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Every beginner who learns the basics of mining will sooner or later become familiar with the term masternodes . Of course, cryptocurrency masternodes, unlike other types of nodes, do not run in every blockchain network . However, you need to know what this unit of the system is. And coin holders can earn good money on masternodes, however, this method of generating income is far from possible for everyone. So let's take a closer look at what a master node is in mining, and how it differs from other connection nodes. First, let's take a short digression into history.

What is a masternode

In computer technology, nodes were used at the end of the last century. The creators of the international non-commercial network Fidonet have developed and launched a multi-tiered system of letter nodes for the exchange of mail around the world. The node, as a full member of the system, was responsible for the content of traffic sent to the network from its own IP address, and could perform any actions within the network within the framework of the Fedonet community charter.

And in the blockchain ecosystem , nodes are equal communication nodes that control all operations within the network. And if at least one of the nodes detects a violation when creating a new block of coins or making a transaction, that operation is rejected by the system. Everyone who has sent cryptocurrency knows that each transfer must receive a certain number of confirmations, and only after it is considered completed will the funds be credited to the recipient's address.

This structure was invented by the legendary Satoshi Nakamoto. And in the process of evolving digital assets, it was supplemented and expanded by other crypto enthusiasts, who created alternative models of communication nodes in the chain, which differ in their purpose. The major nodes of cryptocurrency also play a very important role in the operation of a number of blockchain systems .

What is a masternode in mining? From the English language, the phrase master knot is translated as the master knot. Unique in its functionality, this server supports instant transfers and private transactions within the network. The idea for the creation belongs to the American Evan Duffield, the creator of the cryptocurrency Darkcoin (Dash). The dashboard also increases the anonymity of transactions by splitting information about them into several separate parts that are only stored on its server. Tracking the movement of funds in this case is almost impossible. Subsequently, cryptocurrency masternodes were used by developers of other projects. And there are sites on the Internet that will help you choose the best masternodes, the rating of which is updated periodically.

Coins List

A complete history of blockchain projects using Masternodes is available at . Each line contains information:

1. About the current value of the cryptocurrency.
2. Course dynamics.
3. The amount of currency issued.
4. marketplace.
5. Return on investment (ROI).
6. The number of masternodes in a given ecosystem.
7. The amount of coins needed to prepare a masternode.
8. Masternodes cost this cryptocurrency.

As at the time of writing, Dash masternode tops the rankings, and ImageCoin (IMG) is in second place. Among the coins that are more or less popular on the first page of the catalog, the major node Sin (sinovate), Horizen, Graft and ZenCash are relatively inexpensive. But keep in mind that these blockchains use a multi-tiered system of masternodes with different functionality and launch costs. This structure is used in some innovative projects to attract as many participants as possible. Multi-level communication nodes ensure high security and complete decentralization of the cryptocurrency network.

How to make money on masternodes, profitability analysis

Masternodes receive a certain amount of coins when creating a cryptocurrency block. For example, miners give 45% of the profits for the maintenance of the main nodes. The funds are distributed equally among the masternode operators. The system is used in networks using both PoS and Pow consensus algorithms.

As not all ecosystems where you can run masternodes deserve the attention of investors. Half or even more of the cryptocurrencies on the pro- blockchain list are categorized as “junk,” meaning not used in the financial system. And the ROI indicator does not mean that the money invested will pay off quickly. The profit from the masternode directly depends on the number of transactions, which means that the currency should not have problems with liquidity on the trading floors. And before investing money, you need to thoroughly study the white paper of the project and get acquainted with information about this ecosystem on popular resources such as Bitcointalk. All you have to do is look at the coinmarketcap rating and then decide whether to invest in the budget masternode of an unknown cryptocurrency.

Masternode redemption cannot be accurately predicted, cryptocurrencies are volatile, and a sharp change in the coin's market value can make it rich or destroy its holder, depending on which way the metrics swing. Everything depends on the success of this project and the market situation. For example, when the dash blockchain network was launched , altcoin cost $1, and to take ownership of a masternode, you would need to have 1,000 dash in your wallet. At the moment, the conditions for launching the main node have not changed, but the market price of Dash cryptocurrency at the time of writing is $113, while the payback period for such an investment is about 15 years. Not every user with a capital equivalent to 1000 coins will want to invest in a masternode. 

