What Is A Masternode And How Do Masternodes Work?

Masternode is simply a cryptocurrency full node or computer wallet that keeps the full copy of the blockchain in real-time, just like you have Bitcoin full nodes. It is always up & running. The difference between a Bitcoin-type network with homogeneous nodes competing to mine blocks and a masternode network is that masternodes are paid for their services. Just like full nodes in a cryptocurrency, masternodes can be run by anyone. Depending on the project, the masternode network will not have exactly the same function.

“Masternodes = special network nodes that run wallet software on the blockchain and provide certain services to the network.”

Is it a good idea to own a masternode?

There’s no question that owning a masternode in the right network can deliver good returns. However, choosing the correct network is not always easy.  A pump and dump scheme will have your investment vanish into the ether. Masternodes serve an important function for the smooth running of the network, with special functions (these functions can differ between various types of cryptocurrency) including :

  • Increasing the privacy of transactions
  • Undertaking instant transactions
  • Voting rights and taking part in governance decisions
  • Maintaining network security

All the masternodes are connected to each other, and it is this that makes the blockchain decentralised. In other words, the integrity of the network is never at risk from one single point of failure.

The speed of transactions in the masternode model is one of the most appealing reasons to use it. Most decentralized cryptocurrencies have to wait for enough blocks to pass before there is a certainty that the transaction is irreversible and that there is no chance of “double-spend” of the same funds. The more nodes there are that agree within a network, the more trustless and decentralized the system becomes.

NEXT Masternodes are the PoS layer of the NEXT.chain. Primary requirements to operate a masternode include 25,000 NEXT and a 24/7 server.  By running a Masternode, you help uphold the NEXT network and aid its growth while receiving financial rewards on a regular basis in the form of NEXT. The NEXT network will grow in appeal for investors and users as it increases in size and security, this in turn positively affects the financial incentive provided by running a NEXT Masternode. The only requirement is to have 25000 NEXT as collateral.

How Are Masternodes Useful For Cryptocoin Investors?

Masternodes are very useful for crypto investors because by running a masternode you are incentivized. Consider it just like earning a monthly or weekly interest on your crypto holdings. Different cryptocurrencies have different incentive models through which an MN operator can earn a decently monthly or weekly income.

Another thing to consider is that you should choose the right currency for investment if you are solely investing in running a masternode. You should compare the percentage yield against the investment. In short, you should carefully calculate your ROI. As of now, 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 the meager incentives they provide.

NEXT Masternode holders enjoy perks like daily NEXT coin rewards, independent Telegram chat and higher level of influence over team decisions. Current APR for Masternode holders is ~14% and in the future, this number will increase as NEXT moves from hybrid Masternode/Mining to an eco-friendlier Masternode only chain.

Can you stop being a masternode at any time?

Yes, you can. While your masternode is active, your coin investment in it is ‘locked, meaning you can’t access them for any other purpose, like making purchases or simply selling them.

If you want to stop hosting your masternode, you can do so, and have access to your invested coins once again. You’ll be hoping the value has risen since you invested them, and you can cash out for a healthy profit.

Now that you understand the concept of masternode, you can learn what the next steps are to set up a NEXT masternode here in this article: How to set up a Masternode with Nodehub.io.

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