There is a tendency and it seems irreversible, remove favorable to the world of cryptocurrencies, and that is that it can be mined through PoS algorithms (Proof of Stake), meaning that there are many people in the world investing their money in the digital currencies that generate more coins equal but in amounts greater than the investment, just by having them stored in your wallet. Such is the success of PoS mining that many currencies decided to implement the Masternodes or Master Nodes.

What are the Masternodes?

In a nutshell it is a server. They are also known by the abbreviation MN, they have permanent communication with other nodes and thus form the decentralized network. In the world of cryptocurrencies is a wallet that handle a fixed number of cryptocurrencies, which can not be used except for the operations required by the Masternode.

This purse is specially configured for this purpose, and must be kept active 24 hours a day for a certain time. Masternodes is a node within the Blockchain of the currency in question, which is used to make transactions very quickly, almost instantaneously, such as lotteries, voting and others. The best thing about Masternodes is that they generate passive income for the owners since the Blockchain disburses a certain amount of money every certain time in units of the type of currency invested.

So, if the currency goes up, the payment for the income of the node also goes up. Its difference with respect to a common PoS is the performance, since this is much higher. Another definition could be that they are a type of complete node that provide services to the network and receive a type of reward for it and for a complete node, the Masternode has a complete copy of the Blockchain.

How is a Masternode acquired?

To own a Masternode you only need to have a computer. The value will depend on the currency you want to work with. There are coins that cost 100 units, there are others that cost several million, you have to consider their value in any case. For example, a Dash Masternode could have a value of 1,000 Dash equivalent to 300,000 dollars, while other cryptocurrencies such as Bitcoin could be a bit more expensive. Every time there are more currencies that wish to implement the Masternodes since they help to revalue them increasing their real value.

Functions of a Masternode

Basically a Masternode helps in that for the transactions there is absolute privacy, they can be done instantly and also allow to enable the budget and treasury system in crypts, with which we see the value they provide when using them in mining and also in the blockchain of any cryptocurrency. But let’s learn a little more about the way they work next.

Masternodes performances

Who wants to manage a Masternode can do it, only that it must have a certain amount of coins, to avoid that the system does not become malicious, that amount varies according to the type of currency and will serve as a guarantee to prevent Sybil attacks from the network, not having this guarantee would be very complicated, since the owner of a Masternode can cheat or corrupt the system, creating many Masternodes and making interferences in the network.

In this way the Masternodes operators have something in play during the game. With Dash, this guarantee can be spent or moved when it deems appropriate. Users are also required to host their Masternode on hardware that meets a series of minimum requirements of CPU, RAM, network space and disk.

The Masternode is usually hosted on VPS virtual private servers and by providers such as Digital Ocean or Vultr. In order to comply with these previous requirements, an initial investment is needed, and logically, before investing we want and we must be able to estimate how the return on investment will be.

How does the ROI work with the Masternodes?

As already mentioned, the Masternodes are rewarded for their services on the network and this is what makes cryptocurrency investors are running the Masternodes. The reward will vary between the Cryptocurrency, in the case of Dash who created this innovation and put it to work, the reward of mining divides it so that 45% of that reward goes to the Masternodes, 10% go to a development fund and the remaining 45% to the miner who found the block.

What do you think about this topic? Did you already know something about how masternodes work?

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Image of geralt via under the creative commons license.

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