What’s The Difference Between A Masternode And A Service Node

By Contrast Crypto on Altcoin Academy

What Is A Masternode?

A Masternode is like a regular node — a computer containing data that is linkable with other computers — on a blockchain network, but with more responsibility. Masternodes are generally required to collateralize a portion of their cryptocurrency holdings to be eligible to receive a reward.

By collateralizing, or staking, cryptocurrency into the Masternode, the circulating supply is reduced. Lower supply means both higher demand for the cryptocurrency and less selling pressure.

Masternodes are rewarded in cryptocurrency payments which helps offset the financial cost associated with running a Masternode — the operator needs to ensure the computer (or server) hosting the masternode is on and functioning 24/7. These rewards can be substantial, which is why Masternodes are becoming a very healthy alternative to mining.

What Is A Service Node?

Service Nodes offer the same benefits as Masternodes but have more going on under the hood. They are the next iteration of Masternodes and, because they offer additional functionality, they have the potential to earn higher rewards.

The term ‘Service Node’ is relatively new to the blockchain ecosystem, though their implementation has existed for a number of years. Given Dash’s consensus protocol offers an element of Proof of Service, Dash was the first project to successfully implement a Service Node infrastructure. Although commonly referred to as Dash Masternodes, Dash nodes provide a suite of ancillary services to their users which go above and beyond what is offered by simple masternodes.

So what is it?

A Service Node is a Masternode that provides additional services to a blockchain network, enabling the development of a more functional product with better user experience.

Additional services may include:

— Instant Transactions

— Private Transactions

— Private Web Applications

— Private Web Browsing

— Decentralized Exchange

— Governance

Which Projects Have Service Nodes?

As mentioned previously, Dash was the first cryptocurrency project to implement a Service Node infrastructure — even though they call them Masternodes. But the times have changed, and so have Dash’s node infrastructure, and because modern Dash Masternodes provide additional services, we’ve had to categorize them as Service Nodes.

Unfortunately, we can’t mention every single project we believe to be operating with a Service Node infrastructure, but here are six:

Dash’s Service Nodes give users the ability to transact instantly and confidentially — via InstantSend and PrivateSend. Prior to Service Node implementation, instant and confidential transactions were not an option for Dash holders.

Ether1 uses Service Node technology to store, propagate and deliver content to end-users, combined with the InterPlanetary File System (IPFS) to deliver decentralized content that seamlessly integrates into existing mainstream internet protocols.

The Loki Project implemented Service Nodes to facilitate instant transactions — via their Blink service — as well as storage and data routing services for Service Node applications, or SNapps for short. Loki Messenger, an end-to-end encrypted messaging application, and Lokinet, a blockchain-based onion routing network (like Tor) make use of Loki’s Service Node infrastructure to ensure communications and transactions remain private.

Blocknet’s Service Node infrastructure acts as a distributed hash table (DHT) to support trustless decentralized exchange services, data routing, and cloud services. XBridge, Blocknet’s decentralized exchange service uses Service Nodes to decentralize the four major components of cryptocurrency exchange: storage of funds, order books, order matching, and settlement.

REMChain utilizes a Proof of Service consensus algorithm operating on top of a list of approved nodes, or Block Producers, to control the interactions of nodes and enforce a fair system for confirming blocks and allocating rewards. REMME’s Proof of Service algorithm is designed to ensure every REMME holder is fairly represented and incentivized to participate in the ecosystem.

Holochain can enable a Proof of Service consensus mechanism, rewarding users — in cryptocurrency — when they complete service for another user. It isn’t a coin or a traditional currency, it’s a system of agreement between users — not necessarily associated with a financial value, but rather a Proof of Service value. It’s a system of community engagement, not a system of gambling or profit.

Syscoin’s Masternodes, like Blocknet, provide the additional service of maintaining decentralized marketplaces. Additionally, the Z-DAG Protocol’s instant asset transfer is facilitated by an underlying Service Node infrastructure.

XtendCash has introduced Service Nodes to their project as a collateralized full node, which in the future will enable the team to develop further on the XtendCash blockchain.