What is a Masternode?

What is a Masternode?

Masternode, in simpler terms, is a series of servers that support the decentralized blockchain network. Most of the Masternodes work on consensus mechanism known as Proof-of-Stake or Hybrid Proof-of- Stake + Proof-of-Work. Masternodes are the nodes in the immutable blockchain network which processes instant transactions and introduce new blocks in the network.

Masternodes which are involved in the network receives tokens as a reward for their contribution.

Technically, Masternode is a cryptocurrency full node which can also be considered as a computer wallet that stores the complete copy of the active blockchain in real time.

Dash was the first coin to originally develop the masternode to implement services like InstaSend, PrivateSend, and Decentralized Governance. Like nodes function separately as compared to normal nodes. Masternodes own unique features and specification apart from just storing the copy of the blockchain and sending transactions.

Some of the unique functions of Masternodes include:  

– Increased Security
– More private transactions
– Instant coin transactions
– Involved in decentralized voting systems, Masternodes stores all information about the network in wallets that are fully integrated and 24*7 connected with the blockchain network. Masternodes also verify or rejects new transactions that are added in the process of generating a new block.

Technically, A Masternode is a PC wallet or crypto-coin node, used as a Proof-of-Service algorithm, which safeguards a copy of the blockchain in real-time. It works like a regular Bitcoin full node. DASH first invented the Masternode back in 2014, which has become popular among investors.

Understanding the Masternode

To enable you to understand Masternodes further, let’s explore the different kinds of Blockchain in existence, and discover which one can run a Masternode.

There are two common types of Blockchain out there, namely:

  • POW (proof of work)
  • POS (proof of stake)

Each Blockchain has its own unique mechanism through which it process transactions to enable Blockchain functions.

POW Blockchains are supported by ‘crypto miners’. They enable transactions through ‘crypto mining’ of Blocks that are then certainly added onto the Blockchain. They attain that by use of rigs.

Think of rigs as computers that do the processing of data at very high speeds and essentially guessing answers to puzzles. The rig that gets the correct answer gets rewarded. However, the main challenge with POW is its high consumption of energy.

Another one is POS Blockchain, it is supported by Masternodes. As we already mentioned, Masternodes are computers that enable processing of instant transactions within a Blockchain network and in return earn a reward from the blocks developed. They operate under a system that is collateral-based to guarantee the provision of services that are genuine. They act as the Blockchain network backbone or if you like as a bonded validation system.
Bitcoin and Dash were the first cryptocurrencies to adopt the Masternode model.

Types of Masternode 

Generally, there are 3 common known types of nodes, which are:

  • Ordinary nodes
  • Full nodes
  • Masternodes

Each one has different responsibilities and privileges. 

> Ordinary nodes are the backbone of any digital currency or cryptocurrency. They help secure the blockchain network and prevent double spending. Ordinary nodes are the miners in the PoW consensus model and the staking wallets in the PoS consensus model.

> Second one is Full node, are different in that they hold a whole copy of the blockchain in real-time (ordinary nodes don’t do this), and they can connect to over 124 other nodes (whereas ordinary nodes can only connect to 8).

> And finally, there are the Masternodes, which are basically full nodes with extra abilities and functionalities. They provide different services, such as Private Send, Instant Send, and storing the entire blockchain, and for so doing, they receive block rewards. It’s worth noting that masternodes are essentially full nodes in the PoW and PoS consensus methods.

Cryptocurrencies That Rely On Masternodes

There are various projects that make use of masternodes in their networks, but many of these projects are smaller and not widely known in the ecosystem.
Some notable masternode coins include:

  • Zer-Dex (ZDX)
  • Dash (DASH)

Why run a Masternode?

Besides the coin rewards that you get from running a Masternode, here are more reasons why you should consider a Masternode:

  • It increases the privacy of the transactions
  • It enables instant transactions
  • It allows the user to take part in governance as well as voting
  • It enables the treasury and budgeting system in cryptocurrencies.

While all Masternodes can do the above tasks, performance may slightly vary from one digital asset to the other based on how a Masternode has been implemented in a particular cryptocurrency.

Masternodes solves the blockchain scalability issue of the network. The biggest challenge for Bitcoin blockchain is scalability. The bitcoin blockchain is slow and takes around 30 mins for confirming the transactions. By using masternode mechanism, the transaction speed can be increased accordingly.


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