Dash pioneered the concept of masternodes. This technological innovation continues to increase in popularity many other blockchains use it today. The upside for holders of Dash who run a masternode is that they receive block rewards, which vary based on the current total count of active masternodes. We explain how masternodes fit into the cryptocurrency ecosystem, what is required, and how to earn the highest Dash masternode payout.
Mining vs. Masternodes
Dash uses a decentralized ledger of all transactions (a blockchain). Dash, in contrast with Bitcoin, features a two-tier network. In the first tier, miners manage basic sending & receiving of Dash and integrity of the blockchain. In the second tier, masternodes enable transaction privacy & instant transactions, as well as managing Dash’s decentralized governance & budget/proposal system. To maintain blockchain integrity, masternodes have the power to reject improperly formed blocks from miners. Masternodes do not mine, and mining servers cannot serve as masternodes.
Dash Masternode Requirements
Setting up a masternode requires a basic understanding of Linux and blockchain technology. Dash masternodes must have:
- Stake of 1,000 Dash coins
- Wallet to store your Dash, preferably a hardware wallet, although the system supports Dash Core wallet
- Virtual Private Server (VPS) running Linux
Staked Dash coins remain under the control of their owner, who can still spend them freely. But if the stake falls below 1000 Dash, the associated masternode goes offline and no longer earns rewards.
How to Make Money with Dash Masternodes
Masternodes earn rewards for services they perform. Dash masternodes earn a percentage of the total block reward:
- 45% of the block goes to the masternode
- 45% of the block goes to miners
- 10% of the block goes to Dash’s own governance budget
Many people missed the 2020 news that the Dash network approved a proposal to modify the 50%/50% block reward split between miners and masternodes. Reward reallocation occurs every three superblock cycles (about once a quarter) until the reallocation shifts to 40% miners/60% masternodes. Here’s an approximation of how the splits adjust…
Masternodes are selected for payment in each block from a deterministic masternode list (using a simple list sort algorithm), which is derived from on-chain data. The selected masternode receives 0.17241 Dash per day or ~5 Dash per month. The block reward is currently ~2.7 Dash. The block reward decreases ~7% each year.
Masternodes move to the back of the list after payment. Proof of Service (PoSe) is a scoring system used to verify that a masternode is providing network services in good faith. The full masternode set contains all registered masternodes that have not spent their collateral funding transactions. And that list includes a valid subset of all masternodes that are not marked as Proof of Service (PoSe) banned. Note, receiving a PoSe_banned notification isn’t the end of the world – your masternode moves to the bottom of the list, and it will work its way back up in the list. Masternodes with continuous reliability or integrity issues will stay at the tail end of the queue, however, so a properly resourced & configured server earns more rewards.
This site shares a variety of real-time Dash statistics and this simple page provides a quick snapshot of the network.