to pivot or expand StrongBlock’s offerings so that it becomes more sustainable.
- To me, it’s still not 100% clear that what StrongBlock is providing is indeed an important public service in its current form (i.e., to what degree new RPC nodes specifically support the blockchain). I have to hope they’re truly abiding my their mission statement, but who knows.
- Nodes are expensive, and there’s no way to pull your initial investment out, though you’ll most likely make it back in 110 days (unless the price of STRONG drops a lot).
- One other thing worth mentioning here is that, in addition to expanding to other blockchains, the team has also announced plans to allow for fractional nodes in the future, meaning that new investors could get into StrongBlock without having to pay the full 10 STRONG. Instead, they’d only have to put in a smaller percentage of that to own a commensurate percentage of that node, just like fractional NFT’s. If the team manages to pull that off, it will most likely attract a lot of new investors who have been unwilling or unable to meet the current minimum investment of ~$6,000 for a node, and that will hopefully in turn push the price of STRONG up.
- Gas fees are high for buying nodes, cashing out STRONG, and paying maintenance fees.
There you have it—some very good reasons to invest in StrongBlock, and some parts that might still require careful consideration.
You’ll have to make up your own mind. Here’s how you might start:
As always, my educational series is not about telling you what I think you should do but about explaining what I’m seeing out there in the crypto world.
At the end of the day though, here’s what I know: I’m not sure how much longer it will last; but, I can confidently tell you that StrongBlock has consistently earned me (and many other people) thousands of dollars of passive income per month for over eight months now.
Again, I see this as a medium-to-high risk opportunity. I strongly suggest you diversify your asset allocation. Don’t put too high a percentage of your net worth into StrongBlock—or any one investment category.
We all have our own unique life situations and levels of risk tolerance. But, personally, if a node cost $6,000, I would probably only buy one if I had at least $30,000 in crypto overall. That would mean 20% of my crypto investment money was in StrongBlock. Then, I would want to make sure that at least another 20% of that total was in a very safe investment (e.g., earning yield on stablecoins in BlockFi or Nexo), and 60% in low-medium-risk opportunities (e.g., staking SOL/LUNA, providing liquidity on low-risk pools on highly-reputable DEX’s, etc.).
Then again, I also know people who have put over 50% of their crypto money into StrongBlock and done quite well. It totally depends on your life situation and your risk tolerance.
For example, outside crypto, do you have a lot of safe investments (e.g., in a house, low-risk mutual funds, or bonds)? Maybe you can afford to be riskier in crypto. Are you older and closer to retirement, or are you responsible for kids or aging parents? Maybe you should be less risky. If you lost your entire StrongBlock investment, how much would it affect your life (and the lives of your loved ones)?
If it wouldn’t affect your life much and you still have a lot of earning potential in front of you (i.e., you’re young and you could get hired for a high-paying job pretty easily if you wanted), maybe risking a lot more makes sense for the possibility of achieving real financial independence and retiring early.
In any case, hypothetically, you might ask yourself: If there were a 60% chance of your investment making a return of 350% in a year but a 40% chance of it losing 95% of its value, would you take it? Those percentages are rough and hypothetical based on my very gut feeling in this moment, so you’ll have to come up with your own percentages based on what you’ve read in this post. (Then, you can use the concept of “expected return” that I explained in Part 18 to help you figure out whether and how much to invest here. If you want to be even more thorough, you could incorporate a variety of hypothetical futures, e.g., where the price of STRONG goes up, goes down, stays even, etc.)
By the way, how should you choose whether to create an Ethereum node or a Polygon node?
First, to be clear, everything is still on the Ethereum blockchain either way because that’s where the StrongBlock dapp is. Even if you create a Polygon node, you’re still creating the node and paying gas fees through StrongBlock, meaning everything is paid in ETH, not MATIC.
This is all very new; but, from what I can see, there are three main differences between the node types:
- The actual Polygon nodes are created on the Polygon blockchain network, so you’d be supporting that blockchain instead of Ethereum (even though this won’t really look any different to you as you’re creating the node). This might have implications regarding the sustainability question—i.e., if you’re worried Ethereum has enough nodes already, maybe you want to make some on Polygon instead.
- The new StrongBlock smart contract being used on the Polygon nodes has a decaying rewards model, meaning that you get an extra boost on rewards at the beginning compared to the original contract, but then they decline over time.
