Masternodes are full-fledged nodes that allow their operators to perform advanced functions that are essential for running a blockchain. Masternoding differ from crypto mining, although they have a connection to them, because node operators receive a reward for each “completed” block. Simply put, masternodes are servers that can be found on a decentralized network. It has a unique function which makes it different from regular nodes because normal nodes cannot usually complete the function. Masternoding include many features, including things like instant transactions, private transactions, and direct delivery.
Each network has its own masternode, with unique features, and pros and cons. That way, no two masternodes are alike, and each system approaches them differently. However, while masternoding can be very useful, and closely related to crypto mining, they are also completely different things, and many newcomers confuse the two wrong too.
Since masternoding can do more than regular nodes, running them also involves a more significant investment. However, those running the masternode are also highly motivated, as they are rewarded for doing so through a portion of the reward blocks. Depending on the network, masternode operators may be rewarded once a day, or even several times a day. However, it’s important to understand that masternodes don’t mine. Many people also mistakenly assume that masternodes are an extension of PoS, where cryptos are not mined but staked. However, this is also not true, as PoW projects can use masternodes as well.
Running a masternoding allows operators to generate passive income simply by holding their coins, which is a method similar to the way bets are staked on PoS. It differs from mining in that earning money does not require expensive crypto mining equipment. The money earned by running a masternode depends on a variety of factors, which means there are no simple answers. Every project works differently, every masternode is unique, but one thing that remains true is that running a masternode can be very profitable if you choose the right coins, and their value spikes over time.