Concept

A masternode is a type of node (crypto node) representing a computing device/ server that carries out a several functions and assumes additional responsibilities beyond those of a standard node (full node). A masternode is maintained by its owner, similar to full nodes, but with additional roles like transaction anonymization, clearing, and participation proper management and governance (through voting and similar rights). It facilitates the operation of a network running certain blockchain-based projects and applications, through a set of services that account for the security (and privacy), functionality, and decentralization of the network. By nature, it may be perceived as a crypto full node which can also serve as a computer wallet that stores a complete copy of the active blockchain running in real-time.

Operability

Masternodes are perceived as an alternative to mining, but with less technical know-how and for lower operational costs. However, initial expenses are expected to be high, and hence it would not be easy to earn a decent return from maintaining such nodes. The initial expenses include the currency stake and equipment, as well as operational costs such as power charges and hosting fees. Running a masternode requires a storage of 1,000 DASH (Dash cryptocurrency). Active nodes provide services to users (clients) on the network and in return earn rewards in the form of a dividend. Therefore, users can pay for the services from the same pool of resources and earn a return on investment.

Operational requirements

In terms of operational requirements, running a masternode depends on a significant financial commitment, practical know-how, experience, ability and willingness to contribute to the network’s long-term well-being. The characteristics of many blockchain networks’ masternodes mirror those of the DASH to a great extent. These nodes are similar to the Bitcoin network, except they must provide a level of service to the network and have a pledge of collateral in order to participate. However, certain masternodes do not require the users to place any cryptoassets as collateral. Collateral is never forfeited and remain well secured while the masternode operates. Moreover, these operational features allow users (investors) to provide a service to the network, earn rewards on their commitment and investment and curb the volatility of the asset/ currency being traded.