Understanding Masternodes#

Overview#

Masternodes, once unique to the Dash network, are now becoming popular as the technology is forked into other blockchains. This section of the documentation describes the principles and mechanisms of masternodes and the services they provide to the Dash network specifically.

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 and 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.

Anyone can run a masternode. The objective is to have enough decentralization to ensure that no single person controls a significant fraction of the masternodes. However, to avoid bloating the network with unnecessary masternodes or encouraging reckless operators, there is one condition that needs to be fulfilled: proof of ownership of DASH collateral. The coins don’t need to be in the masternode, but they need to be kept in a certain way that is transparent to the entire network. If the owner moves or spends those coins, the masternode stops working and payment ceases.

Masternodes are paid by the network for the InstantSend, CoinJoin and governance services they provide. 20% of the block subsidy goes to the budget with the remaining 80% split between miners and masternodes per this block reward reallocation table. Then, every 16,616 blocks (approximately 30.29 days), a superblock is created that contains the entire 20% payout to the budget proposal winners. Masternodes are selected for payment in each block (approximately every 2.6 minutes) from a deterministic masternode list, and moved to the back of the list after payment. As more masternodes are created, the duration between payments increases. If the collateral behind a masternode is spent, or if a masternode stops providing services to the network for more than one hour, it is removed from the list until normal service resumes. In this way, masternodes are given incentive to provide efficient and reliable services to the network.

Having so many servers holding a full copy of the blockchain and working for the coin can be extremely useful. Thanks to the reward system, there is no risk of not having enough masternodes, and the developers can rely on them quickly deploying any new decentralized feature they want to implement. This is where the true strength of Dash lies - an incentivized system of thousands of distributed servers working 24x7 means that Dash can scale more efficiently and deploy services more quickly than a blockchain run entirely by unpaid volunteers. The more masternodes, the better and safer the Dash network.

As of July 2024, the Dash network has over 3000 masternodes located in over 20 countries and hosted on over 140 ISPs. The block reward is approximately 1.9 Dash, so the selected masternode receives 1.4 Dash per payment or approximately 6.5 Dash per month. The block reward decreases by 7.14% approximately once per year, so the annual earnings for a masternode owner is approximately 7% of the collateral, and will decrease over time as calculated here. See this tool to calculate real-time payment rates, and this site for various real-time statistics on the masternode network.

Evolution Masternodes (evonodes)#

Evolution Masternodes (evonodes) are a subset of masternodes that have been created to host Dash Platform. Evonodes are similar to regular masternodes, but have these differences:

	Masternode	Evolution Masternode
Collateral	1000 DASH	4000 DASH
Service(s)	Only Dash Core	Both Dash Core and Platform
Voting Weight	1 (collateral amount / 1000)	4 (collateral amount / 1000)

Evonodes also have higher hardware requirements than regular masternodes due to the additional Dash Platform services they host. See DIP28 for more information about evonodes.

Masternode Concepts#

A list of available documentation appears below:

Important concepts:

Masternodes are “registered” and begin offering services when a ProRegTx special transaction containing a particular key is written to the blockchain.
The ProRegTx references the transaction id (txid) and index holding the collateral. The IP address and port of the masternode are also defined in this transaction.
The ProRegTx contains 2 Dash addresses (also called public keys) and one BLS public key, which represent 3 different roles in the masternode and define update and voting rights. The keys are:
1. ownerKeyAddr: This is a Dash address (public key) controlled by the masternode owner. It is different from the address used for the collateral. Because the owner uses the private key associated with this address to issue ProUpRegTx transactions, it must be unique for each masternode.
2. operatorPubKey: This is the BLS public key of the masternode operator. Only the operator is allowed to issue ProUpServTx transactions. Because the operator key is used during live masternode operation to sign masternode-related P2P messages, quorum-related messages and governance trigger votes, the BLS key must be unique for each masternode.
3. votingKeyAddr: This is a Dash address (public key) used for proposal voting. Votes signed with the corresponding private key are valid while the masternode is in the registered set.
Masternode owners should specify an address different from the collateral to receive payments in the ProRegTx. The owner may optionally specify a non-zero percentage as payment to a separate masternode operator, if applicable.
The masternode configuration can later be updated using ProUpServTx, ProUpRegTx and ProUpRevTx transactions. See Updating Masternode Information in DIP003 and Updating Masternode Information in this documentation for more details.

