Many of you who are into the crypto world or are considering investing may have heard about the term Masternode and wondered what a Masternode is?
In this article, I hope to help you learn about Masternodes, explain what they are, and how they work. This is not investment advice and you should always do your own research to avoid unnecessary risks.
What is a Masternode?
It is important to know that a Masternode is a cryptocurrency node or crypto wallet, which is a proof of service algorithm that protects a copy of the blockchain in real time. It works like a typical Bitcoin full node, and thanks to DASH (the first cryptocurrency to use it), Masternode is gaining popularity among investors today.
Furthermore, it should also be noted that Masternodes have different functions when compared to regular full nodes. This is because their features not only protect the entire blockchain but also send transactions as a full node. Here are some interesting functions in a Masternode and other nodes.
- Increase the security of transactions
- Make transactions fast
- Strengthening the accounting system in the crypto world
A Masternode is not only an independent wallet but also a wallet that helps link with other nodes to create a decentralized network, abbreviated as MN.
It should be noted that almost every Masternode performs the functions listed above; though, these features may vary from coin to coin depending on how the Masternode is used. In short, most of the nodes implement these features in the crypto world.
Why should I run a Masternode?
The Masternode itself is a mechanism that regulates the money supply to the market. Its role is very similar to the central bank of countries, but the important difference is that it is not dependent on an individual or small group of individuals, but is completely decentralized. The Masternode acts as a factor that makes the coin secure the balance of value. People are incentivized to run Masternodes because they get a share of the rewards when miners find new blocks. The percentage of profit depending on each cryptocurrency will have different levels.
What risks are there?
Well, as with any investment, risks are always possible. Since the beginning of 2018 there has been an explosion in the number of Masternode coins and unfortunately this has also attracted a large number of scammers to this space.
Hence this article comes with a word of caution. Be wary of any Masternode coin that offers a very high ROI – anything with an ROI of 1000% or more really needs to be handled with care. I will go into more detail about the steps I take to reduce the risk of picking a scam coin in the next post.
OK, I want to run a Masternode. What to do?
Now we basically know what a Masternode is. I will explain in more detail how you set up a Masternode and how to maximize your profits from it.
As explained earlier, a Masternode is a computer that processes transactions on a blockchain and is rewarded with additional coins.
This is achieved by requiring a node owner to hold a certain amount of money to ensure they have an interest in the blockchain and thus ensure they run their node responsibly.
In this example, we’ll assume 10,000 coins as collateral and we’ll discuss running your node in a cold wallet setup – this is the most common setup used and also the device. I use it for all my nodes.
In very basic steps, here’s how you set up your node (you’ll find more detailed instructions for each node on a particular coin’s website):
1 – Buy 10,010 coins on an exchange (always buy a little more to cover trading fees both from the exchange and in your wallet).
2 – Install a wallet on your PC and sync it with the blockchain – some blockchains allow you to download this data separately to speed up the sync.
3 – Send your coins to the wallet.
4 – Set up a node address in your wallet and send your coins to the node. This will then allow you to gather the transaction information and private keys needed to set up your node.
5 – Set up node. You will have a choice whether you do this on a personal server at your home/office or on a VPS (virtual private server) at the provider’s data center. The two most commonly used providers are Vultr and Digital Ocean.
6 – Once the server has been built and you have installed and configured the wallet nodes, you are ready to start the server. You will need to start node ‘daemon’ at the server. The server will then sync with the blockchain at this point.
7 – Set up a Masternode in your wallet and start it up.
8 – At this point the node will run and you will start receiving rewards.
In step 2 you can also consider installing your wallet on a separate VPS. From a security point of view, this may be preferable as this VPS will not be used for internet browsing or with other programs installed, thus minimizing any risk of loggers or spyware. other messages are installed.
For most nodes you can safely shut down the computer without affecting the node BUT if you want to ‘stake’ your rewards you will need to keep your desktop wallet open and running 24/7 .
I hope I helped you understand a little more about the world of Masternode.
In the next article, I will cover the steps I take when assessing whether to ‘invest’ in a node and the strategies scammers use to get your attention.
See also: What is Bitcoin?
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