What Are Masternodes?

Masternodes are a server maintained by its owner, somewhat like full nodes, but with additional functionalities such as anonymizing transactions, clearing transactions, and participating in governance and voting.

A node is a computing device which aims to validate blocks and transactions.

Masternodes were initially popularized by Dash in 2014 to reward owners of these servers for maintaining a service for the blockchain.

It acts as a second layer to Bitcoin’s blockchain and attempts to take the pressure off nodes.

Considered as full nodes, they perform the core functions that nodes do as well as additional features.

They are rewarded for performing these tasks.

Masternodes were created in response to the problem of a decline in nodes.

Rising costs and technical difficulties that result from running nodes often lead to a reduction in full nodes.

This can be problematic because full nodes can hurt profitability.

It also leads to a reduction in overall efficiency of the system.

The reward masternodes get is similar to the concept of Proof-Of-Work, abbreviated as PoW.

Dash was the first cryptocurrency to incorporate masternodes.

Masternodes facilitate advanced functions such as PrivateSend and InstantSend.

Masternodes are backed by collateral in cash. They receive regular contributions for the work they do.

Masternode operators are able to vote each month on a maximum proportion roughly equivalent to 10% of the block reward to fund projects that contribute to Dash’s development.

Masternodes are considered to be sources of support to blockchain.

For this reason, they are often also dubbed “bond validator systems.”

Masternodes are increasingly important as they prevent congestion of blockchain systems as well as aim to reduce transaction processing time.