Source - https://medium.com/coinscapture/what-are-master-nodes-3b10ff77d24
In the cryptosphere, you can earn while sleeping also. Surprised right? This type of passive income is actually possible by hosting a master-node also known as bonded validator systems. It is a server that is entirely synchronized with a blockchain and used by miners to secure the blockchain. There are over 400 blockchain-based projects that allow members of their community to run masternodes on their blockchain. Before diving deep into the masternode, we need to understand some terminologies like nodes and full node with their in the blockchain.
In the cryptosphere, you can earn while sleeping also. Surprised right? This type of passive income is actually possible by hosting a master-node also known as bonded validator systems. It is a server that is entirely synchronized with a blockchain and used by miners to secure the blockchain. There are over 400 blockchain-based projects that allow members of their community to run masternodes on their blockchain. Before diving deep into the masternode, we need to understand some terminologies like nodes and full node with their in the blockchain.
What is a Node?
In simple terms, a Node is a kind of devices like computers, laptops or the even bigger server that stores the blocks of data. In other words, a node is a device connected to the network which keeps the latest blockchain copy, support network safety, and relay transactions. In a blockchain, nodes form the infrastructure of the system. The data stored in it is always up-to-date because all the nodes are connected to each other and there is a constant exchange of the latest blockchain data between them. There is no possibility of wrong or fake operations because once the miner attempts to add a new block of transactions to the blockchain, and broadcasts it to all the nodes on the network each transaction is automatically verified (validity of signature and transactions). If the transaction is accepted by a node it saved on the top of the rest of the blocks.
What is a Full node?
In a network, the node that is fully synchronized and connected to the network 24/7 is termed as a full node. A full node consists of a full copy of the blockchain for its specific coin and it spreads the updated copy of the blockchain to other nodes. The other function is verifying the transactions and its correspondence with the network rules, approving or denying transactions during the addition of the new block by the miner. The only problem with the full node is that it requires a large storage space. For eg., Bitcoin’s full node requires over 300 GB of data which is rapidly increasing every month.
Masternodes are the nodes/decentralized server that carries out functions similar to full nodes. Apart from validating, saving and broadcasting transactions, masternodes perform some other specialized functions like increasing the privacy of transactions; operating instant transactions; decentralized governance and budgeting systems, and immutable proposals and voting systems. People usually get confused with the functions of the full node and masternode. But masternodes, in reality, are a large server which requires more resources like electricity, maintenance, storage space, and memory. The major difference in hosting a masternode is, it can give a chance of earning a passive income to the owner. An income ranging from 2% to 30% portion of every block reward that your masternode/server helped with. The reward can be given out monthly, weekly, daily, or sometimes several times a day.
How to host a masternode?
Hosting of the masternode works on a proof-of-stake consensus mechanism. It would require staking some amount of your cryptocurrency that varies from blockchain to blockchain along with setting up a server to host as a masternode and a dedicated IP address. Users can set up themselves or take the help of the service provider.
Once the user establishes themselves as a masternode certain rights and privileges that depend on the blockchain are granted. The cryptocurrencystaked for funding the masternode cannot be used until it is live. The ROI (return of investment) of the masternode means the percentage of return that a node is predicted to pay out in 12 months. ROI varies depending on the price of the bond, the block reward, the number of operating masternodes, etc. Some of the cryptocurrencies that use masternodes are Dash (DASH), Zcoin, Syscoin, Syndicat (SYNX), 8BIT (8BIT). Luxcoin, PIVX, and Phore
This was all about what is a masternode, its functions and working. Hopefully, it gave you enough knowledge to decide whether you would want to set one up for yourself. It is an expensive investment but it has worthwhile returns.
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