Crypto Analysis Series - Part 8: The MasterNode Ecosystem

in #masternode4 years ago (edited)

In continuation with the Crypto Analysis, here is our latest piece discussing yet another platform in the space. This time we will not be analyzing a single cryptocurrency, but a broad range of them that share the same base mechanism.

A Brief Introduction to Masternodes

The advent of Blockchain has brought all sorts of intricacies and technical aspects that are being developed, debated, criticized and implemented which could not have been imagined a few years back. There isn’t a single protocol, feature or application that checks the 'must have' list of all participants, and that’s a good sign. Criticisms, most importantly, constructive criticisms are what push boundaries, stimulate innovation and bring about progress.

With bitcoin came the consensus algorithm which we now call Proof-of-Work (PoW). PoW was the first known solution to the Byzantine General’s Problem and is the mechanism that secures the bitcoin network and maintains consensus among all participants, called nodes.

As observed throughout history, when one problem is solved, it doesn’t take long for other creative minds to find faults in the solution and develop better, more efficient and innovative solutions. Proof-of-Stake (PoS), Proof-of-Importance (PoI), etc are part of this continuous criticism and improvement circle.

One such niche innovation to consensus mechanisms is the introduction of Masternodes. Masternodes are an added layer on the base layer consensus mechanisms. For instance, Dash is a privacy-based cryptocurrency that makes use of Masternodes. It is a proof-of-work based mineable cryptocurrency that, unlike bitcoin, does not give full rewards to the miners but also the nodes that validate, secure and share the blockchain.

Why consider Masternodes?

Masternodes, in a broad sense, are a sign of growth and innovation in the blockchain and cryptocurrency space. They show that constant innovation is being carried out, without necessarily putting down existing innovations.

In essence, a masternode is just like a regular node, but with an incentive attached. On the bitcoin blockchain, a miner gets rewarded to provide computation power to the network and help​ secure it. But the nodes, who keep a copy of the blockchain at any given moment, secure and reverify the transactions, and share the copy with other nearby nodes get no real incentive to do what they do. If someone wants to be a node, they do it because they want to, rather than actually being incentivized for it.

Whereas, on blockchains that use the masternode mechanism, such as Dash, PIVX, Energi, etc., nodes are given as much importance as the miners. The role of miners is to provide computation power to the network and help in verifying and securing the transactions, while the role of a masternode, who cements their position by staking a minimum amount depending upon the blockchain, is to collect and assemble the transactions, hold records of the blockchain, reverify the transactions, and propagate the information to all the other nodes. This divides the responsibilities and secures the blockchain two-ways. **Masternodes can be customized for both Proof-of-stake and Proof-of-Work chains. **

Due to their inherent inclusion of nodes into the incentive system, Masternodes can also be customized to carry out dozens of other features. Governance​, Privacy, Voting, etc., can be carried out through the Masternodes, as they effectively help in running the network. Another proponent for Masternodes is that they can be used to keep the miners and stakers in check.

A Look into Masternode Coins

To compare masternode coins, we will take the top 4 cryptocurrencies with respect to Market Cap and at least 2 years of market penetration (as of July 2019):

1. Dash

- Consensus Algorithm: X11
- No. of`Masternodes: 4828
- Minimum Stake: 1,000 Dash
- Responsibilities of the Masternode: Masternodes are powerful servers backed by collateral held in Dash, and are designed to provide advanced services and governance on the blockchain. Masternodes host full copies of the blockchain and provide a unique second layer of services to the network, facilitating advanced functions such as InstantSend, PrivateSend and usernames on the blockchain.

2. PIVX

- Consensus Algorithm: Customized Proof-of-stake + zerocoin Proof-of-Stake Hybrid
**- No. of`Masternodes: **1421
- Minimum Stake: 10,000 PIVX
- Responsibilities of the Masternode: Other than the responsibilities of a general masternode, a PIVX masternode has to ensure total privacy of all transactional information flowing through the node. The node has to readily participate in the governance decisions of the network and is allowed to give and make changes, given consensus is achieved first. A system called ​the decentralized budgeting system, or more simply called as the Treasury, is also held under the purview of the masternode. It makes budgetary decisions for the network, such as marketing allocation​, developer incentives, etc.

