What are Nodes?

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

Block

Block

New Block

Miners

What is a Masternode?

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.

Block

Block

New Block

Masternodes
Miners

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 are:

  • Participating in governance and voting
  • Increasing privacy of transactions
  • Instant transactions
  • Enabling budgeting and treasury systems in cryptocurrency networks
Masternodes are rewarded in the form of newly minted cryptocurrency

In exchange for performing these special functions, all masternodes are rewarded in the form of newly minted cryptocurrency, just like the miners or validators mentioned above.

How Do I Set Up a Masternode?

Setting up a masternode can be a difficult and time consuming process. We built NodeHost to eliminate the difficulty and streamline that process.

With NodeHost

Requirements
  1. Sign up for NodeHost
  2. Deposit coins or enter a masternode transaction ID from your local wallet
  3. Click launch

On Your Own

Basic Requirements
  1. Download and build the coin’s core wallet (sometimes only available as source code)
  2. Send your deposit through the blockchain to create a masternode transaction output
  3. Configure and start your masternode by filling out wallet configuration files
Security Requirements
  1. Download and build the coin’s core wallet again on a virtual private server (VPS), so your coins are not vulnerable to hackers
  2. Secure the VPS beyond its default security configuration
  3. Configure your masternode to your safety deposit by filling out wallet configuration files
Ongoing Requirements
  1. Monitor your masternode to ensure it stays connected to the correct chain
  2. Monitor that your masternode does not go offline
  3. Locking and unlocking transactions when you want to withdraw your stake and shut down your masternode