What is POS / POW / Masternode ?
Today, we will explain pow / pos / masternode for basic understanding.
Computer is rewarded for contribution to block creation and verification(network validation) through a number of computations.
POW is increasingly resource-heavy with considerable electricity requirement, so there is a high level of cost involved with mining through POW method.
- POS(Proof Of Stake)
Wallets(nodes) are rewarded for the coins within that contributes to block creation and verification(network validation)
Fair decision making done not based on mining hash, but on coin shares
Prevents centralization through mining hash power
Economical and environmental with no energy waste
Provides fair reward based on ownership of coins
APIS utilizes POS mining
APIS COIN which aims to “lower the barrier to entry of cryptocurrency investment and expand the adoption of blockchain” will utilize POS in line with its goals.
Masternode is a special form of node(that normally verifies transactions on the network). What sets masternode apart is its governance and voting rights as well as increased transaction privacy and instant transactions, but perhaps the most known benefits of a masternode is that some of the block reward is granted to the owners of masternode. By setting aside a set number of a coin on a masternode, an investor can get a stable reward much like how interest is given at banks.
For instance, if one held onto Dash, one of the most notable masternode-capable coins, for a year from Dec 1 2016 to Dec 1 2017, his ROI would have been 9040% due to Dash price increase. Had he set a masternode with his Dash, the ROI would have risen to 9844% due to masternode reward.
If the price of a coin rises continuously, ROI will rise higher. Even if the price decreases, one is less likely to lose out due to masternode rewards. This reward therefore enables risk management to some extent.
The main disadvantages of masternode is what is required to set up a masternode. One must construct a server or borrow from server providers(AWS, google cloud, AZURE)on which masternode can run on, and the minimum number of a certain coin required for a masternode(1,000 coins for Dash, which translates to $450,000). Such high amount of a certain coin, in addition to the professional knowledge required to set up a masternode, continues to be a significant barrier to entry for masternode.
In summary, masternode can allow stable increase of asset in a certain cryptocurrency, but it requires significant capital and professional knowledge.
Next time, we will post the scalability of APIS.