Masternode is a cryptocurrency full node or computer wallet that keeps the full copy of the blockchain in real-time, just like your have Bitcoin full nodes and is always up & running.But masternodes are considerably different in their functionality than normal nodes.
They are different because they perform several other functions apart from just keeping the full blockchain and relaying blocks/transactions as a full node does in Bitcoin/Litcoin.
Some of the special functions that these nodes perform are:
- Increasing privacy of transactions
- Doing instant transactions
- Participating in governance and voting
- Enable budgeting and treasury system in cryptos
- These masternodes are not standalone but they are always communicating with other such nodes to make a decentralized network and are often referred in short form as MN.
Note: Mostly the masternodes perform the tasks that we have listed above but it can slightly vary from cryptocurrency to cryptocurrency depending upon how masternodes have been implemented. But more or less they perform these functions in a cryptocurrency.
What Does It Take To Run A Masternode?
Just like full nodes in a cryptocurrency, masternodes can be run by anyone. However, there is an entry barrier in place to ensure that the system doesn’t get malicious. The entry barrier is what one needs to commit or collateralize certain units of that particular cryptocurrency to run a masternode.
This is done to ensure that a masternode owner doesn’t cheat or corrupt the system and the best of doing so is by putting this entry barrier where the masternode operator has something at stake in the whole game.
So naturally, it becomes very less likely that a masternode operator will cheat because he has a stake in running the whole system and even if he chooses to do so he will be punished in the form of devaluation of their own HODLings.