What Is a Masternode in Cryptocurrency?

Cryptocurrency offers unlimited opportunities to earn money. One of the possible options is to run a masternode.

However, before moving to how to earn by running masternodes, let us check what is a masternode in cryptocurrency. Only when you understand what it is and how it works you can decide whether this is the best way for you to follow.

What Is a Masternode Crypto: Explanation in Simple Words

A masternode is a full code of cryptocurrency. Ok, you can also call it a special computer wallet. Why special? It keeps a copy of the blockchain in real-time mode. However, don’t confuse masternodes with ordinary nodes. They are completely different. In addition to just having the blockchain and the transactions in it, they also perform more functions in addition to those that are normally performed by a node:

 

• • They increase the privacy level of the transactions;

• • They participate in the governance and voting procedures;

• • They perform instant transactions;

• • They enable treasury and budgeting systems for cryptocurrency.

A blockchain network consists of such masternodes.

You shall also distinguish different types of blockchains. They are mainly divided into three categories:

 

• • Proof-of-Work, or POW;

• • Proof-of-Stake, or POS;

• • A mixture of the previously mentioned types.

One of the most popular and known POW blockchain types is the blockchain that was used for bitcoin. To confirm a transaction, miners have to solve a cryptographic puzzle. This process is called mining. When a mining rig (a special software & hardware unit designed to process huge data volumes within a very short time period) solves the puzzle, it is awarded cryptocurrency. The block is mined and added to the blockchain.

Such blockchains consume a lot of energy. That’s why the world is moving to different blockchain types. POS is one of them. Here, we will explain in detail what is masternode in cryptocurrency. POS functions based on masternodes. Masternodes are computers. They perform transaction processing. They are awarded coins, too, but in this case, rewards are guaranteed. Every masternode crypto is a part of a queue and when one of them reaches a particular position in a queue, it gets the award.

Now, an increasing number of cryptocurrencies are adopting the blockchain based on masternode crypto. Dash and bitcoin are the first cryptocurrencies that started using the POS rather than POW.

Masternode Crypto, or Why It Is Profitable to Have One

Now, when you know what is a masternode in cryptocurrency, you might want to know what you need to run one. Basically, anybody can run a masternode. But to do so, you need to have something in the system, some coin volume. It is needed to ensure that the person will not cheat or undermine the system. If an operator does it, his own assets are suffering.

Now, when you know what is masternode cryptocurrency, let us check what requirements you need to comply with to run a masternode:

 

• • You need a VPS or any other server that enables you to host your blockchain 24/7;

• • A dedicated IP is needed;

• • Sufficient storage space is required to save the entire blockchain.

Do you still remember the entry barrier? So, make sure you have enough coins to start running a masternode. The number of coins varies depending on the cryptocurrency you have selected. For example, if you decide to work with zcash, you need a particular zcoin number. If you opt for dash, the number of dash coins to enter the system will be different. Now, you might think that it is not as cheap as you have expected. We would say, however, that any business needs investment. Moreover, the business you are entering also needs some guarantees that you aren’t going to misuse it.

Now, when the question ‘What is a masternode in cryptocurrency?’ is solved, you might want to know why it can be profitable to run a masternode. Of course, running a masternode is not for everybody. It is a perfect way to earn additional money for those who invest in cryptocurrency. So, if you use Linda or Stellar, or any other exchange service or platform, you can count on yourself only. If you make a correct decision, you earn. If you make a mistake, you lose.

That’s why it is crucial to assess the options that any particular cryptocurrency gives you. if you select the right cryptocurrency, you win. If your choice is wrong, you will lose. And here is when the tricky part comes. Calculate the ROI, or your potential yield for investment, very carefully. It shall not be low. However, if it is incredibly high, it is a red flag, too. Many scammers are operating in the field. If somebody offers you ROI above 1,000%, it is clear that something must be wrong with it.

Also, select a cryptocurrency properly. Whether it is Dash, or Ethereum, or something else, it shall be reliable. Now, when the research is made, you are ready to start. Buy the needed number of coins. Download and install the desktop wallet and sync it with the selected blockchain.

Move your coins to your wallet and set up in the wallet a node address. Now, setup a node on either a PC or a server. A VPS is a common option to do it. start the server and sync the node with it. Now, you can start the masternode. It will run, and you will start receiving rewards.

Even though it looks like a perfect way to earn a good passive income, you might still need to learn many things before you really can take advantage of this option. At least basic technical knowledge is needed. Don’t forget about the initial investments, too. However, even though this option is not for everybody, but it can bring you good money if you know what you are doing.