All about Masternodes
In the world of blockchain and cryptocurrency, many people want to make money from this new technology. One way to generate passive income is through a controller node. You may have heard this term before and have asked yourself what it is or how it works.
No worries! In this piece, we answer the question; What is a controller node?
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Hosting
To know exactly what it is, it is important to have a global view of how a blockchain works. In a blockchain, all information is stored over a large network of computers and devices. Each computer on the web is a node that holds a small piece of information. Such a node is called a node.
However, a complete copy of all information must also be hosted. The controller node does this. Thus, the controller node acts as a head node within the entire network. As a reward for this, the controller node receives crypto coins.
How the Masternode works
Not every blockchain works the same way. The algorithm behind a blockchain is also called a consensus algorithm. The consensus algorithm determines the type of blockchain. This is important to know because a masternode cannot work on every type of blockchain.
The two main types of blockchains that exist are;
Proof-of-Work (PoW)
Proof-of-Stake (PoS)
Blockchains that work with a POW algorithm depend on “miners”. These users make the computing power of special computers (mining rigs) available to the network, allowing transactions to be processed. One cryptocurrency that runs using Proof-of-Work is Bitcoin. Although this system works very well, running the blockchain properly takes a lot of energy.
This has led to a shift to PoS as an alternative. Masternodes support a Proof-of-Stake blockchain. Just like miners, Masternodes ensure that transactions within a network can be processed and receive a reward in the form of cryptocurrency—a masternode acts as the backbone of a blockchain.
Dash was the first cryptocurrency that allowed users to run a master node.
Why
Most people do it purely for the profit it brings. Managing a masternode can make a lot of money, but we’ll get to that later. In addition to the reward it brings, there are a number of other advantages:
- The ability to make direct transactions
- It increases the privacy of the transactions
- Participation in the decentralised governance of the network
While all Masternodes can perform the above tasks, the actual capabilities may vary by cryptocurrency.
Back to the rewards. How much does a controller node deliver?
In some cases, you can generate passive income with it. However, how much this depends on the exact coin of which you manage a controller node. You will be paid for this coin. If this coin only decreases in value, you will earn little from it in the longer term. For a concrete example, we choose Dash.
To manage a Dash controller node, you need 1000 Dash. Given the price of 1 Dash, this is only affordable for some people. You get paid about 2 Dash every week, which amounts to 104 per year. This is a return of 10.4%. Not only, considering you don’t have to do much for it.
Set up a Masternode yourself
To host a controller node, you need to have a server available with an unlimited internet connection. You can use a VPS platform for this. A VPS stands for Virtual Private Server. Various national and international hosting parties offer this service.
In addition, you will have to invest. As mentioned, each coin has its limit of how many coins you need to manage a master coin. In Dash’s case, there are 1,000. In the case of pics, this is 10,000.
Ensure you have installed a wallet for the coin in which you have stored your cryptocurrency. The server you make available to the network must always be online and have a good internet speed and sufficient storage.
Currently, hundreds of currencies allow setting up a controller node. Don’t stare unthinkingly at this; there are a lot of projects that are not professionally set up and do not have long-term views, Some more serious coins that you are considering are:
- ChainCoin
- Vcash
- PIVX
- ION
- DASH
Before you make a choice, it is important to know that setting up a masternode is an investment. And just like any other investment, there is a risk involved. The value of a coin can plummet, causing you to suffer a loss. Before you invest, you should ask yourself what the potential of a specific cryptocurrency is. Does it solve a problem? Is there a good chance that the coin will still exist in a few years? Can I miss the required investment amount if I lose everything? Etc.
