Simply put, it is a server.
Translated into the world of cryptocurrencies it is a wallet that has a fixed number of coins, which is required by the masternode. This coin wallet, which has already been configured for this purpose, it must be kept open 24 hours a day, for a certain period.
This wallet is a node within the blockchain of the currency in question, which serves to perform operations such as instant transactions, lotteries, voting and many other functions that allow the blockchain to move forward with only a fraction of the electricity that Proof of Work mining requires.
The exciting thing about masternodes is that they are mostly passive income for their owners since the blockchain pays a certain amount of coins, from time to time to the owner of the Masternode. In other words, if this currency rises, your payment for the rent of the node also increases. It differs from a traditional PoS because the return is much higher. However, the more masternodes on a network the more time it takes for your masternode to be rewarded.
Masternodes are known as linked validation systems. They are servers that support the network of a chain of blocks and help to enable things that miners cannot do for themselves using the concept of a working test.
It exists in a two-tier system where the second-tier master nodes are next to the first-tier miners. The service voucher and the maintenance voucher are performed side by side in the network.
The Dash cryptocurrencies were the first to use this protocol, but many other cryptocurrencies have adopted the idea ever since. Its original implementation was for anonymous transactions, but it is now being used for many other functions.
HOW CAN I OWN A MASTERNODE?
Anyone with a computer can own a Masternode, and the cost varies depending on the currency you want to invest in. Some coins ask for 100 units to own a Masternode while others ask for a few million, although you also have to consider its value. For example, a Masternode in Dash costs 1000 DASH which would be almost $300 000 dollars, while an Arctic Coin Masternode that costs 1000 ARC only equals $70 at the time of this posting.
Now, what does it take to be part of this new economic potential? Believe it or not, you only need a virtual wallet, it is straightforward, but it is so simple that it can bring some security complications, for example, Virtual currencies can be sent to any person, without quantity restrictions or authorizations, and this can be done under a pseudonym, any day and at any time. It is definitely recommended to also have a VPS setup to allow the node to stay online even when you shut down your computer. I personally use ServerCheap.net as well as Vultr.com for my VPS needs and I highly recommend them.
The advantage of this procedure is that the transactions are totally transparent, since it is possible to verify how many commercial activities are being carried out, by whom and when, everything in real-time, in addition to the capacity that this has to reduce costs and shorten the processes, since, having the opportunity to make payments in real-time the negotiations can be instantaneous, thus eliminating the risks of fraud.