3. EtherZero

- Consensus Algorithm: Proof-of-Stake
- No. of`Masternodes: 851
- Minimum Stake: 20,000 ETZ
- Responsibilities of the Masternode: The management structure of the EtherZero Community, backed by masternodes, is designed in such a way that Community members could fully manage both the development of the community and its finances. One of the management tools is ETZVote – a system for making proposals by members of the community and voting for them. The official websites states that the main motivationfor masternodes will be the assessment that the proposals on the forum are beneficial for the growth of the coin price.

4. ZCoin

- Consensus Algorithm: Proof-of-Work
- No. of`Masternodes: 5161
- Minimum Stake: 1,000 XZC
- Responsibilities of the Masternode: A network based on the principles of the zero coin whitepaper, ZCoin is another privacy centric cryptocurrency. It is mineable, has a supply structure similar to bitcoin and, as an added feature, involves a masternode layer. The Masternodes ensure the privacy of transaction, information and anonymous voting and governance.

Conclusion:

It is quite difficult to comment on the future adoption and usage of MasterNode coins as it is quite inconclusive about how relevant they will be. Masternode based application, on paper at least, show immense value and prospect for use. But it's the users that will ultimately decide. For personnel or groups that aim to constantly engage in the network, wish to reward people who contribute time and resources and see the need for a decentralized organizational architecture can always consider the masternode architecture of the above mentioned cryptocurrencies or any other platform.

  • SB

Resources:

  1. Masternode.Pro
  2. Masternode.Online
  3. Masternode.Buzz

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Dear @reverseacid

It has been quite a while since I've lost my interests with masternodes (it kind of happened once I discovered STEEM blockchain and I fully got engaged into becoming part of community).

However I found your post both interesting and refreshing.

One thing that I always had trouble understanding is: should masternodes be considered securities? after all rewarding investors with dividents is security. To avoid being called security it would be better to burn tokens (the way binance does).

Also I came to realization, that most masternodes do not offer anything for their stake holders except of financial rewards. And to maintain those rewards without price constantly being crushed by selling pressure ... they need constant new flow of money. It's almost not possible to find masternode that does offer any other value for stake holders.

Yours
Piotr

I have master nodes on the Airwire platform. You need 35,000 Wire to get a node and they create about 96 wire per day. Wire is so cheap right now you can buy 35,000 wire for under $50. In a years time your wire holding will double. I am not giving financial advice but showing for a very small amount of money you can try it out. Good luck, everybody.

Pretty Interesting @clayrawlings.

Do you mind telling more about the features and applications of this AirWire platform you are part of? I would love to know more.

Thanks.

I am hesitant to say much about Wire because I will be accused of shilling for a coin. Wire can be sent over all the social platforms for almost nothing in fees. The problem is it is only on one exchange at the moment so it lacks liquidity. Facebook Libra could possibly wipe it out so it is not without risk. It is so cheap you can try ot to familiarize yourself with masternodes without committing a lot of money. Dash for example costs a fortune to get just one node. To read more you can go to Airwire platform to see what it is about. If it catches on it will be great but it is a long shot.

Dear @clayrawlings

Interesting conversation you guys are having here.

Thx for your comments.

Since you're so responsive, I thought that perhaps I could share with you my latest publication and ask about your own opinion on discussed subject:
"DID OUR WORLD LEADERS JUST PUSH GLOBAL RECESSION AWAY from our doorsteps?"
https://www.steemit.com/economy/@crypto.piotr/did-our-world-leaders-just-push-global-recession-away-from-our-doorsteps

I would appreciate it greately.

Yours
Piotr

Hello dear @crypto.piotr

It has been quite a while since I've lost my interests with masternodes (it kind of happened once I discovered STEEM blockchain and I fully got engaged into becoming part of community).

I can understand you losing interest, as there hasn't been any sufficiently interesting advancement in the space since the introduction of Dash. Dash is solely leading the entire pack for now, with its engaging community, privacy and governence feature. In my opinion, it is the most functional DAO as of yet.

One thing that I always had trouble understanding is: should masternodes be considered securities? after all rewarding investors with dividents is security. To avoid being called security it would be better to burn tokens (the way binance does).

Interesting comment there. However, I have to disagree with your observation. Tagging a cryptocurrency as a security depends on how you describe a security. If you think a security is anything than pays dividend/interest for its holders, gives an ownership right and allows the holder to engage in the decision-making process, then surely it is a security. But if you say that a cryptocurrency that is decentralized, allows applications to be built on top of it, and has an engaging community that builds and upgrades it, then IMO that is not a security. It just depends on how one looks at it.

