If you’ve been reading about the crypto world at all lately, then I’d guess that you’ve already heard about Masternodes. From Dash to Pivx to Divx, they’re all over the crypto-sphere. What you may not know is: what exactly is a Masternode (PIVX)?
It all starts with a Proof-of-Stake cryptocurrency network. Proof-of-Work networks do not have Masternodes. To review, a Proof-of-Stake network is structured in a way that the nodes that own the most coins have the most power, though this is somewhat of an oversimplification of this concept.
A Proof-of-Stake network also includes the capability of certain nodes earning constant coins from the network when they help to lead it. To earn this leader or Masternode status, the network usually first requires what can be thought of as a minimum demonstration of stake.
Overall, this means that a user needs to deposit a certain amount of coins to be awarded Masternode status. For example, in the case of PIVX, one Masternode costs 10,000 PIVX coins and requires that the user running the Masternode participates in the governance of the network in specific ways.
This would include voting on network updates, as well as helping to secure the PIVX network. In addition and more specifically, PIVX Masternodes also help to anonymize network transactions, facilitate instant transactions and validate all block transactions. Finally, in particular, PIVX Masternode holders earn consistent coins from the block reward for their services.
In essence, thinking of this reward as PIVX terms it can help to understand it. It’s basically interest on the Masternode’s stake as a sort of thanks for what it does for the network. Therefore, it’s not getting free money and any network that promises this without any shouldered responsibility should be avoided.
Ask yourself simply: how can a network be trusted that doesn’t incentivize its most valuable users to promote security and governance?
All in all, that is the gist of Masternodes, including the good and the bad sides of using them. We hope that with this simple explanation, you can feel more comfortable investing in a Proof-of-Stake cryptocurrency network. Remember, nothing is certain in crypto but with the right knowledge, you can avoid many of the pitfalls that regularly come to pass.
BY: BGN Editorial Staff