The Masternode Ecosystem – A Leading Innovation in Consensus Mechanisms
With the advent of Blockchain technology, came in all sorts of intricacies and technical aspects that began to be developed, debated, criticized and implemented. There isn’t a single protocol, feature or application that checks the list of any participant, and that’s a good sign. Criticisms, most importantly, constructive criticisms is what pushed boundaries, stimulated innovation and brought about progress.
One such niche innovation to consensus mechanisms was the introduction of Masternodes. Masternodes are an added layer on the base layer consensus mechanisms. For instance, Dash is a privacy-based cryptocurrency that makes use of Masternodes. It is a proof-of-work based mineable cryptocurrency that, unlike bitcoin, does not give full rewards to the miners but also the nodes that validate, secure and share the blockchain.
What are Masternodes?
A masternode is simply a cryptocurrency full node or computer wallet that keeps the full copy of the blockchain in real-time, just like you have Bitcoin full nodes and is always up & running. But Masternodes are considerably different in their functionality than normal nodes.
In general, nodes, which keep a copy of the blockchain at any given moment, secure and re-verify the transactions, and share the copy with other nearby nodes. These get no real incentive to do what they do. If someone wants to be a node, they do it because they want to, rather than being incentivized for it.
But with Masternodes, that is not the case.
On blockchains that use the masternode mechanism, such as Dash, PIVX, Energi, etc., nodes are given as much importance as the miners. The role of miners is to provide computation power to the network and help in verifying and securing the transactions, while the role of a masternode, who cements their position by staking a minimum amount depending upon the blockchain, is to collect and assemble the transactions, hold records of the blockchain, re-verify the transactions, and propagate the information to all the other nodes. This divides the responsibilities and secures the blockchain two-ways. Masternodes can be customized for both Proof-of-stake and Proof-of-Work chains.
Just like full nodes in any protocol, Masternodes too can be run by anyone interested enough. However, there is usually an entry barrier in place to ensure that the nodes do not act against the system. The entry barrier is a small stake the person running the node takes up on themselves. It is a small collateralize, consisting of certain units of that particular cryptocurrency to run a masternode, taken as a guarantee to disincentive the person from acting against the network because he has a vested stake in it.
Due to their inherent inclusion of nodes into the incentive system, Masternodes can also be customized to carry out dozens of other features. Governance, Privacy, Voting, etc., can be carried out through the Masternodes, as they effectively help in running the network.
A Look into Major Masternode Coins
To compare masternode coins, we will take the top 5 cryptocurrencies concerning Market Cap and at least 2 years of market penetration:
- Consensus Algorithm: X11
- Number of Masternodes: 4690
- Minimum Stake: 1,000 Dash
- Responsibilities of the Masternode: Masternodes are powerful servers backed by collateral held in Dash and are designed to provide advanced services and governance on the blockchain. Masternodes host full copies of the blockchain and provide a unique second layer of services to the network, facilitating advanced functions such as InstantSend, PrivateSend, and usernames on the blockchain.
Consensus Algorithm: Customized Proof-of-stake + zerocoin Proof-of-Stake Hybrid
- Of Masternodes:1,421
- Minimum Stake: 10,000 PIVX
- Responsibilities of the Masternode: Other than the responsibilities of a general masternode, a PIVX masternode must ensure the total privacy of all transactional information flowing through the node. The node must readily participate in the governance decisions of the network and is allowed to give and make changes, given consensus is achieved first. A system called the decentralized budgeting system, or more simply called the Treasury, is also held under the purview of the masternode. It makes budgetary decisions for the network, such as marketing allocation, developer incentives, etc.
- Consensus Algorithm: Proof-of-Stake
- of`Masternodes: 529
- Minimum Stake: 20,000 ETZ
- Responsibilities of the Masternode: The management structure of the EtherZero Community, backed by masternodes, is designed in such a way that Community members could fully manage both the development of the community and its finances. One of the management tools is ETZVote – a system for making proposals by members of the community and voting for them. The official websites state that the main motivation for masternodes will be the assessment that the proposals on the forum are beneficial for the growth of the coin price.
- Consensus Algorithm: Proof-of-Work
- of`Masternodes: 5,812
- Minimum Stake: 1,000 XZC
- Responsibilities of the Masternode: A network based on the principles of the zero coin whitepaper, ZCoin is another privacy-centric cryptocurrency. It is mineable, has a supply structure similar to bitcoin and, as an added feature, and involves a masternode layer. The Masternodes ensure the privacy of transactions, information and anonymous voting and governance.
- Consensus Algorithm: Proof-of-Stake
- of Masternodes: 970
- Minimum Stake: 10000
Responsibilities of the Masternode: The Proof of Stake algorithm used by the project uses less than 1% of the electricity that traditional mining does. In addition, they have invented a spectrum of features on the masternode technology, that boasts a wide range of applications. Divi is the first project to experiment with the tiered masternode system. This system works on the principle of offering higher rewards to those who accumulate more coins for their nodes. The protocol also offers visual on-demand stats, such as the Masternode Map. Masternode Map shows the connection between each node, how they are related and who they are connected to, among other details. Masternode owners choose their level of commitment to support the network, and are paid based on that effort.
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Stats Updated on 04 April 2020 From Masternodes Online