Academy - Masternodes

The Masternodes

By Crypto Nation – 21 June 2020   

For a long time, the transactions of most cryptocurrencies were secured thanks to the consensus system called Proof of Work (PoW), a mechanism based on the computing power of computers. This consensus quickly showed its limits, especially on the energy consuming aspect, and new ways of securing blockchain exchanges have appeared.

The Proof of Stake (PoS), replaces the mining by staking. It is with this new technique that some blockchains use Masternode systems. And here we will see what these famous Masternodes are and the opportunities they can offer!

What is a Masternode?

When blockchains were introduced, many worked only through a consensus system of Proof of Work (PoW). This consensus is currently the most secure. But it is limited to manage many transactions, and very greedy in energy consumption.

It was therefore necessary to innovate, and to propose a new mechanism, in order to overcome this problem. Welcome to the PoS, the proof of stake. It is within the functioning of this consensus that Masternodes appear.

Masternodes are computer servers that secure and ensure the proper functioning of a blockchain based on the Proof of Stake.

We find on these servers a complete copy of the entire blockchain of the project concerned, thanks to this, they are able to validate new transactions issued on the network.

The DASH, is the precursor in the mater by activating the first Masternode in 2014. There are now many players in this segment, including Horizen (ZEN), DIVI, Energi (NRG), or even PIVX.

How does a Masternode work?

Masternodes are deployed within the Proof of Stake consensus . Their operation is based on the staking of a certain amount of cryptocurrency. This staking will be blocked on the network, and will be the collateral allowing the Masternode to work.

This collateral is different depending on the cryptocurrency project. For example, the Horizen project (ZEN) requires for its Securenode, 42 ZEN of collateral. The creation price is therefore rather low here ($3 000). But it can be much higher, as for the DASH which needs 1 000 DASH of collateral, which is worth more than $180 000 !

Start a Masternode

Once a user posses the right number of tokens, he/she will have to deposit them on a Wallet, which will operate the Masternode.

To make a Masternode work, it is possible to embark on the adventure on your own, but you will need strong technical skills, and time to maintain it. Otherwise, you can go to specialized companies, such as Just Mining, or Feel MiningThey will deploy and maintain the server for you! Once the Masternode is underway, you will get rewards, and thus you will have passive income in cryptocurrency. These rewards are earned through your node’s participation in validating transactions on the network.

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