What is a Masternode?
A masternode is a cryptocurrency wallet often referred to as a full node which contains a copy of the ledger in real-time. Blockchains can typically be broken down into three types: Proof of work, proof of stake, and a blend of the two. These blockchains need a system for processing transactions which enables the blockchain to function. However, masternodes are substantially different than the functionality of regular nodes. They go above and beyond in functionality compared to a node which is simply relaying blocks and transactions.
Some of the unique features that make up master nodes include:
• providing a treasury system for crypto
• keeping transactions private
• enabling instantaneous transactions
• enabling governance and voting
Masternodes are referred to in short form as MN, and they are not standalone. They are always in contact with other nodes which make up the decentralized network.
Running a Masternode
Masternodes are great because they provide you with the benefit of earning guaranteed coins in addition to the potential upside of the coin value. Masternodes can be run by anyone, but there are barriers to entry which have been put in place to prevent fraud or wrong-doing. The first requirement is to put up collateral —Forcing operators to have a direct stake, a stake that they can lose if cheating occurs. This serves as a self-policing measure which keeps fraud to a minimum. So how much collateral does it take? Here are some examples from various currencies:
• Dash: 1,000 dash
• PIVX: 10,000 PIVX
Additional things you’ll need to run a masternode include your own VPS or dedicated server, a dedicated IP address and enough storage space for saving the blockchain ledger. So how valuable is a masternodes for crypto investors? Well, Masternodes can be very beneficial for crypto investors because they are an on-going revenue source, earning them interest on their investment. How much someone can earn running a masternode varies from currency to currency. Some come with exclusive incentives, others pay by the week or the month. You really need to research them individually to determine which one is the best fit for your investment and ROI. You should also take a look at the currency from an overall standpoint. Be sure its one that you have faith in for the long-term. Making a large investment into a currency that’s here today and gone tomorrow is obviously something you should try to avoid. Focus on stability and ROI and you should be able to find one that fits both.
So how does one get started?
This will vary once again depending on the currency, but here is a basic checklist you can use as a
guide since you’ll follow this to some extent regardless of which currency you select:
- 1. Buy the amount of coins you need for collateral (be sure to buy a little extra to cover transactions fees)
- 2. Install the wallet on your server
- 3. Send your coins or tokens to your wallet
- 4. Setup a node address in your wallet and transfer the coins to the node
- 5. Setup the node.
- 6. Once configured, you’re ready to start the server. At this point you’ll need the node daemon.
- 7. You’re ready to rock and roll and begin earning coins off your masternode!
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