Masternodes are described as servers that can be found on decentralized networks. These servers have unique functions that make them significantly different from ordinary nodes. The ordinary nodes normally cannot complete the functions that masternodes can. They have many features like private transactions, instant transactions, and direct send.
Every network has its local masternodes that have distinct features offering both benefits and shortcomings. Thus, there are no two masternodes that are entirely alike and each system approaches them differently.
Nevertheless, although masternodes can be quite rewarding, and are majorly linked to crypto mining, they are a completely different thing. Many newcomers confuse the two.
Difference Between Masternodes and Mining
Running masternodes involves a considerable investment since they do much more than the regular nodes. But, all investors that run the masternodes are highly motivated since they get rewarded for doing that in the form of a segment of the block rewards. Masternodes operators may get rewards daily subject to the network they use. Some even reward several times a day.
Nonetheless, it is important to understand that these masternodes are not mining. Many people also confuse and assume that the masternodes are an extension of PoS, where the cryptocurrencies are not mined but entirely staked. That is not the case since even PoW projects can use masternodes too.
Operating a masternode enables the users to generate a passive income by just holding on their coins. That method is similar to how stakes work in PoS. That makes it different from mining since earning money does not need getting expensive crypto mining equipment.
The money that is obtained by running a masternode is determined by different factors meaning that there is no simple answer. Every project is unique in the way it works since every masternode is unique. However, what is proven is that running a masternode can be quite profitable if a user chooses the right coin and its value surges in time.