Masternode
Masternodes are a cryptoeconomic primitive some proof of work blockchains employ empowering a subset of nodes with additional power to oversee the mining and governance of the network.
The primary operational difference for blockchains employing the masternode model is the separation of powers between discovering and verifying new blocks. Masternodes verify blocks submitted by miners. They are incentivized to do this job well by a separate block reward designated for masternode operators.
To earn status as a masternode requires holding a substantial amount of a network’s cryptoasset. Posted as collateral to ensure the operator responsibly conducts the activities required by the network of masternodes.
If a masternode fails to conduct its oversight responsibilities to the required specifications of the network. Typically a penalty is imposed slashing a portion of the posted collateral from the masternodes holdings.
For example
If an network requires masternodes to hold 1000 of the network’s token to operate and imposes a 10% penalty for verifying blocks that fail to meet the chain’s requirements. Than an operator would lose 100 tokens if they verified a block that did not conform to the specifications of the network.
In this regard Masternodes operate almost like a Proof of Stake Layer on top of a Proof of Work chain. Since masternodes earn their block reward by passively staking the network’s native cryptoasset to securely verify blocks. As opposed to actively trying to earn rewards via mining.
Further Reading Masternodes
What are Masternodes? Complete Beginner’s Guide