Masternodes are Revolutionizing the Functionality of Blockchains

October 8, 2018 Posted by Rebellious

Within the cryptosphere, there are now hundreds of different variations in blockchain algorithms, methods of consensus, and requirements for joining a network. One specific network infrastructure is favored across a broad spectrum of cryptocurrencies—masternodes.

MASTERNODES, WHAT DO THEY DO?

Operating above the network of regular nodes, masternodes provide revolutionary features for connected users. Many cryptocurrencies now operate a two-tiered structure. Regular network users run the first tier via a node which allows access to a copy of the decentralized ledger and the ability to send and receive transactions. On a proof of stake consensus, regular nodes can also receive a reward if they are selected to verify a block.

The second tier is where the masternodes operate. Not only do they have access to the same functionality as regular nodes but they can be utilised to enable instant-payments, increase the privacy of transactions, participate in governance and voting, or provide valuable auditing features. The most significant benefit of running a masternode is the crypto token reward via chargeable fees or block rewards in exchange for delivering any one of the listed services to the network in question.

RUNNING A MASTERNODE HAS SIGNIFICANT ADVANTAGES

First, let’s take a look at the advantages masternodes bring to the person running the node before discovering the benefits to the network.

For the individual running the masternode, besides the ability to shape the network they are connected to through the governance and voting features, masternode owners receive a crypto token reward for providing services. This return on investment (ROI) does vary from blockchain to blockchain but is usually between 40-60% of every verified block reward.

Just like regular nodes, the chance to be selected for a reward is random, however, with the number of masternodes on a single blockchain significantly less, the probability of receiving a reward more frequently is higher. This applies to both proof of work (PoW) and proof of stake (PoS) blockchains. With many blockchains, the number of masternodes, and the rate of release for new tokens is publicized; it is therefore theoretically possible to calculate the exact ROI over the duration of a blockchains maturity.

MASTERNODES HELP MAINTAIN THE NETWORK

Masternodes are a valuable means of protecting a blockchain from malicious attacks or fraudulent transactions. Setting up a masternode requires a sizeable investment, and subsequent rewards are only awarded for the verification of legitimate transactions.

Therefore it would cost an astronomical amount for any one user to control multiple masternodes and authorize fraudulent transactions on the network. They would risk both their initial collateral and the promised block rewards. The risk does not outweigh the reward of correctly operating a masternode, thus encouraging an honest and healthy network environment.

THE INITIAL INVESTMENT KEEPS BLOCKCHAINS SECURE

We have mentioned it a few times, but what exactly does a masternode investment look like? It does vary dependant on the blockchain, however, typically the same rules apply.

• Firstly, a sizeable investment of collateral is needed. The token value will play the determining role in the “X” amount required but expect to pay a lot to run a masternode. Remember, the cost has to be high to protect the network.

• Secondly, you will need access to your own server or VPS so that your digital wallet can be maintained 24/7. A blockchain is no good if instant transactions can only be verified when a masternode server chooses to be live. There is also a requirement to have a dedicated IP address; this is usually configured at the same time as setting up your server.

• Finally, you will need dedicated storage to hold a complete copy of the decentralized ledger.

In all honesty, there are minimal downsides to running a masternode. If anything the only disadvantage is that keen cryptocurrency enthusiasts will need serious financial backing to be able to run one effectively. A word of caution; if at any point you fail to meet the requirements of the blockchain you are connected to, then masternode privileges will be removed. You won’t lose your investment as this is returned to you, but you will, however, lose any future block rewards.

HOW MASTERNODES ARE TRANSFORMING BLOCKCHAINS

With the basic premise of masternodes covered, how are several blockchains making use of their functionality?

1. DASH

The Dash blockchain was the pioneer of masternodes. PrivateSend, InstantSend and governance tools are all available on the Dash blockchain.

2. VECHAIN

VeChain is unique because it offers two different levels of masternode. Economy and VeChain Authority. The principles remain the same; however, the investment needed to run either is different. VeChain authority requires more collateral but enables deployment of business applications, testing of dapps, and cross chain services. The cheaper economy masternode acts as a point of distribution for power and privilege on the network itself, rather than providing advanced services.

3. PIVX

PIVX was originally a hard fork of Dash. The PIVX network specialises in the ability to send completely anonymous transactions while still being recorded on the blockchain. Other masternode features include instant transactions and prevention of double spending.

HOW WILL REBL USE MASTERNODES?

The initial investment is substantial but so too are the rewards. With the bonus of increased security and encouraging an active ecosystem of users, masternodes are becoming a critical aspect of blockchain development. At Rebellious¹, we take a similar approach to the cryptocurrencies previously listed, but with some additional, unique benefits.

OFFERING UNIQUE BENEFITS

REBL operates with a central blockchain that is designed to have a scalable amount of client chains feeding into it. On the REBL blockchain, masternodes provide access to instant send transactions and give security to the overall blockchain infrastructure. Anyone running a masternode server will automatically be allocated a masternode on every client chain, with the client providing the collateral for these nodes. In exchange for doing so, clients will use REBL tokens to purchase audit features and block verification services from the masternode. Finally, masternodes will receive 60% of a block reward making the ROI significantly higher than several other blockchains.

With REBL masternode the opportunity to earn rewards is threefold; REBL masternode rewards, client auditing rewards, and client masternode rewards. With every client chain that is developed, the subsequent rewards can increase significantly. Further details of predicted ROI’s can be found on the Rebellious website.

WHAT ARE THE REQUIREMENTS TO RUN A MASTERNODE?

To run a masternode on the REBL blockchain, the following is required:

• Masternode Collateral: 100,000 REBL
• Private server or VPS for 24/7 wallet access
• Dedicated IP address
• Access to storage space to maintain a local copy of all blockchain data

References

1. Rebellious Whitepaper Page 39.

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