The process of setting up or upgrading a masternode is as follows:

Set up your server and operating system
Install the Dash software and synchronize the blockchain
Generate a BLS key pair and enter the private key on the masternode
Prepare a ProRegTx transaction
Sign the ProRegTx transaction
Submit the signed ProRegTx transaction

Step 1 can be omitted if you have an existing server. Steps 2 and 3 require direct access to the masternode. Steps 3 and 4 require access to a Dash Wallet (or DMT). Step 5 requires access to the wallet actually holding the collateral. Step 6 requires a Dash balance to pay the transaction fee.

Masternodes vs. mining#

Dash, like Bitcoin and most other 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: 80% of the block subsidy is split between the miner and a masternode per the distribution found here, while 20% is reserved for the budget system (created by superblocks every month).

The masternode system is referred to as Proof of Service (PoSe), since the masternodes provide crucial services to the network. In fact, the entire network is overseen by the masternodes, which have the power to reject improperly formed blocks from miners. If a miner tried to take the entire block reward for themselves or tried to run an old version of the Dash software, the masternode network would orphan that block, and it would not be added to the blockchain.

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. Additionally, each masternode is “secured” by DASH collateral. Those DASH remain under the sole control of their owner at all times, and can still be freely spent. The funds are not locked in any way. However, if the funds are moved or spent, the associated masternode will go offline and stop receiving rewards.

Payment logic#

Masternodes payments all originate on the Core chain. The Core chain pays out 62.5% of the masternode portion of Core block rewards. The remaining 37.5% is put into the credit pool and used for evonode rewards on Platform. Masternodes and evonodes also receive a portion of transaction fees on the Core chain, while evonodes receive all fees from Platform.

Because the reward distribution percentages are fixed, the number of evonodes is expected to stabilize around a fixed number based on the total number of masternodes (considering the current number of ~3850 Masternodes, ~450 evonodes are expected). This is because if there are more than that fixed number of evonodes, running a regular MN will be more profitable than running an evonode, and hosts will convert their evonodes into MNs.

Reward reallocation#

Since the masternode reward reallocation hard fork activated in August 2024 at block 2128896, part of the coinbase masternode subsidy is moved into the credit pool each time a block is mined. Now, evonodes receive a single reward per payment cycle on the Core chain instead of rewards from four sequential blocks, as in Dash Core v19/v20.

Masternode payment frequency and payment amount have both been affected by this fork, as described in the following sections. Although masternodes initially saw a significant drop in rewards, a market-driven point of equilibrium between regular masternodes and evonodes is expected where rewards are similar to what they were before the fork.

Tip

Until the network reaches a point of equilibrium, the number of masternodes and evonodes is expected to fluctuate. As more masternodes are converted to evonodes, payment frequency (and therefore rewards) on the Core chain will continue to increase. See the Evonode FAQ, DIP28, and the proposal approving evonodes for more information.

Payment frequency#

The frequency of Core chain masternode payments has increased as fewer payments are made per cycle. Around the time of the hard fork, the network had approximately 2600 enabled masternodes and approximately 175 enabled evonodes. This resulted in a reduction from 3330 payments per cycle (2600 + (175 * 4)) before the fork to only 2775 (2600 + 175) after the fork. See the following table for the outcomes of this change.

	Pre-fork	Post-fork	Difference	Outcome
Payment (blocks)	3300	2775	-525	More frequent payment
Payment (days)	5.73	4.82	-0.91	More frequent payment
Payments / year	64	76	12	More payments

Payment amount#

The increased payment frequency is balanced against the reduction per-block payment amount on the Core chain. This reduction resulted from the moving of some funds to the credit pool for Dash Platform. The table below compares the miner, credit pool, and Core chain masternode payments from a block immediately before the hard fork with the block immediately after it.

