Masternodes are getting more popular in the crypto world. With Dash as a front runner over 450 currencies build their network using masternodes. The popularity of masternodes can also be seen on Google. There are now three times more searches, even though it’s still way below the peak in December and January. In this guide we will explain what masternodes are and why we need them, and of course how they could benefit you.
What are masternodes?
Masternodes (MN) are a type of node that performs certain tasks on the blockchain. These masternodes need to be online as much as possible, preferably 24 hours per day and 7 days per week. They validate transactions and other tasks that need confirmations. Unless you have a room full of servers, it’s unlikely you will run a masternode from your home. Thankfully these MNs can also be run from a Virtual Private Server (VPS), but more about that in another guide.
Dash was the first coin that introduced masternodes. This coin is aimed at privacy, and it uses the nodes to empower its PrivateSend function. This would make transactions untraceable, and ensures the privacy of your transaction. Those who run a masternode often also get voting power in the governance of the network. This is a difference from normal nodes, who don’t get this extra power. Keep in mind, that abilities from each MN differ per blockchain. Pivx, Dash, Desire, Drip, they all are a bit different. But of course not everybody can just run a masternode. You need a certain amount of coins to do that. The amount of coins needed for setting up a masternode, is different for each project. A Dash MN now requires 1000 Dash, which equals 185 thousand dollars. While Drip requires 10.000 Drip coins, which equals only 51 dollars.
Why do people run masternodes?
Running a masternode requires an investment. This can be speculative when you start one or more masternodes for a small and upcoming coin. Or you invest in a more established coin like Dash and Pivx, and these MN are more expensive obviously. When you lock your coins into a wallet to run a masternode, you no longer have access to it. And when you unlock your money, you will no longer run a masternode. So why would you like so much money away to protect a network? Simple. You get rewards!
Masternodes are entitled to receive a portion of the block rewards. How much varies per blockchain, but these masternodes generate a steady stream of coins. The amount of coins you get for running a masternode, would need to justify you running it. If not, then you are making a bad business decision.
Obviously the rewards are different for each project, depending on the activity on the network and the value of the coin. You could think of these MN rewards as interest. Instead of putting money on the bank, you put money in a masternode. However, if you put 100 dollars in the bank against 1% interest, you will have 101 dollars one year later. With MN this is a bit more complicated, because your rewards are in the same coin. If you would lock away 100 coins in a masternode, it very possible you will have 150 coins by the end of the year. But the true value of your rewards depends on the market value of your coin against the dollar.
If you want to discover more coins using masternodes, please check Masternodes Online. According to that website there are 235 thousand masternodes online in the world, with a total value of almost 1.1 billion dollars.