Last updated on March 22nd, 2023 at 08:06 am
Introduction
Master nodes are full nodes that give their operators access to sophisticated operations necessary for maintaining a blockchain.
Although they have a connection to cryptocurrency mining because node operators receive incentives for each “solved” block, master nodes are distinct from it.
Newcomers to the crypto realm frequently struggle to comprehend all the various terminologies linked to cryptocurrencies as well as other facets of this broad field. Other than choosing coins to invest in, some of the more frequent queries include topics like master nodes.
In conversations about crypto, the term “master node” is frequently mentioned in passing without being properly explained.
1. What are master nodes?
Master nodes are sophisticated servers that can be found on blockchains i.e. decentralized networks. They are computer systems that aid in the creation of new blocks on Proof-of-Stake blockchains and even in Proof of Work (PoW) blockchains. In short, master nodes are computers that sustain the blockchain network of cryptocurrencies.
They have functionalities that distinguish them from regular nodes since ordinary nodes cannot often complete such functions. They have many features, such as instant transactions, secure transactions, and direct transmission.
Each network has its own master node, each with its own set of advantages and disadvantages. As a result, no two master nodes are the same, and each system treats them differently. However, while master nodes can be extremely rewarding and are closely related to crypto mining, they are also something quite different, and many beginners confuse the two.
2. How does a master node work?
A master node’s operation is heavily reliant on the implementation of its algorithm in the blockchain where it is executed.
In general, a master node follows the Proof of Stake or Proof of Stake protocol. This is due to the fact that the owner of the master node can allow the establishment of the said node through staking.
In Dash, for instance, the formation of a master node occurs because the node’s owner has 1000 DASH at his disposal. This money will be blocked as an assurance of the node’s functionality. The amount to be restricted in PivX, another cryptocurrency that uses master nodes, is 10.000 PIVX.
Of course, there are master nodes that employ Proof of Work (PoW). MPower, a cryptocurrency, is an example of this type of master node using PoW.
Once activated, the master node will carry out the functions for which it was programmed. Again, this is determined by the blockchain on which the node is running.
One of the most prevalent characteristics of master nodes is the ability to accept fast or anonymous payments. They are also utilized as a part of a decentralized governance system in which node administrators vote on blockchain development problems in which they participate.
All of these functions create a reward, allowing the master node operators to profit. In fact, as participation in PoS or PoW mining grows, so do the benefits.
3. Main differences between mining and master nodes
Master nodes are better equipped than standard nodes. However, when it comes to the comparison of the cost of the equipment with Mining, Master nodes expenditure on equipment is fairly low.
Mining requires expensive CPUs, GPUs(Graphics processing units), or dedicated Asics (application-specific integrated circuits).
On the other hand, master nodes require you to buy a minimum number of coins for the project to start. In the case of Dash, it is 1000. So, if the value of the minimum number of coins is high, running a master node becomes expensive and vice-versa.
It is critical to realize, however, that master nodes are not mining. Many people also wrongly believe that master nodes are an extension of PoS, in which cryptos are staked rather than mined. However, this is also incorrect, as master nodes can be used in PoW projects.
Operating a master node enables managers to generate passive income by merely holding on to their coins, similar to how stakes operate in PoS.
It differs from mining in that generating money does not necessitate the purchase of pricey crypto-mining equipment. The amount of money earned by running a master node is determined by a variety of circumstances, therefore, there is no clear solution.
Each project operates differently, and each master node is distinct, but one constant is that running a master node may be very profitable if you choose the appropriate coin, and its value rises over time.
4. Top master node Cryptocurrencies
1. Peony
Users can purchase agricultural items directly from farmers using Peony Coin. It enables users to participate in agriculture and other similar activities in exchange for a portion of the items generated.
2. Stratis
Stratis, which debuted in August 2016, is a blockchain-as-a-service system that offers several products and services to corporations, including full node hosting, an initial coin offering platform, and more. STRAX, the Stratis token, can be used to buy and operate services on the platform.