Also I came to realization, that most masternodes do not offer anything for their stake holders except of financial rewards.

That might not necessarily be true my friend. Other than financial incentives of the cryptocurrency, a masternode coin allows for applications to be built on top of it, allows one to engage in the decision-making process, gives a sense of belonging to the developers and community members and, has huge commercial and governmental implications. Masternodes are gravely underappreciated.

Thanks for the comment friend.

Dear @reverseacid

Thank you for your kind and prompt reply. Appreciate it.

Amazing comment.

Other than financial incentives of the cryptocurrency, a masternode coin allows for applications to be built on top of it,

Indeed. Masternode coin "ALLOWS" us to do all of that, however I failed to find masternodes that indeed do so. Except of 2-3 most popular.

Masternodes are gravely underappreciated

Masternodes are mostly greately complicated :)

ps.
Since you're so responsive, I thought that perhaps I could share with you my latest publication and ask about your own opinion on discussed subject:
"DID OUR WORLD LEADERS JUST PUSH GLOBAL RECESSION AWAY from our doorsteps?"
https://www.steemit.com/economy/@crypto.piotr/did-our-world-leaders-just-push-global-recession-away-from-our-doorsteps

I would appreciate it greately.

Yours
Piotr

Doesn't the howey test pass for masternodes?

Posted using Partiko Android

Thanks for sharing this nice and useful information with the crypto enthusiastic people here. Masternode ecosystem can be beneficial for the users but it all depends on the position of the masternode crypto in the crypto market.

For personnel or groups that aim to constantly engage in the network, wish to reward people who contribute time and resources and see the need for a decentralized organizational architecture can always consider the masternode architecture of the above mentioned cryptocurrencies or any other platform.

Exactly.

Hey @akdx

You are very welcome mate. It was my pleasure to write up this piece.

Masternodes, IMO, is a very under appreciated area. One can see a lot of prospects for the future. Although there are a few alternatives to its features, it’s how the masternode system incentives all members irrespective of their role that appeals to me.

Cheers.

Cheers.

Posted using Partiko iOS

Hi! @reverseacid

Excellent work explaining Masternodes.

But I have a question. Is it more profitable to mine on your own or to invest in a Masternodes account? 👀

Hello @jadams2k18

Excellent work explaining Masternodes.

Thanks for the comment friend. Much appreciated.

Is it more profitable to mine on your own or to invest in a Masternodes account? 👀

Hahahah, I think I should've mentioned before, but I do not provide financial advice, friend. Well, I could, but it is not commendable as any/all implications that might have will directly lead back to me. That is the general rule of thumb among anyone who gives out information when it comes to money.

But I could definitely do one thing, I can help you with resources and information that will lead you to make that conclusion on your own. If you wish for me to help you with that, do hit me up here or on Discord

Much regards.

I do not provide financial advice, friend

Ok... Noted it 😜

hit me up here or on (Discord)

I will 😄

Hi @reverseacid

Definitely in your conclusion they make an excellent summary of what can happen with this crypto. and that is how the human and his behavior of acceptance and diffusion are those who can follow the pattern to see the benefit that can be obtained from that.

Thank you friend for this excellent information, so that others can know about this topic I made resteem.

Greetings from Venezuela a country that fights for its freedom.

Hello dear @lanzjoseg

Thanks for the much needed appreciation friend. I’m glad to know that the piece along with a lot others was helpful in understanding this impactful space.

And finally, cheers to you to from India, my friend. We are here for your support, although not physically, but in any other way we can.

Much cheers.

I think these needed to be known by everyone so I am re steeming it.

Hi @nurseanne84

You’re welcome and thanks a lot for sharing it with your followers. Means a lot for us to see people from all areas helping us out.

Cheers.

Posted using Partiko iOS

Thanks for sharing you post with me. But as always it goes way over my head. But reading you posts helps me understand the intricacies of crypto although very slowly. I guess we are all still learning.

Posted using Partiko Android

Hello @andyhem

I’m sure when one tries, it won’t fee that hard to grasp it. I’m glad that you are tagging along on this slow but fruitful proves of learning, knowing and bracing for something new that’s about to impact a huge majority.

Cheers and keep engaging.

Hit me up on Discord if there’s anything you’d like to know or share.

Posted using Partiko iOS

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