What are masternodes?
So we’ve all heard about mining bitcoin the proof of work (POW) system. You once could mine bitcoin with a desktop computer and get decent returns, but now your returns won’t even cover your power bills when using a top of the line bitcoin mining unit.
Now there’s all this stuff coming up about masternodes the proof of stake (POS) system, being the new mining, only without the huge power bills. So how does it work?
With mining, a computer program runs an algorithim to try and find a number or key for that block of coin. Transactions are verified by miners which are paid a fee to do so and the security of the network is largely dependant on the honesty of those miners.
Masternodes work a bit different. First and foremost the purpose of a masternode is to bring security to the network. The blockchain still works in the same way, information all connected via a network of computers transferring realtime information to one another, here is the difference..
To have a masternode you must
-Purchase a certain amount of that masternodes coins/tokens and lock them in a digital wallet to be used as collateral for that masternode.
-Download a total copy of the blockchain with every piece of transaction information and link the wallet with the coins to the copy of the blockchain through a techy process.
There is no mining needed to find coins because they are minted at the creation point and usually it is a fixed amount so no more can ever be made. Every time a transaction is generated the fees are split among masternode holders as a reward for confirming those transactions and keeping an up to date copy of all that information and sharing it with other masternodes to create a fully fair, secure, open network.
Proof of work mining is out masternodes are in!
The need for computers to be doing all this work is rapidly becoming unnecessary, burning precious energy running algorithms to find what is really just randomised numbers for a now illegitimate reason. The bitcoin system was a great stepping stone but we have come a long way since the code was written for the bitcoin blockchain and the future is very exciting for what blockchain and evolving tech can offer this world.
If you want to learn more about masternodes and how to buy them click HERE for a full beginners masternode Guide