What is a Masternode, How Does It Work?

In blockchain technology, there are three commonly known types of nodes: ordinary node, full node, and masternode.

Ordinary node is the foundation of a cryptocurrency and its purpose is to prevent double spending and secure the blockchain. Nodes are rewarded for contributing to generation and blocking network consensus. In PoW, nodes are miners, and in PoS, they hide wallets.

A full node contains the entire copy of the blockchain in real time, while an ordinary node does not contain such a copy. A full node can connect to over 124 nodes, while an ordinary node can only connect to 8 nodes. Masternodes, on the other hand, are full nodes with extra capabilities, performing different types of services such as instant sending, private sending, and storage of the entire blockchain from which they receive block rewards. We can say that masternodes are full nodes in both PoW and PoS.

In short, a masternode is a server located in a decentralized network that is used to complete unique functions in a way that an ordinary node cannot.

How does it work?

Just like full nodes in a cryptocurrency, masternodes can be run by anyone. However, there is an entry barrier to ensure the system is not malicious. A barrier to entry is what a cryptocurrency needs to commit or collateralize certain units in order to run a masternode.