What is a masternode, and how does it work?

Today we’re talking about a technology that is very close to our hearts - masternodes! If you’re new to cryptocurrency, welcome! This article is an overview of masternodes, what they do, how they do it, and what they could facilitate in the future!

Kyle Turnbull

June 22, 2021 · 4 min read

How does a masternode work?

How does a masternode work?

First, to understand how a node works, it’s beneficial to understand the proof of stake protocol. We’ve published extensive articles on this subject if you need a refresher!

However, staking is just one piece of the puzzle when it comes to Divi’s proof of stake network. The Divi Blockchain uses a balance between masternodes and staking nodes, to achieve security and decentralization of the network. The reason Divi has two types of nodes is to achieve a balance between a decentralized and centralized system. There are many processes that are more efficient when centralized, but less secure. By having two ecosystems, we can create centralized processes on our masternodes but remain incredibly decentralized. It’s a win-win for both the users and the blockchain.

How does a masternode work?

Terminology in the crypto-space is not ubiquitous. The term masternode may refer to either a proof of stake or proof of work entity (Bitcoin masternode). For the purposes of this blog, we will be talking about the roles of masternodes in proof of stake protocols, as that is most pertinent to Divi.

Without diving into complex code, or blockchain development, we can still get a good idea of what masternodes can do, and what makes them distinct from staking nodes. When you really break it down, masternodes are simply staking nodes that have additional privileges or abilities. Here at the Divi Project, we like to refer to staking nodes as the muscle of the network, and masternodes as the brain, as they take on advanced organizational functionality.

  1. Instant transactions: Masternodes offer flexible and dynamic servers, able to verify transactions. For example, Bitcoin uses miners, who expend energy fighting for the right to verify a transaction. Masternodes remain efficiently organized and tend to collaborate more effectively.
  2. The entire ledger: Masternodes work together and remain in sync. As they are the ultimate source of truth for the blockchain, their consistency is required. No one masternode is responsible for this, but as a collective, they are. Masternodes usually keep an up-to-date copy of the blockchain, to ensure the accuracy of transactions.
  3. Protect the blockchain from attacks: Masternode operators are expected to act in the best interest of the network. As a majority, they maintain honest and productive control of the network.
  4. Blockchain flexibility: Masternodes are able to assist with deploying blockchain updates quickly to create a more responsive and flexible ecosystem. We are currently refactoring our codebase to make it more modular, which will assist with this flexibility.
  5. Advanced governance: There is the potential for masternodes to offer their say in the future of the network, vote on certain additions or changes to the protocol.

How to run a masternode

Granted, these instructions will vary depending on the ecosystem you are looking to support, but there are consistent themes across projects. Since we utilize masternodes, let’s use Divi as an example. To run a masternode, there are a few criteria. Beyond this, there are project-specific requirements, but this is the basic structure of many:

  1. Allocate a set amount of currency as collateral. In the case of Divi, this is a minimum of 100,000 DIVI for a copper masternode.
  2. Keep a full and up-to-date copy of the entire blockchain.
  3. Keep a server running consistently to carry out tasks on the blockchain.

How do you set it up?

  1. Establish a Virtual Private Server or local server, to run the node on. A node is essentially an application that requires a system to carry out its work.
  2. Let the coding begin! Most masternodes require the user to have a working knowledge of the command line. It is a very technical process. But not with Divi. Our proprietary MOCCI technology allows users to establish a Divi Node in a few seconds, without all of the code. There’s no need to be a masternode pro!
  3. Once it’s set up, the node itself operates largely autonomously, although users should make sure they’re monitoring it, and ensuring it stays online.

The work that masternodes perform is invaluable to the network’s security. If you complete this 'work', and act in the best interest of the network, you are rewarded with ‘block rewards’. Not only can you earn very good rewards, but you’re also not locked into a contract or ‘fixed-term’. If you’re interested in starting a masternode, we’d love to have you on board. The more the merrier.

If you’re interested in viewing masternode rewards on the Divi network, check out our masternode tier calculator.

What is the future of Masternodes?

In the ever-changing world of blockchain development, predicting the future is near-impossible. What we do know is this: Masternodes will provide us with the opportunity to move ever-closer to satoshi’s vision of a world where truly peer-to-peer, sustainable currencies exist. Whether it’s advanced on-chain governance, rapid global transactions, or something new and exciting, we’re confident in the future of the technology.

If you’re looking for a list of the best masternode projects to start your journey, look no further. We love our masternodes, but there are others in the space you can check out - we’ve included some helpful links to get you started.

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Kyle Turnbull

June 22, 2021 · 4 min read

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