Masternode

Masternodes, also known as bonded validator systems, are special types of nodes in a peer-to-peer network which guarantees a minimum level of performance and functionality to perform certain tasks in exchange for a financial incentive. A master node is a full cryptocurrency node or cryptocurrency wallet that contains a full copy of a blockchain and acts similar to a server on a decentralized network.

Masternodes are useful for performing special functions and have special features made possible through containing a full copy of the blockchain, these include: increasing transaction privacy, performing instant transactions, governance and voting participation, and enabling a budgeting and treasury system on the blockchain.

There are three types of masternodes which include masternodes using different consensus mechanisms; proof-of-work (POW), proof-of-stake (POS), and a hybrid model of POW and POS.

Due to the nature of masternodes rewarding users for owning them, cryptocurrencies using masternodes have the potential to be scams because the coins may offer no utility, have unfair coin specifications, unfair pre-mining, unfair presale schemes, unclear roadmaps, and/or unknown developers.