What Are Masternodes?

Masternodes are sophisticated software programs running as servers within blockchain networks. They perform key functions beyond regular nodes, including:

  • Holding a full copy of the blockchain
  • Validating transactions and securing the network
  • Enabling advanced features like instant transactions and enhanced privacy
  • Participating in network governance

Operating a masternode requires a significant investment in the network's cryptocurrency as collateral. This ensures commitment and discourages bad behavior. In return, masternode operators receive steady income paid in the native cryptocurrency.

Masternodes play a crucial role in maintaining network security and integrity. They often influence the network's future through voting on important proposals. While potentially rewarding, running a masternode comes with technical challenges, requiring a solid server setup and constant uptime.

Compared to staking, masternodes typically require locking in coins and more active participation in network operations.1

An illustration showing the key functions of a masternode, including blockchain storage, transaction validation, and network governance

Setting Up and Running a Masternode

Setting up a masternode involves:

  1. Deciding between a hot or cold setup
  2. Meeting the initial investment requirement
  3. Securing a Virtual Private Server (VPS)
  4. Installing and syncing the cryptocurrency wallet
  5. Configuring the wallet file
  6. Ensuring 24/7 server operation

Hot setups run continuously on a connected server, while cold setups enhance security by using both a hot wallet on a server and a cold wallet stored offline.

Popular VPS providers include Amazon EC2, DigitalOcean Droplets, and Microsoft Azure.

Ongoing maintenance is crucial:

  • Regularly update wallet software
  • Stay informed about network changes
  • Monitor server performance
  • Consider automated scripts for server restarts

While challenging, running a masternode can provide passive income and an active role in network governance.

A series of icons representing the steps to set up a masternode, including server setup, wallet configuration, and ongoing maintenance

Difference Between Masternodes and Staking

Masternodes and staking differ in several key aspects:

Aspect Masternodes Staking
Investment Large, locked investment Smaller, flexible contributions
Technical Requirements Complex server setups, ongoing maintenance Simpler, less technical overhead
Rewards More consistent income Less predictable, often random selection
Network Role Advanced functions, governance participation Primarily transaction validation
Accessibility Higher barrier to entry More accessible to average users

Both contribute to network security and operations, but cater to different types of participants based on their resources and commitment levels.2

A side-by-side comparison of masternode and staking setups, highlighting the differences in investment, technical requirements, and rewards

Top Masternode Coins for 2024

Notable masternode coins for 2024 include:

  1. Dash (DASH)
    • Price: $29.91
    • Collateral: 1000 DASH ($29,912.35)
    • ROI: 6.81%
    • Reward frequency: 6d 8h 32m 3s
    • Active nodes: 3,385
  2. PIVX (PIVX)
    • Price: $0.1688
    • Collateral: 10,000 PIV ($1,830.66)
    • ROI: 21.98%
    • Reward frequency: 1d 5h 38m 13s
    • Active nodes: 1,735
  3. DeFi Blockchain (DFI)
    • Price: $0.3475
    • Collateral: 22.8047 DFI ($5,712.78)
    • ROI: 41.45%
    • Reward frequency: 5d 22h 36m 30s
    • Active nodes: 17,113
  4. Syscoin (SYS)
    • Price: $0.0839
    • Collateral: 100,000 SYS ($8,468.55)
    • ROI: 6.26%
    • Reward frequency: 4d 21h 24m 28s
    • Active nodes: 2,627
  5. SmartCash (SMART)
    • Price: $0.000213
    • Collateral: 10,000 SMART ($24.66)
    • ROI: 83.95%
    • Reward frequency: 4h 23m 23s
    • Active nodes: 137
  6. Firo (FIRO)
    • Price: $1.46
    • Collateral: 1000 FIRO ($1,507.01)
    • ROI: 17.33%
    • Reward frequency: 6d 13h 34m 19s
    • Active nodes: 4,110

When choosing a masternode coin, consider factors such as investment amount, potential ROI, network stability, and ongoing development efforts.3

Masternodes play a key role in blockchain networks by validating transactions, securing networks, and participating in governance. Their potential for steady income makes them an interesting option for those willing to invest time and resources in the crypto space.

"Masternodes represent a unique opportunity for investors to actively participate in blockchain networks while earning passive income. However, they require careful consideration of technical requirements and market conditions."
  1. Antonopoulos AM. Mastering Bitcoin: Programming the Open Blockchain. 2nd ed. O'Reilly Media; 2017.
  2. Buterin V. On stake. Ethereum Blog. 2014.
  3. CoinGecko. Masternode Coins by Market Capitalization. CoinGecko; 2024.