Running a Dash Masternode
By: Ralph Taylor
Tags: Digital Cash, Masternodes, Cryptocurrency, Dash, Blockchain

Running a Dash Masternode

Why, and how to run a Dash masternode, an integral and pioneering part of the Dash infrastructure Ralph Taylor Follow Jun 22 · 6 min read

Dash is best known as the leading cryptocurrency with a focus on user-friendly payments and transaction speed. What many people do not know is that these features are implemented on top of a network of dedicated servers known as masternodes, which gives rise to many exciting features not available on conventional blockchains. These features include instant and private transactions, as well as governance of the development of the Dash network through a monthly budget and voting. This in itself is a first in the crypto world, and the masternodes are necessary to achieve the privacy and speed that Dash offers.

What are Dash Masternodes?

Masternodes are specialized nodes in the cryptocurrency network that are responsible for verifying and approving transactions. Also, the list of responsibilities, as well as enabling increased speed and safety special features.

Simply put, a masternode is a server with a full copy of the Dash blockchain, which guarantees a certain minimum level of performance and functionality to perform certain tasks related to block validation, as well as InstantSend and CoinJoin, as the instant transaction and privacy features in Dash are called. The masternodes are paid for this service, using a concept known as Proof of Service. This is in addition to the Proof of Work done by miners to secure the blockchain. Masternodes are also allowed to vote on governance and funding proposals, with each masternode receiving one vote (yes/no/abstain) on each proposal submitted to the system. Proposals are typically requests for funding, however they can also simply ask a question of the network, allowing Dash to remain decentralized yet come together to solve critical issues as one.

Masternodes vs mining

Dash, like Bitcoin and many early cryptocurrencies, is based on a decentralized ledger of all transactions, known as a blockchain. This blockchain is secured through a consensus mechanism; in the case of both Dash and Bitcoin, the consensus mechanism is Proof of Work (PoW). Miners attempt to solve difficult problems with specialized computers, and when they solve the problem, they receive the right to add a new block to the blockchain. If all the other people running the software agree that the problem was solved correctly, the block is added to the blockchain and the miner is rewarded.

Dash works a little differently from Bitcoin, however, because it has a two-tier network. The second tier is powered by masternodes (Full Nodes), which enable financial privacy (CoinJoin), instant transactions (InstantSend), and the decentralized governance and budget system. Because this second tier is so important, masternodes are also rewarded when miners discover new blocks. The breakdown is as follows: up to 10% of the block reward is reserved for the budget system (created by superblocks every month), while 60% of the remainder goes to masternodes and 40% goes to miners.

In short, miners power the first tier, which is the basic sending and receiving of funds and prevention of doublespending. Masternodes power the second tier, which provide the added features that make Dash different from other cryptocurrencies. Masternodes do not mine, and mining computers cannot serve as masternodes.

Masternode creation fee

The increased responsibilities given to masternodes requires increased incentives. The Dash developers introduced an additional financial restriction to protect the network from attacks: only a user with 1,000 coins on his balance can create a masternode. This mechanism protects the network against Sybil attacks, where an attacker spins up countless nodes to overwhelm the network.

At the Dash cryptocurrency’s current rate, to launch a masternode, you need to own more than $170,000 worth of Dash. The amount may seem excessively large, but do not forget that the contribution was created precisely to prevent a hostile actor from being able to easily take over the network by providing a high financial barrier of entry to running a single node.

Also, you can often find information about shared masternodes, launched by the joint efforts of several users. In this case, multiple users pool their funds together, either on their own or by using a third-party service, to reach the 1,000 Dash amount and create a masternode. This can either be done by trusting a single party with custody of the funds, or by a more involved multisignature setup whereby any user can withdraw the funds and dissolve the node at any time, reducing risk for fraud or theft.

What you need to run a Dash masternode?

There are two ways to run the masternode:

1. Configure the server yourself;

2. Buy a place on a specialized hosting.

Let’s analyze each option separately.

Running masternode on your own server

The server to run the masternode must appropriate the system requirements presented below. As the network evolves, the requirements for disk space and traffic will increase.

System requirements

Operating system: Linux (Ubuntu LTS edition recommended)

CPU: 1 Ghz

RAM: 2 GB

Free disk space: 40 GB and more

IP address: dedicated, permanent

Basically, most owners host masternodes on VPS — virtual servers that provide a small amount of resources. Let’s list the most famous hosting providers offering VPS rental: DigitalOcean, Amazon, Hetzner, LeaseWeb.

In most cases, even the minimum monthly cost of $ 5–10 is fully suitable for the indicated system requirements. In addition, to securely store funds, you need to install the Dash wallet on your computer running Windows, Linux or Mac OS.

Using dedicated hosting for masternodes

Setting up a masternode on a VPS or your own server is a rather complicated task that requires the user to be skilled in working with the command line and the Linux operating system. Not wanting to bother with setting up a server, many users prefer to simply buy space on specialized hosting for masternodes.

Dash masternode hosting is provided by several, including of the following companies: CrowdNode, Allnodes, SID Hosting Service, Node40, NodeHub.io, Masternodehosting, etc.

All these services offer similar fees, the cost of which is about 2 times higher than the price of VPS rental. In this case, the user will be relieved of the need to configure the server on his own: to launch the masternode, it is enough to download the ready-made masternode.conf settings file and connect it to the wallet on the PC.

How to set up a masternode

In general, the process of setting up a masternode is as follows:

Purchase of VPS or specialized hosting or initial setup of your own computer. Installing a wallet on a home computer and synchronizing with the blockchain. Generating a key for creating a masternode using the masternode genkey and getaccountaddress 0 commands in the Tools menu. Wallet encryption with a password. Сreating multiple backups with recording on offline media (flash drives or other portable devices). Sending 1000 DASH to your address. Installing and configuring the dashcore package on a VPS (in the case of purchasing a specialized hosting, this step is not necessary). Copying the masternode.conf file from the VPS to the wallet folder on your home computer. Running a masternode

After completing all the steps, the wallet on the local computer can be closed: it is only needed to store coins, while the server with the masternode works completely independently.

Conclusion

The main problem in assessing the investment attractiveness of masternodes is the unpredictable Dash price. The last few years have shown that the price of cryptocurrencies can change by hundreds of percent over the course of several months or days. Changing the price will inevitably affect the payback period and profitability of the masternode.

In fact, launching a masternode is a major cryptocurrency purchase that brings additional income, and, more importantly, provides integral services crucial to the functioning of the Dash network, including having a direct say in its governance and direction. If an investor has sufficient resources to purchase 1000 Dash, he should take a closer look at this interesting opportunity.