What are masternodes and how do they work?
Masternodes are a type of node on a blockchain network that perform specific functions beyond simply relaying transactions.
They are incentivized nodes that require the owner to lock up a certain amount of coins as collateral in order to operate. In return for providing these services, masternodes are rewarded with a portion of the block reward. Masternodes are responsible for several important tasks on the Dash network, including: 1.
InstantSend: This feature allows users to send and receive payments instantly, without waiting for confirmations on the blockchain. Masternodes enable this by locking inputs and validating transactions almost instantly. 2.
PrivateSend: This feature allows users to send and receive payments anonymously, by mixing coins from multiple users in order to obfuscate the origin of funds. Masternodes facilitate this by mixing coins from multiple users in order to make it difficult to trace the origin of funds. 3.
Governance: Masternodes also play an important role in Dash’s decentralized governance system, which allows stakeholders to vote on proposals that affect the network’s development and future direction. In order to become a masternode, an individual must first purchase or own at least 1000 Dash coins (currently worth around $150,000 USD). These coins must then be locked up as collateral in order to operate the masternode and provide services on the network.
In return for providing these services, masternodes are rewarded with 45% of each block reward (currently 6 Dash per block). This reward is split among all active masternodes on the network proportional to their stake in the network (i.e.
, how many coins they have locked up).