Regarding the matter of how Nagato got his Rinnegan, it goes like this:
1. Madara awakened his Rinnegan on the verge of death in his old age.
2. Summons the Gedo Mazo and binds it to the giant flower structure connected and produced by Hashirama's living clone.
3. Creates multiple clones of Hashirama (Zetsu clones).
4. Proceeds to have his eyes transferred to Nagato at a very young age.
Extra
5. Madara is revived in his prime, which is in his youth when he doesn't have the Rinnegan. But he shortly awakens it afterwards due to almost being totally obliterated and made vulnerable due to Naruto's Rasenshuriken. This gives him back his Rinnegan essentially.
The way pirated Rinnegan works is the same way pirated Sharingan work. They're always active. In the case of the Rinnegan though, they are a permanent change to one's eyes. We all know of the requirement already. But the reason why Madara set them into Nagato, is because he is able to summon the Mazo. If he placed them into anyone else that was not of Senju-derived decent, then he could not use them for his plan, due to the user being unable to summon nor control the Mazo. Madara had stated to Obito that due to half his body being Senju, he can control the Mazo even without the Rinnegan. But that doesn't mean he could summon it without the Rinnegan. And the fact that it is the final evolution of the Sharingan means that it can be heavily taxing on users who are not Senju or Uzumaki.
Now onto my next explanation as to why the eight resets (Uchiha and Senju x4) should be required. I'll be breaking down the powers of the Rinnegan.
-The ability to use all five basic chakra natures. Normally people should only have two, while more powerful shinobi are able to use three.
- Deva Path, the ability to manipulate attractive and repulsive forces. It's basically gravity control to a certain extent, and gravity is one of the four basic principles of the universe. There's also Chibaku Tensei, where if someone had enough chakra to do so, they would be able to create their own smaller moon-like structure and cause devastating structural changes to the region which it is done. One would obviously have to consider redrawing the map. And let's not forget the Meteorite technique.
-Naraka Path, the ability to interrogate and the ability to restore bodies. If one were to get caught and questioned using the interrogation ability via the King of Hell, then they would have no choice but to tell the truth or die. There's also the restoration thing, which would restore one's body upon being consumed by the King of Hell.
-Animal Path, the ability to summon animals of different types and species. The summoning for these animals grants them eyes which the user can see through, via the Outer Path. Some of these summons can simply be claimed to have the Amplification Summoning Technique applied to them, which can only multiply the summon and make them extremely hard to deal with. And let's not forget the Gedo Mazo, though that would probably be limited to only one user.
-Preta Path, the ability to absorb pure chakra. Plain and simple, it absorbs most jutsu made by normal chakra. It can also restore a person to a healthier state if enough is absorbed.
-Asura Path, the ability to instantly summon extra mechanical limbs with various devices already built into them. This easily has the potential for mass-destruction, as someone can simply spam a few chakra blasts and missiles here and there. Yeah, missiles in the shinobi world.
-Human Path, the ability to see into the mind of a person and absorb some of their knowledge, as well as the ability to simply drag out one's soul and kill them. This is accomplished by simple touch, so taijutsu would mostly prove deadly if they can simply get their hands on you.
-Outer Path, the abilities to revive the dead, use chakra chains to bind and restrict foes, have additional range of vision through animal summons and paths, and the Six Paths of Pain technique. Reviving the dead is pretty controversial, and this path is automatically attained in the second reset. All that range of vision can be pretty hard to deal with, if one can see where you are and cover any blind spots one could have. The SPoP, yeah, that creates your own mini-army capable of using one of the aforementioned paths in each body.
That's a lot of powers and abilities a doujutsu can have. Everyone and their mother being able to have these eyes can be pretty ridiculous. There should also be a ruling concerning single-eyed Rinnegan users would have more chakra consumed when using these abilities.
