As someone who intends to start your masternode journey, you might have come across the word “collateral.” This is a bit different from the collateral we know when it comes to DeFi protocols, that is using your digital asset as a guarantee to borrow cryptocurrencies. The collateral amount is one of the most important requirements, along with software and hardware requirements. What we plan to achieve with this post is to make the concept of collateral in the masternode world simple to understand and highlight its importance.
What is a masternode collateral?
A masternode collateral is a certain amount of cryptocurrency that a node owner needs to have as part of the requirement to run a masternode. This collateral amount is locked up in a wallet and cannot be spent while the node is in operation. The fascinating part is that the collateral can be accessed at any time the node owner wishes to.
Usually, masternode owners get compensated for pledging this number of coins to help ensure the security of the network and power certain functionalities. The more masternodes an owner has, the more frequently they become eligible to receive a percentage of the cryptocurrency created when a new block is added to the blockchain.
How many coins are required to run a Masternode?
The collateral amount varies depending on the blockchain, so it is advisable to verify the correct number of coins required. All the DECENOMY projects have different collateral requirements. For instance, at the time of writing this post, you will need to deposit 200,000 SAPP into your wallet to run a Sapphire masternode. In contrast, to run a Flits masternode, you are required to have 4,000 FLS.
This implies that the cost of acquiring a masternode will also vary since each coin is traded at different prices on exchanges. If you need to acquire any coins to run your nodes, you can place a buy order on Birake Exchange for all the DECENOMY coins.
Collateral updates
For some masternode networks, the collateral amount is dynamic. This means the amount required to run a node changes at a certain block height. For DECENOMY coins that need collateral updates, such as Flits, node owners are informed beforehand to prepare accordingly. Typically, they will need to stop their nodes with the old collateral amount and then redeploy new ones with the new collateral amount within a seven-day window.
Conclusion
Understanding the concept of collateral is necessary for individuals considering investments in masternodes. DECENOMY offers a variety of cryptocurrencies with distinct focuses, providing investors with a range of options. For current owners of DECENOMY nodes, staying informed about collateral changes is imperative. Acting promptly and appropriately in response to these changes is necessary to ensure continued participation in the network.
