Herein lies the first problem: there is 1 address, controlled by the developers holding all of the coins for Masternodes. Doesn’t seem like a problem, right? Wrong, if this address were to be compromised, the malicious actor would be able to collect all the Masternode rewards and move them wherever they wanted. The only way to regain control over Masternode rewards would be to generate a new address and hard fork the chain. A hard fork requires time for people to upgrade their clients and during this time the rewards can be siphoned out the address by the malicious actor and there is practically nothing that can be done to stop it.

Let’s look at another example of what can go wrong. Since the Centralized Masternode systems need a payment server to process payments and distribute Masternode rewards, what happens when that server goes down? Your masternode doesn’t receive rewards until the developer is able to get online and fix whatever stopped payments, this has happened numerous times across all Ethash Masternode coins here’s an example taken straight out of the Ether-1 Discord:

“My node didn’t get paid and it’s the project’s fault

Essentially the payment server had conked out and payments were only being sent to the Master & Gateway nodes. It’s a sad turn of events and one which all Ethash Masternode coins have had to deal with on numerous occasions. So much so that it has become the new norm!

Here’s yet another example. Let’s say you had 100% uptime on Monday and Centralized the payment server went offline on Tuesday. Your server provider has an issue and your node experiences downtime on Tuesday right as the payment server is fixed. The Devs manage to fix the payment server and they scan node uptime and process node payments. You miss out on your reward from Monday because you AND the Centralized payment server had downtime on Tuesday, that isn’t fair. It isn’t fair that your node was securing the network on Monday but isn’t rewarded for its effort because of a problem with centralized payment infrastructure. Usually, Developers will remedy this by offering 2x the rewards as compensation for the payment servers downtime. Who is to say that this is done fairly and equally? You have to take the developers’ word for it. You could watch the payments flow out the wallet but with over 500 nodes online, who has time to sit and monitor it?

Some Masternode coins will say, “Aha, that’s where you have it wrong dear Ether-1 project! My centralized system is keeping track of all blocks submitted on Monday so I can pay everyone fairly.” To this response we would just stare blankly at the gall it takes to flaunt your centralized system as a feature. Every cloud has a silver lining, right?

Here’s an interesting problem for you. Developers often create resource requirements for their tiers of Masternodes. It would be a reach to say the developers do not run any nodes for themselves. Most of these centralized systems are not open-sourced and if they are, how does one verify the code on the Github is the code being used on the server handling all of this? You cannot. This brings with it the danger of the system designer being able to bypass all the requirements enforced on all other node operators. We have observed this in the wild and it’s truly a sad situation.