- It’s still not completely clear at this point what that looks like. But it seems like the rewards start out around 1/3 higher for Polygon nodes and begin to slowly taper down each day until they become worse than the Ethereum node rewards around day 100. Supposedly, the Polygon rewards will never drop to zero.
- So, the Polygon decaying model might be slightly better for you if you’re very worried about the sustainability of StrongBlock and you want to make back your initial investment as quickly as possible (while slightly sacrificing longer-term rewards).
- The new version of the contract should soon allow you to use your accruing rewards for creating new nodes without having to extract them to your wallet first; so, you’ll save on gas fees.
So, which node type should you choose? There are pros and cons to each. I’ve bought one Polygon node so far, but I’ll probably stick with the Ethereum nodes beyond that, especially in case the team decides to switch everything over to the decaying rewards model at some point (which they’ve alluded to). Because of that, most people in the community seem to be loading up on as many Ethereum nodes as they can in the short term to hopefully lock those in.
Finally, a note on taxes (for the United States at least):
Once you start compounding nodes, you can make a lot of money with StrongBlock. And that means a lot of taxes.
(No, you can’t just hide this income from the IRS—because it’s on the public Ethereum blockchain, they can trace your profits back to whatever onramp you used to buy your STRONG or the ETH, USDC, or USDT that you used to swap for that STRONG. And, all the major centralized exchanges—including Coinbase and Crypto.com—are reporting to the IRS).
Check with your accountant, but many people in the community write off all that STRONG going into new nodes (as well as gas/maintenance fees) as business expenses.
The basic idea as I understand it (and I’m not a CPA) is that you’d have to treat your StrongBlock investment as a business rather than a hobby. Many people end up creating LLC’s or S Corps here, but that’s probably not necessary until you have many nodes. Again, not a CPA, but the rule of thumb I’ve seen in the community is to create an S Corp once you reach $50K-$60K/year USD in profits from StrongBlock. Creating an S Corp involves a lot of bureaucracy (you’ll probably need to hire a crypto tax accountant or tax lawyer for help), but it could save you tens of thousands of dollars if you have enough nodes.
I’ve done a lot of research into crypto taxes, and here are some of the best crypto tax experts I’ve found (I haven’t worked with each one personally, but I researched each one and they ticked all my boxes for credibility):
Huge pro tip: Stephen the Calculator Guy made an incredible StrongBlock tax calculator that tells you exactly how much you’ll owe in taxes. It’s saved me a ridiculous amount of time and money. Here’s his video explaining it, and here’s his Patreon that you can join to get it (as you’ll see, he has all sorts of awesome spreadsheets and videos on a variety of crypto topics).
If you decide StrongBlock is right for you, here are some tips to get started:
- The price of STRONG is constantly fluctuating. So, as I cover in Part 17, you might consider dollar-cost averaging: To work your way up to the 10 STRONG necessary to get a node, you could buy a few STRONG tokens every day or every few days so that the higher prices and lower prices balance out.
- Also, be aware that the price of STRONG often drops on weekends when gas prices drop because that’s when a lot of node owners cash out and sell their STRONG. But, that pattern isn’t foolproof either, so don’t wait forever for the price to drop.
- I strongly suggest you use a Ledger hardware wallet for your StrongBlock investment. We’re talking about an additional $150 USD to secure your $6,000 or $7,000 investment (which will hopefully grow well beyond that).
- Remember that you can’t move your nodes to another wallet once they’re made, so it’s important to set things up for the long-term right at the beginning if you think you might be compounding into a lot of nodes eventually.
- If you’re buying or compounding into multiple nodes, I suggest speaking with a crypto accountant to make sure you’re properly set up to write off STRONG and fees as expenses on your taxes. This could make a difference of many thousands of dollars. So, you might want to do this before you start to make sure everything is set up for success.
- If you’re going to put a lot of money into StrongBlock, I suggest keeping up-to-date on what’s happening with the project. The easiest way is either to check out the AMA’s with the founder every Saturday or subscribe to the subreddit or Discord.
- As always, be careful of scams. There are several scam sites that look just like StrongBlock and have very similar names but are slightly misspelled. The real website is https://strongblock.com/.
- Finally, if you want to read more about StrongBlock, here are some good places to start:
That’s it for StrongBlock. In the next post, I’m going to break down all the categories I’ve covered by risk and reward and then offer specific recommendations based on how much money you’re working with. Thanks for reading!
(1/27 Update: I also added a new “Update on StrongBlock” section to Part 22 which I recommend you read if you’re considering investing in this project.)