Masternodes are integral in the operations of many cryptocurrency networks. Whilst their roles may vary from one blockchain network to another, they significantly contribute to the network’s functionality and security.
Beyond validating transactions, some other responsibilities of masternodes may include facilitating instant and private transactions, as well as participating in the effective governance of the network. Masternode operators typically receive a portion of the block rewards for performing these specialized functions.
Masternodes: The Exclusive Club for Crypto Whales
Due to the specialized nature of masternodes, the barrier to entry is often high. For instance, the required collateral to host a Dash masternode is 1,000 units of the DASH token. With the cryptocurrency currently trading at approximately $30, it will cost a whopping $30,000 to deploy a Dash masternode, an amount that is beyond the reach of many retail investors. Although there are masternode networks that require significantly lesser amounts, the consensus is that running a masternode is expensive.
To be fair to the existing model, this is not entirely a bad thing. The motivation behind having a high staking requirement is to ensure masternode operators have “skin in the game” and are invested in the long-term success of the network. It helps prevent bad actors from hosting numerous masternodes just to attack or manipulate the system. On the flip side, it means running a masternode is out of reach financially for most cryptocurrency holders. The average person simply doesn’t have tens or hundreds of thousands of dollars in spare capital to tie up in staking a node. This obviously limits the decentralization of the masternode system if mainly wealthy holders or organizations can participate.
The Need for Evolution
Given the limitations of the current masternode model, Decenomy emphasizes the need for a “groundbreaking shift” in how masternodes operate. Its progressive masternode collateral system seeks to transform the landscape by democratizing participation and fostering a more inclusive and decentralized network. Notably, the proposed system will redefine the way rewards are distributed to network participants.
At the heart of this change lies the intention to significantly lower entry barriers into the masternode ecosystem. By doing so, the proposal seeks to democratize participation and make the network more decentralized and inclusive.
A Tiered Structure & Fractionized Masternode Payments
One of the key features of the proposal is that masternode payments will be split into 16 slots. It also introduces a sequential reward algorithm that allocates slots based on masternode tiers. In essence, a masternode’s tier will determine the number of slots that get allocated to it. Tier 1 masternodes will receive one slot, Tier 2 two slots, and so on, up to Tier 5, culminating in 16 slots.
This sequential approach introduces a level of stability and predictability. “It aims to offer a more equitable and structured approach to reward distribution while fostering a transparent and organized system for masternode operators,” Decenomy said.
For added clarity, it is worth mentioning that each slot will have a different collateral requirement and receive a different amount of reward.
In conclusion, the proposed transformation of masternode systems could mark a new era in cryptocurrency networks through the introduction of innovative features that are designed to redefine participation, reward distribution, and network stability.
