Since their advent in 2014, masternodes have grown to become a key part of many blockchain networks. These nodes provide an essential function by helping to secure a blockchain, validate transactions, and maintain network consensus. They are typically operated by individuals or organizations that hold a certain amount of the network’s native cryptocurrency, and they are rewarded for their services with a portion of the block rewards.
While the hype around masternodes has declined over the years, they are still being used by a number of blockchain projects. In this article, we will explore some of the real-world use cases for masternodes and how they are being used by different blockchain networks.
One of the most common use cases for masternodes is governance and voting. In some networks, masternode holders are given the power to make decisions about the future direction of the network, such as changes to the protocol, new features, or funding decisions. In this way, masternodes provide a mechanism for stakeholders to have a say in the network’s decision-making process, regardless of the size of their holdings.
One example of the application of masternodes in decentralized governance is VeChain blockchain, which uses masternodes to facilitate community voting on important decisions. VeChain masternodes are responsible for validating transactions, contributing to the consensus process, and participating in community votes on various proposals, such as changes to the network’s governance model.
Decentralized Storage and Computing
Chances are that you have some unused computational power or storage space on your computer. Another real-world use case for masternodes is decentralized storage and computing. In this case, masternodes can be used to host and validate data or execute computations in a decentralized manner, without relying on centralized servers or third-party providers.
Although not exactly a masternode, the Storj blockchain uses nodes to facilitate decentralized cloud storage. These nodes are responsible for hosting files on the network and validating that the files are stored correctly. They are rewarded for their services with Storj tokens, which can be used to pay for storage or traded on cryptocurrency exchanges.
When Dash pioneered the masternode concept in 2014, one of the major highlights was near-instant transactions. Compared to the Bitcoin and Ethereum networks, which became congested during periods of high demand, Dash enabled near-instant transactions. Compared to legacy blockchains, Dash uses a group of masternodes to facilitate instant transactions.
With Dash InstaSend, a transaction can be confirmed in as little as 1.3 seconds. This makes it particularly useful for point-of-sale transactions and other situations where speed is critical.
Another use case for masternodes is facilitating private transactions. Masternodes can be used to obfuscate the origin and destination of cryptocurrency transactions, providing increased privacy and anonymity for users. They utilize various privacy-enhancing technologies, such as coin mixing, zero-knowledge proofs, and ring signatures. These technologies work by obfuscating the transaction data and making it difficult or impossible to trace transactions back to their origin.
PIVX, for instance, uses masternodes to enable private transactions through its zPIV feature. zPIV utilizes a zero-knowledge proof protocol to prove ownership of a certain amount of PIVX without revealing the wallet address or other identifying information.
Masternodes can also be used to create decentralized marketplaces that allow users to buy and sell goods and services without needing centralized intermediaries. Syscoin, a blockchain that markets itself as “one of the most decentralized service layers and fully distributed supplies” uses masternodes to facilitate transactions on the Syscoin network, as well as enforce rules and regulations for its marketplace.