Masternode

A masternode is a server on a cryptocurrency network that keeps a full copy of the blockchain, holds a fixed amount of the network's coins as collateral and performs extra services beyond ordinary block relaying, such as instant payment locks, privacy mixing or governance voting. In return, masternodes receive a share of each block reward. The model was introduced by Dash in 2014, when the coin was still called Darkcoin, and was later copied by many other altcoins.

A masternode is a special type of full node, not a miner: in Dash, blocks are still produced by Proof of Work (PoW) miners, while masternodes form a second tier that provides services and checks. Because operators must lock up collateral to qualify, masternodes share some features with Proof of Stake (PoS) validators, and the arrangement is often described as a two-tier or hybrid network.

Think of a market where anyone can sell goods, but only licensed stallholders who have left a sizeable bond with the market office can run the scales, settle disputes and vote on how the market fee is spent. If a stallholder takes the bond back, the licence ends at once. The bond keeps them honest, and the market pays them a cut of every day's takings for their extra work.

Masternodes follow the same logic. The collateral is the bond, the services are the extra work and the share of each block's reward is the pay. Ordinary users still use the network without running anything.

The Dash documentation sets out the main rules:

• Collateral. A regular masternode needs 1,000 DASH. An evolution node, or evonode, which also hosts Dash Platform, needs 4,000 DASH. The coins stay in the owner's crypto wallet; if they are moved or spent, the masternode stops qualifying and its payments stop.
• Services. Masternodes power InstantSend, which locks a transaction within seconds so it cannot be double-spent; ChainLocks, which protect against chain reorganizations; CoinJoin mixing for privacy; and the governance and treasury system.
• Quorums. Groups of masternodes are selected into long-living quorums, which use joint signatures to approve InstantSend locks and ChainLocks.
• Proof of Service. Each masternode carries a score that rises when it fails to provide services, such as taking part in key generation. A node whose score crosses the threshold is banned until its operator fixes it and re-registers.

Dash 0.13.0 introduced deterministic masternode lists under the DIP003 standard, which record each masternode's registration on-chain and make payments predictable. In August 2024 a hard fork reallocated part of the masternode reward to evonodes for their work on Dash Platform.

According to the Dash documentation, 20% of each block subsidy goes to a budget, or treasury, and the remaining 80% is divided between miners and masternodes. Masternodes are paid in turn, so each one's income depends on how many masternodes exist and on the falling block subsidy over time.

The treasury funds proposals submitted by anyone, from development work to marketing. Each regular masternode casts one vote per proposal, and an evonode carries four times that weight. This makes Dash one of the earliest examples of on-chain governance funded by the protocol itself, a forerunner of the treasury votes later used by many Decentralized Autonomous Organizations (DAOs).

From around 2017 many smaller coins launched with masternode schemes, often advertising fixed collateral amounts and high annual returns. The term spread so widely that "masternode coin" became a category in its own right. Some networks used masternodes for real services; others offered little more than a payout for locking coins.

Masternodes are distinct from several similar roles:

• A node operator runs any kind of node, with or without collateral or rewards.
• A PoS validator is chosen to produce or attest blocks in proportion to stake, whereas a Dash masternode does not produce blocks.
• A super staker on Qtum stakes coins on behalf of others through offline staking, without the fixed collateral or extra services that define a masternode.

The high collateral means only wealthier holders, or shared hosting services, can run masternodes, which concentrates both rewards and voting power. Hosted masternode services may require operators to hand over control of some keys, adding custody risk, though Dash allows the owner key and operator key to be held separately. Lists of active nodes are public, so they can also become targets for Distributed Denial of Service (DDoS) attacks.

Critics have also pointed to promotional masternode coins whose returns depend largely on new buyers and inflationary token emission, a pattern that can resemble a pump-and-dump scheme. Whether a masternode network is useful depends on what services it actually provides, how the collateral is valued and whether the coin has real demand beyond the rewards. Masternodes are often compared with staking and with hybrid PoW/PoS consensus, since all three reward holders for committing coins to the network. Dash's own coin page, Dash (DASH), covers the asset in more detail.

• Dash documentation: Understanding masternodes
• Dash documentation: Features