The Basics of Masternodes
Masternodes: A Way to Earn Crypto and Help Ensure the Integrity of a Coin’s Network
One way to increase your cryptocurrency stack and to help ensure a coin’s network is by running a masternode. A masternode is a full node that requires collateral and essentially returns interest. We explain the basics of masternodes.
TIP: Dash is probably the best example of a crypto with a masternode and a good place to start your journey. See Dash’s page on masternodes or watch the video below.
Masternode Setup, Buying Shares, and ‘Interest-Bearing Accounts’ of the Future | DASH: Detailed.
Masternodes are required to have 1000 Dash collateral, a dedicated IP address, and be able to run 24 hours a day without a more than a 1 hr connection loss. Masternodes get paid 45% of the block reward on every block, which is distributed to masternodes one at a time. Typically, around 2 dash is paid to each masternode every 7 days.
– From the Dash website
What is a Masternode
In cryptocurrencies, a node is a computer that participates in the coins network (cryptos are decentralized and distributed, they work by many people running nodes across the globe).
A full node is a node that hosts a copy of the coin’s ledger (aka blockchain) and helps ensure the network by doing so.
A masternode is just a full node running specific types of functions that help support the network. In return for this, the node receives coins as a reward (AKA “free coins”).
Essentially it is an alternative to mining (the other way to get coins for helping to ensure a coin’s network).
What is the Point in Running a Masternode
The main reason to run a masternode, aside from just being cool and helping ensure the network, is the coins one is rewarded from running the node.
How Much Can I Make Running a Masternode?
In Dash those running Masternodes get 45% of the reward for mining blocks (miners get 55%). That is split between all masternodes. On Dash’s website they say it works out to about 2 Dash every 7 days (so you put down 1,000 Dash and you get over 1,00 a year; about a 10% return annually assuming prices stay the same or you value things in Dash…. pretty darn good).
What Do I Need to Run a Masternode?
In general, to run a masternode one needs a virtual private server (or server with a dedicated IP) and enough of a given crypto to put up as collateral (you need to hold onto this coin for as long as you run the node). The server is the “easy” part (you just follow the directions on a coin’s website), getting the large amount of coins needed to run the network is more difficult (for most normal people).
Which Cryptos Have Masternodes?
Not every crypto uses masternodes, and only one of the top coins does (Dash is the only widely traded coin that uses masternodes; many coins have followed Dash’s model though).
The list of alts that use masternodes is too many to mention, but you can see a list of coins that use masternodes here.
TIP: Altcoins are generally cheaper than Dash, but they have risks in terms of not having the same level of liquidity and longevity as Dash. Choose carefully before stocking up on a coin. Also, be sensible about when you buy your coins if you are going to buy them in bulk (you’ll need a bulk to run the masternode). Buying at the height of an alt run isn’t inherently bad, but it isn’t historically ideal.
How Do I Run a Masternode?
Each crypto is going to have a different process, but generally speaking you can find information about running a node on the coins website.