What Are Masternodes? An Exclusive Guide


Masternode in a cryptocurrency is a dedicated server or system that has governing rights on the Blockchain protocols. They are different from nodes/miners; as nodes (POS or POW) have earning rights and make decisions on mining and Proof-Of-Stake, whereas a Masternode can vote on important issues on the network and also perform other specific functions. The Masternode is what adds decentralized governance and incentive-based development into a blockchain network, as the nodes can vote on important issues regarding developmental changes on the blockchain.
Masternode can be established by mortgaging the collateral amount of coins in the specific cryptocurrency. Each cryptocurrency has its own set of supply and different POW or POS or symbiotic protocols. Hence, the minimum number of coins to set up a Masternode varies with each cryptocurrency.

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The above collateral amount and profit percentages vary because of the price of the cryptocurrencies. Hence the real profit realization rate should be around 7-10% per year. Because of the longer duration of the rate of return a stable cryptocurrency with less volatility is chosen.

The mortgage amount is kept high to deter spammers from clogging the network; it is an incentive-based initiative that works like a miner but has more control over the network than a miner/node on a POS network. The stakes are higher, and the returns are uniform across all the masternodes, this avoids centralization of the cryptocurrency by forming pools and mining hubs.


Dash was the first cryptocurrency to implement the Masternode design. It was developed by Evan Duffield and has almost 20 % of the volume of the entire cryptocurrency powered, worth 1 billion USD network of Masternodes Click To Tweet

Dash was the first cryptocurrency to implement the Masternode design. Evan Duffield developed it and released in January 2014 as Xcoin. It has the largest volume of collateral among the Masternode networks. Dash has almost 20 % of the capacity of the entire cryptocurrency powered, worth 1 billion USD network of Masternodes.

Dash Masternodes where designated to perform the following:

  • InstaSend: Masternodes confirm transaction using their node only almost instantly
  • PrivateSend: Masternodes allow for participants to send and receive anonymous payments
  • Decentralized Governance: Masternodes vote and propose new technological and financial developments for the blockchain

Dash coin follows a two-level Blockchain Governance system. The first level involves miners and which perform the POW for the network to confirm and verify routine transactions. The second level comprises of Masternodes that can perform these above-given functions as well. This second level of decentralization makes the Dash coin most popular decentralized cryptocurrency as the Masternodes and Miners alone are the stake owners of the network. There are some other applications of Masternode which can be used to perform a plethora of secure internet applications.


PIVX was developed introduced as a Fork of Dash to include privacy features in the Dash protocol. PIVX was conceived from Dash and hence, continued the Masternode design. The PIVX masternode can be set up on Linux and Raspberry Pi systems only.

The PIVX masternodes perform similar functions to that of Dash coin to offer decentralized governance, the added feature with it is privacy which is compromised in Dash. The PIVX coin follows a customized Zerocoin Protocol which ensures the privacy of the users and the masternodes as well.

Syscoin is a Blockchain based peer-to-peer marketplace that is built on the syscoin platform. The currency used on the network is syscoin. It comes as a replacement of the e-bay marketplace which is losing its customers due to spammers and untrustworthy sellers. The syscoin governance involves a better shopping experience both for the customers and the merchants. The masternodes on Syscoin are established to validate the transactions and help in performing anonymous instantaneous transactions.

Masternodes instils an essential feature in the cryptocurrency that is Decentralized governance. Its application has been tapped by some other cryptocurrencies including Zcoin and Blocknet.


Bulwark (BWK), Wagerr (WGR) and Alqo (XLQ) were, however, the only coins that generated profits for people on invested in early 2018.

The losses for those masternode setups come in the light of the fact that the cost of those masternodes was very high then. This is forcing many people into liquidation of masternodes due to decreased profits as the opportunity cost is higher elsewhere. Nevertheless, cryptocurrency markets have seen greater highs than any other field in this decade. Patience is always rewarded, and a long-term commitment to a promising stable cryptocurrency might just become highly profitable in the future.



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