Category	Pre-Fork	Post-Fork	Difference
Miner	0.48	0.48	No change
Credit pool	0	0.54	+0.54
Masternode	1.43	0.89	-0.54
Total	1.91	1.91	No change

Tip

As more masternodes are converted to evonodes, payment frequency will increase, and the difference between overall pre-fork and post-fork rewards per year on the Core chain will decrease.

Core block rewards#

Since Dash version 0.13.0, masternode payments are entirely deterministic and based on a simple list sort algorithm. Dash version 0.13.0 implemented DIP003 which defines two sets of masternodes.

The full set, which contains all registered masternodes that have not spent their collateral funding transactions.
The valid set, a subset of the full set which contains all masternodes which are not marked as Proof of Service (PoSe) banned.

Each masternode in the set of valid masternodes, identified by its registration transaction ID, is associated with the block at which it was last paid. If it has never received payment or was banned for failing to meet the PoSe requirements, then the block at which it was first registered or at which service was restored is used instead. The list is sorted in ascending order by this block height and ProRegTx hash (as a tie breaker in case two masternodes were registered in the same block), and the first entry is selected for payment.

The Core block reward rules apply uniformly to regular masternodes and evonodes. Each are paid once per payment cycle and receive the same block subsidy amount.

Platform rewards#

Evonode rewards are based on participation in Platform consensus. Specifically, evonodes are paid for the blocks they propose while in the active validator set. At the end of each Platform epoch (9.125 days), block rewards are paid to the masternode identities associated with the participating evonodes.

Proof of Service#

Proof of Service (PoSe) is a scoring system used to determine if a masternode is providing network services in good faith. A number of metrics are involved in the calculation, so it is not possible to game the system by causing masternodes to be PoSe banned for failing to respond to ping requests by e.g. a DDoS attack just prior to payment. Each failure to provide service results in an increase in the PoSe score relative to the maximum score, which is equal to the number of registered masternodes. If the score reaches the number of registered masternodes, a PoSe ban is enacted and the masternode must be repaired to ensure it provides reliable service and registered in the list again using a ProUpServTx. The current scoring rules as of Dash 0.14 are:

Failure to participate in DKG= 66% punishment
Each subsequent block reduces PoSe score by 1

Quorum selection#

In past versions of Dash, quorums of 10 masternodes were formed spontaneously to lock InstantSend transactions. As of Dash 0.14, quorums are deterministically formed, contain more masternodes and remain alive for a longer period of time. While they remain responsible for InstantSend transactions, the locking mechanism has changed to automatically attempt locks on most network transactions according to the requirements described here. Masternodes are now also responsible for more network consensus functions, such as ChainLocks. Masternode quorums are formed through a process of distributed key generation. Failure to participate in DKG will eventually result in a PoSe ban as described above.

Masternode requirements#

DASH collateral: Hosting a masternode requires a large amount of DASH collateral. Arguably the hardest part. Dash can be obtained from exchanges such as Poloniex, Bittrex, Kraken and LiveCoin. Shapeshift’s service is also an excellent way.
A server or VPS running Linux: Most recent guides use Ubuntu 22.04 LTS. We recommend VPS services such as Vultr and DigitalOcean, although any decent provider will do.
A dedicated IP address: These usually come with the VPS/server.

In addition to the DASH held in collateral, masternodes also have minimum hardware requirements. For Dash versions 20.0 and higher, these requirements are as follows:

Regular masternodes#

	Minimum	Recommended
CPU	2x 2 GHz	3x 2 GHz
RAM	4 GB + 2 GB swap	8 GB + 4 GB swap
Disk	60 GB	80 GB
Network	750 GB/mth	1 TB/mth

Evonodes#

Evonodes have higher hardware requirements since they host Dash Platform services along with Dash Core. To support the network effectively, the following requirements are recommended:

	Recommended
CPU	4x 2.4 GHz
RAM	8 GB + 2 GB swap
Disk	200 GB
Network	1 TB/mth

Masternode bandwidth use varies and will grow as the network does.