In addition to traditional Proof of Work (PoW) rewards for mining Dash, users are also rewarded for running and maintaining special servers called masternodes. Thanks to this innovative two tier network, Dash can offer innovative features in a trustless and decentralized way. Masternodes are used to power CoinJoin, InstantSend, and the governance and treasury system. Users are rewarded for running masternodes; 45% of the block reward is allocated to pay the masternode network. You can view practical guides on all topics relating to masternodes here.
Masternodes enable the following services:
- InstantSend allows for near-instant transactions. Dash InstantSend transactions are fully confirmed within two seconds.
- CoinJoin gives financial privacy through a decentralized implementation of CoinJoin.
- ChainLocks, which protects the blockchain against 51% mining attacks by signing blocks as they are mined.
- Governance and Treasury allows stakeholders in Dash to determine the direction of the project and devotes 10% of the block reward to development of the project and ecosystem.
- Dash Evolution will make using cryptocurrency as easy as using PayPal.
Masternode owners must have possession of 1000 DASH, which they prove by signing a message included in a special transaction written to the blockchain. The Dash can be moved or spent at any time, but doing so will cause the masternode to fall out of queue and stop earning rewards. Masternode users are also given voting rights on proposals. Each masternode has one vote and this vote can be used on budget proposals or important decisions that affect Dash.
Masternodes cost money and effort to host so they are paid a percentage of the block reward as an incentive. Because only one masternode is paid in each block, the frequency of the payment can vary, as well as the value of the Dash paid out. This tool shows a live calculation of masternode earnings. These rewards decrease by 7% each year, together with the block reward. There is also the possibility for masternodes to earn money from fees in the future.