3. Divi
Divi, a blockchain initiative launched in September 2018, is tasked with hastening the adoption of digital currency. Divi’s innovative blockchain technology and user-friendly Smart Wallet make bitcoin transactions faster, cheaper, and more convenient.
4. Flux
This is a new breed of scalable decentralised cloud infrastructure that aids in the development, management, and spawning of applications over several servers.
5. Syscoin
Syscoin is a smart contract platform that provides ultra-low costs, Layer-2 scalability, and decentralised Layer-1 security to the Web 3.0 ecosystem. It was created to enable the future of smart contracts in IoT, the Metaverse, Smart Cities, and future interplanetary economies.
6. Sapphire
Sapphire strives to create a coin that is simple to use, allows for quick financial transactions, and is easily available to the community. SAPP aspires to be utilised as a stable form of payment in the actual economy, granted solely to trustworthy partners in the long run.
7. Horizen
Horizen is a zero-knowledge blockchain platform powered by the industry’s largest node infrastructure. It provides tremendous scalability as well as optional privacy options.
Zendoo, a sidechain system that permits the deployment of thousands of independent sidechains, is also included.
8. Safe
It aspires to be the most secure and private virtual currency payment and software application in the world. Safe payment, safe assets, safe voting, safe gaming, and safe consultation are some of its applications.
9. Dash
It is an open-source cryptocurrency and blockchain. Dash was launched in January 2014 as a fork of Litecoin. It focuses on delivering a speedy, cheap payment processing network. It is decentralized in nature.
10. ION
ION is a blockchain-based, decentralised gaming platform developed specifically for gamers. It wants to make mobile games more exciting by paying users with its own token, ION. The coin is today worth more than $3,000. The all-time high for ION is $5,265.15 (April 2022), and the all-time low is $0.002414. (August 2021).
5. What to do before investing in a Master Node?
As mentioned earlier, the Master node creates blocks on the blockchain. Every new block generates a transaction fee that is given to the master node owner.
As a result, running one is similar to investing in equities that give dividends. The more you run them, the more dividend you get. However, not all master nodes are created equal. Some, in fact, should be avoided at all costs.
5.1 Only invest funds that you can afford to lose
While owning a master node will continue to generate passive revenue, the tokens used to purchase it may lose value.
Purchasing a master node is as financially hazardous as purchasing any other bitcoin token.
To finance a master node, you’ll need to buy a lot of tokens, thus it’s more crucial than ever to choose your master node properly.
5.2 Use master node comparison websites
masternodes.online is the most well-known master node comparison site. It displays the 24-hour change, annual ROI, number of nodes running, volume market cap, and number of coins required to purchase a master node.
You can get daily, monthly, and annual income estimates, albeit these, are difficult to be accurate because of the volatility of the bitcoin market.
masternodes.pro, crypto-coinz.net, and livecoinwatch.com are other options. It makes no difference which website you visit as long as you take note of this information and weigh your options before making a purchase.
5.3 Always keep an eye on the volume
A master node’s volume is critical. If a master node has no volume, it means that no one is purchasing it, and you will be unable to sell it. If you can’t sell it, it doesn’t matter how much it rises; you can’t make a profit.
By default, master nodes.online places the most active master nodes at the front of its list. It is suggested that the volume be at least three times the price of the master node.
If a master node is spanking new, it is unlikely to have a high volume, thus, you may want to take a chance on a low-volume buy, but this is the only probable exception to this rule.
5.4 Timing of purchase is key
The volatility of master node pricing is as high as that of the rest of the cryptocurrency market, but you’re compelled to spend more by purchasing a large number of tokens.
As a result, timing your purchase is more critical than ever. Get in as soon as possible and get out before the coin collapses.
Conclusion
Master nodes are also worth investing in because they might bring exceptional benefits. The ROI, or Return On Investment, is the economic value generated as a result of certain economic operations. We can calculate the return on investment using this information.
