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So what is a Masternode?

Let's get the boring stuff out the way. In the context of computer science, a node is a device within a network that performs a certain function. It can be a full nodes (which keeps all information), a light client (which keep only certain information) or a masternode.

A masternode is a node that has "administrative" rights and performs specialized function such as validation of transactions that flows through the network. In order for masternode to behave, stakes (values) are set aside to ensure it does its job properly. The network on the other hand rewards the masternode when it does its intended job. That's basically how a masternode work and why a user of the network would run a masternode.

Blockchains are essentially computing networks running on different algorithms. Its cryptocurrencies are the value used to incentivise the network. For example, the Bitcoin blockchain runs by the Proof of Work consensus algorithm. The miners use ASIC devices to validate the transactions on the network and they receive Bitcoin as a reward. The other blockchain such as Ethereum 2.0 will be running the Proof of Stake consensus algorithm soon and its cryptocurrency, Ether, will then be utilized for staking and rewarding its masternode.

As previously mentioned in my other articles, there are thousands of different blockchains at this early stage of blockchain technology development. Many are competing and offering very lucrative rewards for the users' participation in their network. I operate a few masternodes using the platform. The platform hosts the servers that run the masternodes on my behalf. All I need to do is to provide the platform with the public addresses of my wallets that contains the staked cryptocurrencies. Every day these servers will do their jobs and help validate the transactions on the networks. Every day the rewards are deposited into my wallets. This is as passive an income as it get.

To give an idea of the cost and returns that one can expect running a masternode, below is a summary of some masternodes that can be hosted on :

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