All cryptocurrencies are built on top of a network of computers that are each referred to as "full nodes". Full nodes are computer wallets that store complete copies of the blockchain and secure the network by verifying blocks (sets of transactions) and sharing valid ones with their peers. Some of these full nodes are also responsible for adding new blocks to the blockchain (commonly referred to as miners or validators).
When a new block is added to the blockchain, new coins are minted and rewarded to the miner or validator whose candidate block was selected.
A masternode is just a full node, but it has much more power and responsibility in the network. Masternodes have this power because they agree to put up a large stake of the cryptocurrency (similar to a safety deposit) in order to run. This deposit is in place to prevent masternodes from abusing their power and harming the network.
In cryptocurrency networks that implement a Masternode system, a percentage of each block reward is awarded to one of the currently active masternodes.
Once a network participant has locked away the required collateral (coins), those coins can deploy a masternode and perform special functions in the network. Some of these functions include participating in governance and voting, increasing privacy of transactions, instant transactions and enabling budgeting and treasury systems in cryptocurrency networks.
In exchange for performing these special functions, all
just like the miners or validators mentioned above.
Setting up a masternode can be a difficult and time consuming process. We built NodeHost to eliminate the difficulty and streamline that process.