But, of course, there are projects with a shorter payback period, and, for example, sinovate masternodes will bring profits from 170 to 220% per annum. That is, according to its indicator, as the return on investment in the current period, you will be able to return your money within 6-8 months. But as already mentioned, long-term forecasts cannot be completely trusted. You are also investing at your own risk.

As for buying masternodes in clubs, this is a very risky investment. The coins are invested in the wallet of one owner and there is no guarantee that he will not withdraw them, thus stopping the functioning of the communication node. The exception is also super nodes - these are the master nodes that operate without an official wallet and act as the endpoint of the cryptocurrency API.

How to set up a masternode

Regardless of which blockchain the Masternode operates in , setting up its operation consists of three phases.

• Download and install software that ensures the operation of the communication node.

Windows requires the PuTTY utility to connect to the server. On Linux, just type ssh root@<server_ip> and then, when prompted, enter the username and password provided to you by your hosting provider. And after connecting to a remote server, for security reasons, it is better to change the password to a more complex one and take additional security measures.

• and get the required amount of coins to the address of the wallet linked to the masternode. 

Dash developers also recommend using the Trezor hardware vault or the official Dash Core wallet. In the hardware safe, you can create a separate account and send the security deposit to it.

• Final setup and start of the program.

To run a masternode, you need to register it from a local device or wallet. For this, three private keys are generated.

1. Owner's key.
2. operator key.
3. Voting key.

Then the node is configured and the reward address is added. Detailed instructions are on the official website .

The PC can also be used as a host server. But keep in mind that the masternode consumes a lot of power, so a budget computer will not work. In addition, you must ensure the smooth operation of the system by making sure that both the power supply and the Internet connection fail.

Important! Another mandatory condition for the operation of a communication node is the presence of a dedicated IP address. It is not always possible for the average user to meet these conditions, but there are alternative ways. For example, renting a remote server (VPS) or paying for private hosting services to set up and maintain the master node.

Choose a VPS

When choosing a plan from a hosting provider or installing a masternode on a PC, keep the minimum system requirements in mind . Running a master node on the Dash blockchain requires:

1. RAM of 2 GB.
2. Free hard disk space of 50 GB.
3. Monthly traffic volume of 500 GB.

And in other ecosystems, this data may differ, just look for a detailed guide on how to launch a masternode on the website of your chosen project.

Masternode Services

To avoid problems with payments, you need to transfer funds from a personal wallet, and not from a crypto-exchange deposit. In the 2Masternodes service, you can calculate the return on investment in a specific project. And the masternode's own calculator will help you with that.

Pros and cons

When talking about the benefits of earning cryptocurrency on a masternode , it might be worth mentioning

1. Complete absence of noise in the apartment if you use a hosting provider.
2. The master node is set up once, then you only get the profit. And if using a masternode service, your participation in the launch is generally not required.
3. The masternode is updated without restarting the server and transferring funds.
4. You do not pay for the ownership of the main node, but freeze coins on the account and receive a bonus.

At first glance, everything looks good, but there are also downsides .

1. Significant amounts of investment are needed to run masternodes on many blockchain networks.
2. You can lose the savings invested in a scam project.
3. High risk of hacker attack on a local wallet.
4. Long recovery period.
5. The higher the number of key nodes, the lower the operators profit. But, if you looked at it from the other side, the network would be very weak if it only had one masternode.

Society's reactions to these systems are also very diverse. Opinions are divided into pros and cons.

conclusion

Building a network on a multilayer system has many drawbacks, however, the concept is very interesting. In addition, it is quite workable, which is proven by the example of the Dash coin. The creators of new major nodes cryptocurrencies need to deal more with liquidity in order to attract the attention of investors.

And Masternode services , such as 2Masternodes, have an automated system for launching and maintaining Masternodes. And you can buy a masternode or a stake in it by sending money to the service wallet and paying a commission of 10% of the profit, freeing yourself from all worries.