A node can simply be understood as a computer that plays a part in ensuring the integrity of a coin network. The crypto space is not only decentralized but also distributed; therefore it functions by several people running nodes from different parts of the world. That said, you require a full node to host a copy of the Blockchain (coin’s ledger) and thus support the network.
A Masternode is a crypto full node (computer wallet) that supports the network by hosting an entire copy of the coin’s ledger in real time. In return, the Masternode will receive crypto coins as a reward. It is a great alternative to mining.
Understanding the Masternode
To enable you 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 (Bitcoin is under this category) are supported by ‘miners’. They enable transactions through ‘mining’ of Blocks that are then finally 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.
This has triggered a shift to PoS as an alternative. POS Blockchain is supported by Masternodes. As we earlier mentioned, Masternodes are computers that enable processing of transactions within a Blockchain and in return earn a reward from the blocks created. 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. Now you can activate your masternode with Byron Coin!
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.
So, how much can you make from running a Masternode?
The masternode enables you to earn some passive income from participating in network maintenance functions. However, there is no one-size-fits-all response on how much you can earn. Generally, it would depend on the following factors:
- The coin then you select to invest in
- The protocol that facilitates the Masternodes per coin
- The rise in the eventual value of a coin into the future.