Masternodes are computers that process blockchain transactions and are rewarded with coins from the blocks being created for their efforts. Masternodes differ from full nodes in that they perform additional functions besides transaction verification and storing the full blockchain. Some special functions they can do are:
- Increase the privacy of transations
- Participate in the voting and governance of the coin
- Perform instant transactions
There are several requirements to host a masternode. Those are:
There is a barrier to entry, which helps to deter wrong doers, so you will have to put forth collateral. For example, to host a Dash masternode one will need 1000 DASH units for collateral.
- A VPS or a server with linux
A VPS or a server with a dedicated IP address is required in order to host your wallet for 24/7.
You want to make sure you will have enough storage in your VPS to store the entire blockchain.
These requirements are pretty much the same for any masternode coin.
How to choose a masternode coin
Before choosing a coin, there are a few things to consider:
- The buy in fee
How much the masternode will cost in collateral.
- The return on investment (ROI)
How quickly you will get your investment back. 100% will pay back your initial investment in a year.
- Integrity of the coin
How reliable is the coin. It could be a scam.
- Has a utility
A utility is a purpose or the function of the coin. A coin with more realistic utilities is seen as more reliable.
- Has a digital presence
The coin has a website, Github repository, social media accounts, Discord, etc.
- Has a whitepaper
A whitepaper is the coin's mission statement for the project. It generally contains the coin's purpose, technical specs of the coin, a road map and team details. Look to make sure it is professionally written and free of spelling and grammar errors.
Most importantly, use your own judgement when selecting a coin.
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