Masternodes play an important role on the Dash network as they support the infrastructure that enables specific functions to work. Essentially a masternode is an online computer that runs a dash wallet helping the network make important decisions, such as locking transactions with InstantSend, coordinate mixing of coins, and voting on budget funding. A masternode is required to have 1000 Dash as collateral, a dedicated IP address, and be able to run 24 hours a day with minimal connection loss. 45% of the block reward gets paid to masternodes on every block, which is then distributed to masternodes one at a time. Masternodes enable the following services:
- InstantSend (instant transactions). In contrast, Bitcoin takes about 10 minutes to confirm a payment.
- PrivateSend (anonymous transactions). In contrast, Bitcoin transactions are totally public and traceable. Only the identity of the addresses is anonymous.
- Decentralised Governance (masternodes govern, while the blockchain funds development). In contrast, Bitcoin is controlled by a few big miners and funded by 3rd party centralised institutions with self interests.
- Dash Evolution a decentralized payment processor (think a decentralized Paypal).
Masternodes are also given voting rights on proposals. Each masternode has 1 vote and this vote can be used on budget proposals or important decisions that affect Dash. For a complete list of current proposals please click here.
What Are Masternode Shares?
Masternode shares are for those that can’t afford to purchase the 1000 dash that are required to run a masternode. Masternode shares allow users to accumulatively meet the 1000 dash requirement of a masternode. This is achieved by utilising a 3rd party service that pools together the funds and sets up the masternode for the shareholders. The service provider then splits up the masternode rewards and pays it out to all shareholders of that masternode. Remember that by purchasing shares in a masternode, you are putting trust into the 3rd party service, so please do your own due diligence before purchasing.