Before exploring the technical aspects here, it is crucial to understand the concept of nodes because even today, there is a lot of confusion regarding the term. In its most generic essence, it is nothing more than a data junction in a network. Now the way it is utilized for different use cases is totally up to the business model or intended tokenomics.
It is worth mentioning that Dash happens to be the pioneer cryptocurrency to have used masternodes for focusing primarily on transaction speed and anonymity of the users. Dash features an ‘on-chain’ voting and budgeting system, which was not available at any other blockchain when the venture was launched and the level of privacy and efficiency offered by Dash can only be achieved with an infrastructure backed by masternodes. While Dash is not exactly a new cryptocurrency, nothing has yet to come close to its capabilities; except for EOS (which admittedly is still buggy).
To its credit, Dash’s initial investors who bought enough tokens to setup a masternode are still happily making recurring income (and probably the only major league cryptocurrency to do this), while investors of other projects are still praying for a capital gain in this slow market.
Running cryptocurrency like a business
In the Dash network, masternodes refer to ‘highly specialized’ computers which carry out transactions and are tasked to host the native wallets. In some cases, these different nodes have different functions, assisting the network in making a range of decisions such as:
- Performing instant transactions
- Performing coin mixing
- Budget funding
It should also be noted that one of the core requirements for a computer to be labeled as a masternode is at any given time, its wallet most possess 1000 Dash, together with a dedicated IP. Since this node is responsible for carrying out almost every major function on the network, it receives a 45% reward on every block. It’s like mining, without mining equipment.
How to participate?
Most early investors flocked to Dash because of its unique concept of mining without hardware – when Proof of Work (POW) tokens were still all the rage. Today, one can still participate in the rewards, by simply purchasing 1000 Dash. However, it might set one back at least US$150,000 (as per today’s price) – quite a healthy chunk of change.
For those who are least likely to afford a full node, they can opt to purchase masternode shares, which is a type of service offered by third party companies. Under this scheme, a pool (comprising of different users) is set up by the third party and the rewards are divided among all participants. But, please conduct sufficient research before investing, and don’t take our word as investment advice.
Is it worth it?
It depends on how you plan to use it and how much you are willing to risk. First of all, you should consider the fact that for the past year, Dash, like most tokens fell in absolute terms close to 90%. At the same time, masternode count is only going up, reducing overall token payout to each masternode. Drawing similarities from multi-level marketing schemes, it is always the best idea to get in early, and enjoy the rewards. Again, Dash is not the only game in town – many masternode projects currently flourish in the market.
Cover photo by: By cinerama/bitcoinisle
Journalist and Blogger. Azeem has a keen interest in blockchain technology and he frequently writes about different applications and services to make the general public aware of blockchain's extensive utility in daily life.