Crypto Alphabet

What is a masternode?

In the cryptosphere, there are several ways by which you can make profits and earn a handsome amount of money. And the best thing is that you can choose the best way that works for you and can accordingly adjust your reward/risk ratio. One such way of earning in cryptosphere is by running a masternode.

What is a masternode?

A masternode (MN) is a server which is on a publicly available IP address, and participates as an active member in a coin’s transaction network. In order to qualify as a masternode, the server must meet certain parameters, including having a specific number of coins held in reserve via a wallet. This wallet can either be directly on the masternode, or held via a different computer. Because masternodes have a very important purpose to the coin network, coin developers encourage people to set up and maintain masternodes through coin rewards at frequent intervals.

How does a masternode recieve rewards?

When a masternode is set up, it begins to do work on behalf of the coin network. However, it will not immediately be eligible to participate in masternode rewards. All coins have a waiting period where the masternode must demonstrate it is participating actively, is stable, and is handling sufficient work for the network. During this time, the rewards are paid out to other masternodes and the new masternode is excluded. Once a new masternode has met stability and participation thresholds, it then becomes eligible for rewards. The masternode must receive votes from other masternodes to get into the rewards or “winners” queue. All of the masternodes will track which nodes have been paid out over a given cycle, so no single masternode can hoard or receive multiple payouts per round. Thus, the frequency of payouts is an ever changing calculation of how many masternodes are eligible for rewards, how many transactions or blocks are being mined, and whether there are other masternodes to get rewards soon, or not.

Let’s see what things are required to set a masternode up:

  • One needs a minimum amount of coins of that particular crypto (For DASH MN you need 1 000 DASH units; for PIVX MN you need 10 000 PIVX units). This minimum number varies from crypto to crypto;
  • One needs a VPS or server to host that wallet for 24/7;
  • One needs a dedicated IP address for that;
  • One needs some storage space to save the blockchain.

How to set up a masternode?

  • You need to get a dedicated server or VPS with a static ip-address;
  • Download the original cryptocurrency wallet of the chosen cryptocurrency, which, of course, must support the masternodes;
  • Synchronize with the blockchain network (this will happen automatically when you start the cryptocurrency wallet, you just have to wait);
  • Make the configuration of the wallet according to the instructions for setting up the masternodes of the chosen cryptocurrency.

Typically, making the configuration of the wallet means the following steps:

  • Generate a new address in the launched wallet;
  • Send the required number of coins to the received address, exactly as required to run the masternode;
  • After transfer of funds you should generate a masternode unique private key;
  • Make configuration file settings clearly according to the requirements that can be found on the official website of the chosen cryptocurrency;
  • Start the masternode.

How are masternodes useful for cryptocurrency investors?

Different cryptocurrencies have different incentive models through which an MN operator can earn a decently monthly or weekly income. If you invest in a cryptocurrency that allows you to run a masternode, you should definitely explore that option of earning.

You should also choose the right currency for investment if you are solely investing for running a masternode. You should compare the percentage yield against the investment. It means you should smartly calculate your ROI (a coin’s return-on-investment).

At the moment, there are numerous cryptos out there in the market that allow you to run a masternode but not all of them are worth running because of meager incentives they provide.

There are few links where you can check if your crypto allows you to host an MN or not: