What is a masternode?

TECHNICALLY:

Let's say that there are, above all, 2 ways to mine blocks and certify transactions.

PoW system (Proof of Work), which is the one that has historically been used in all currencies. Example is the bitcoin and its famous miners, already converted into lobbies with a power of decision in the incredible currency and billions of investment (and benefits) behind them.
PoS system (Proof of Stake) which is the current that emerged relatively recently in which the Masternodes are used instead of the traditional miners. Here the best example is Dash, which was the first currency that allowed the development of Masternodes. A Dash Masternode today is worth about $ 310,000

(There are many more types of tests, but I have summarized it to avoid rolling the article too much)

So, what is a Masternode?

It is basically a digital base where an integral and updated copy of a cryptocurrency chain is maintained. This node is connected to the blockchain to validate transactions and blocks. In this way, the network remains secure and in ideal operating conditions. The more number of connected nodes, the greater the security and stability of the network.

The nodes are also responsible for performing some functions such as:

· Increase in the privacy of transactions.
· Perform instant transactions.
· Participate in governance and voting.

These nodes do not work independently, but they communicate with more nodes forming a decentralized network and the aforementioned functions are those that mostly perform in addition to stabilizing the price, they can vary depending on how they have implemented the main nodes.

The adoption of PoS is a trend among cryptocurrencies due to its better efficiency in terms of electricity consumption, differentiating itself from the PoW mining (labor test), where the miner limits himself to dropping the coins in the market.

The distribution of rewards in the PoS system varies substantially with respect to the currency algorithm.

REALLY

You put at the disposal of the network of a certain currency (later we will see examples) a certain amount of coins, these must be 24x7 connected to the internet through a fixed IP. In return, the network rewards you with more coins for giving that service.

BUT, THEN DO THEY PAY ME? HOW MUCH?

Yes, you charge in currencies of the network to which you provide the service.

How much? It depends. This is all strategy. I will explain.

Behind the word #masternode there is a whole world of currencies (hundreds), each one with a payment strategy for investors and each one with a business objective and hundreds of them without any business objective, just being a masternode , that is, a simple ponzi system.

You can find coins with an annual ROI of 35,000% and others with one of 5%.

So it's like everything, advise you well, study where you put your money and be attentive.

Also influences another important point, the number of Masternodes that already has that network.

I will explain myself with an example. Imagine a coin, "Crypto Clan Coin" $ CCC. It turns out that he decides to pay 45 coins per block and makes 2,000 blocks a day. Those coins, 45x2,000 = 9,000 will be shared among all the masternode holder, so if there is only one MN, he takes the 9,000 coins on his own, but if there are 1,000 MN, he will take only 9 coins a day.

So, the greater the number of masternodes, the fewer rewards you will charge, and your ROI will go down. This is the typical graph of the ROI of a currency:

As you can see, as the number of Masternodes increases, the annual ROI decreases.

SCAMS

Yes, here it is very easy to fall into what they really are, scams.

You have to be very well advised and look a lot to avoid biting.

Why? Because many currencies are based on algorithms and networks that are copies of others (Most Dash), then someone copy it and with small adaptations create another new currency, launch it, make a presale, put a very high ROI for you to enter and in 2 or 3 weeks the creators sell their own coins and leave, they disappear with more tan 40 or 50 bitcoins in their pockets.

Obviously, people see that in their discord nobody answers them and nobody is developing anything, so the value reaches ZERO right away.

PONZI

It is not a scam, but it is close.

There are hundreds in circulation: ROI of 40,000% or 5,000% and currency without a specific objective.

The operation is simple, as your currency really does not work or will ever be useful, only the buyer who wants to generate coins to sell them to the next investor ... it does not sound like a PONZI system?

This is the typical chart after 100 days quoting:

SERIOUS PROJECTS

These are the signs you should look for, or at least some of them:

Purpose of actual use: That is, the currency has to be used for something.
Decent ROI but not exaggerated (> 10% and <300% generally).
Team identified with names and surnames, available CV or linkedin.
More than 63 days of existence and quoting at stable prices.
Enter into their Discord and see if your community is active, check if there are recent announcements or not from the developers.

This is a real example of graphics (60 days):