Masternode Guide for Beginners

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What is a masternode?

A master node is a network node that performs special tasks within the respective network. For the operation of the master fashion and the completion of these tasks, the operator is rewarded. In order to operate the master mode, a server is necessary, usually enough for a relatively small VPS. In addition, you need a certain amount of the respective cryptocurrency and must keep this deposit on a public key permanently so that the server is qualified as a master mode.

Therefore, the possession of a deposit – usually acquired through purchase, in some cases purchased by mining – always associated with the operation. Often we consider the reward the operator receives in the context of the deposit made. Therefore, there is often talk of “ROI”, which means “Return on Investment”.

Similar to the classic interest rate, a percentage value is determined which indicates how much money the operator receives per year. This value can also be determined per day, week or month and varies sometimes extremely. These fluctuations are partly due to the fact that the respective cryptocurrency is subject to fluctuations compared to the Bitcoin and the US dollar, if it can be traded directly against the dollar or the euro. In addition, for some cryptocurrencies, the part of the block rewrite intended for Masternode operators changes. In many cases, this increasingly reduces or is dependent on the deposit paid is increased (Tiered Masterternode).

Most reputable projects have a sentence that remains stable for a long time, but does not throw away huge sums of money.

The technology

The above explanations are basically correct, but it is worthwhile to take a closer look to understand how a master fashion works exactly.

Masternodes, as already mentioned, perform some special tasks. This may include, among others:


  • Perform anonymous transactions
  • To perform instant transcations
  • To exercise voting rights in the network
  • Monitor the network itself (example Hypernodes)

As you can see from these examples, Masternode technology has to be differentiated from “Proof of Stake”. Although there must be a deposit here too, it is not primarily about verifying transactions. In fact, Proof of Work and Masternodes are not mutually exclusive. It is often the case that Miner and Masternode operators share the Block Reward in a certain ratio.

In addition to the special tasks, mastering a master also mastered general. These are the same tasks that normal network nodes perceive. This primarily involves the distribution, storage and distribution of the network itself. The miners verify the transactions, the nodes distribute them across the network.

Without adequate distribution through different nodes – preferably as many as possible – the decentralized nature of the network is lost. All cryptocurrencies that do not use masternode technology ultimately rely on the voluntary use of the operators. For example, you can run a Bitcoin Full Node, but there is no reward for the operation, the use is purely voluntary.

The Virtual Private Server

A VPS is a small, virtual server that is usually rented from a vendor. On it the actual master mode is operated. The hiring is useful because you need a static IP, for example, to operate the master mode. Thus, the VPS from a technical point of view is the vital component, if you want to operate a master narrative yourself.

Most beginner-related problems are related to the VPS and often affect the following:


  • Choice of provider / scope of services
  • Choice and configuration of the operating system for the VPS
  • Configuration of the master mode on the VPS
  • Updates of operating system and masternode

As far as the first point is concerned, many newcomers choose too little power for their VPS. The reason is easy to make out, it should be saved. However, if you have too little computing power, memory or bandwidth, then the master mode can not work properly.

All in all, packages that offer:


  • 2 CPU cores
  • 2 GB RAM
  • 3 TB bandwidth
  • Min 40 GB SSD (more if the network is older)

When choosing the operating system, the ghosts are different. In general, Linux is recommended because it is the best system for operating servers. Which distribution is a personal matter of taste. In addition, Linux is available for free.

But it can be problematic if you have no idea about Linux. Because in addition to the configuration for the start of the node, at some point updates must be recorded.

Of course, Windows Server also works and admits many beginners, because the environment is more familiar. The first masternode is a great reason to finally get involved with Linux. Because Windows is not only more expensive, but many instructions for Masternodes are written for Linux.

The configuration of the master node is done at two ends, once on the VPS and once in a configuration file for the wallet. Please note that Masternode and Wallet always have to be operated separately. Beginners fail at this point, because the respective instructions of the communities do not always explain everything. Sometimes authors take intermediate steps for granted.

Masternode Coin sees the light of day

Let’s say that you have become aware of a very recent project through a relevant forum or website dealing with Masternodes. The marketing of the project promises great features. This cryptocurrency will change everything. Because “ExampleCoin” will succeed through:


  • An own Marketplace (Sure, eBay, Amazon and even OpenBazar have had their day)
  • Fast block time (nobody else has)
  • Extremely high ROI (10000% pa)
  • Own DEX in 2022 (BOAH!)
  • A premine (15% are modest, right?)

As you can see in the notes in brackets, as a writer you can not write a journal on the subject without a breeze of sarcasm. But again seriously: The above features can be found in hundreds of projects.

Probably the most important promise that is made by extremely many projects is the immense ROI. On relevant pages, some crypto currencies are listed, with more than 90,000% pa. To the fallacy that you get rich quick, we’ll come later.

Dev left. Coin dead.

The worst thing that can happen to you now is bad news for the project. If the confidence of other investors is lost, then the price for BeispielCoin can collapse massively. Because there is still little interest from the buyers. A non-exhaustive list of common problems:


  • The developer leaves the project or simply disappears
  • Someone discovers a fraud and makes it public
  • Someone claims there is a scam and finds hearing (FUD)
  • The Exchange denotiert the example Coin

Fraud allegations are common in the crypto scene. Most are directed against persons or actors. Others refer to bugs in the software code that were purposely built by the developers to secretly generate profits.

The latter has already happened more than once and is the death sentence for a project. Even if allegations are invented, they can cause great insecurity and break the course. If a cryptocurrency is denoted, then it is completely out. At least when she’s as young as BeispielCoin.

Masternode checklist

So that you can avoid some of the problems that we have explained with our example, let’s summarize a few points. The list is not exhaustive and you should supplement it where your individual situation requires it.


  • Make sure who the developer or developers are. Scammers are often newcomers to relevant forums and remain anonymous. There are also anonymous developers who are good at it (see Satoshi Nakamoto), but there is always caution.
  • If a premine is offered for auction, that’s a bad sign. Many young projects need months to get the money they need or apply for smaller exchanges. Donations by the community are also quite common. It is possible that the anonymous developers will enrich the auctions and manipulate them as well.
  • A premine also means that the developer can sometimes run a huge number of master nodes. This is not decentralized. He also pays huge sums of rewards. He retains a monopoly position. A premine should be low or appropriate, it is not fundamentally bad.
  • The highest possible ROI is no guarantee of success. Many established projects have a ROI below 25% pa And even that is still very high when you compare it with other assets.
  • If a Masternode Coin is already listed on Exchanges, then get smart about the market data. Where is it listed, how high is the market capitalized, what is the volume?
  • How is the project set up on social media? It is not wrong to offer a Discord Channel. However, a healthy community is always accessible on several channels, although not always equally active.
  • Pay attention to functioning websites. Scammers build simple mockups to make the project at least seem legitimate.
  • If you are able to: Browse the code! Errors and inconsistencies can not be hidden there. Every project should be viewable on GitHub. If this is not the case then extreme caution is required.

As with all other investments, here too: In case of doubt, always include an investment advisor.