We all know that blockchain technology is a distributed ledger that is the backbone of the cryptocurrency ecosystem that we’re experiencing today. Companies and consumers are making money through cryptocurrency trading and by introducing new technologies that serve the ecosystem.
Running a masternode benefits the growing use of cryptocurrency as it contributes to need for stability in the market. Stability is achieved by rewarding masternodes with rewards. This makes them extremely important for the future of cryptocurrency .
We’ll explain more below.
Overview: What is a Masternode?
Any cryptocurrency needs distributed nodes to function effectively. The entire network is made up of different nodes on which a piece of code is stored safely. Through this technique, no single node or computer has all the power. That’s the beauty of the blockchain system. You need a full node if you want to host a copy of the blockchain. This allows you to also support the growing network this way.
A masternode is a full node in the blockchain. For that reason, it supports the network by hosting an entire copy of the blockchain in real time. The masternode receives a crypto coin as a result of its hosting service. Many people may not know about this concept, but it’s a growing one in the crypto space.
An Alternative to Mining
Although a lot of your bandwidth is taken up by the network, it’s a positive alternative to mining for coins. Mining has become increasingly competitive, as there are various miners across the world. Different cryptocurrencies will have their own MN (masternode) setup, incentivizing users with rewards accordingly. Comparing the yield to the investment should help you decide which currency to consider becoming a masternode. Setting up a masternode does hold some technical challenges but is a viable alternative to mining for coins.
The Benefits of a Masternode
Apart from the reward that you are receiving by being the masternode, there are other advantages to becoming one.
- It increases the privacy of all transactions occurring.
- It also enables instant transactions, depending on the strength of your bandwidth.
- It allows each masternode to take part in governance related decisions and gives them a voting right.
- If there are many masternodes in a currency, they may start to bond together making the space more organized over time.
- If provides stability inside the network’s economy similar to a bank, yet decentralized.
What are the Requirements to Setup a Masternode?
For someone to start a masternode, they need to have a minimum amount of that coin in their account. E.g. , for PIVX, you may need to have 10,000 PIVX coins in your account. This is a significant investment, which is why few entities do it. Each coin will have their own unique perquisites to become and remain a masternode. .
You need to install a desktop wallet and connect it to the blockchain, after which you can transfer the coins to the wallet itself. You will also need a VPS or cloud server to host the wallet with 99% uptime. This is another investment that must be made prior to becoming a masternode.
You also need to have a dedicated IP to become eligible, which is something that most VPS and cloud servers offer anyway. You also need a lot of storage space dedicated for the blockchain.
After you’re all setup, you can run the program in the background, but the wallet must run 24/7.
What Cryptocurrencies have Masternodes?
You can become a masternode using more than 400 cryptocurrencies. The most popular among them are Dash (DASH), Bata (BTA), Crown (CRW), ChainCoin (CHC) and PIVX (PIVX).
How do I Choose the Right Crypto to Become a Masternode?
It’s important to understand the intrinsic value of cryptocurrency outside of being valuable as a masternode. Most cryptocurrencies serve a purpose and are driven by an internal economy. Do your research to find out about each coins background. Also look at the coins financial past by viewing its historical data and price fluctuations.
All of these research points will help you make an informed decision. Investing in a masternode requires the same amount of research as investing in long-term trading. You should know where your money is being invested.
You should always double check the ROI that you’re getting from becoming a masternode. The rewards systems should be transparent, and there should be other masternodes in the blockchain with you. You can even reach out to them via social media and talk to them about their experience with the currency.