Why Masternodes have to go ?

July 14, 2023

Why we’re removing Masternodes from the Divi Blockchain

Stability, simplicity, security, three ‘S’s that put us on a better path

In a recent article we described the differences between many (but not all!) consensus models available in the cryptoverse. Of these, Divi has pursued a Proof of Stake model for consensus finding and block validation. However, when we started out, Divi used a masternode model (like PIVX, and Dash before that).

As previously discussed, the masternode model of a PoS consensus system has two networks, normal staking nodes that do the block validation and the masternode network that are supposed to provide a governance system.

A masternode network affects a normal PoS network in a way of both rewards transfer and potentially governance. Masternodes need to be funded, but they are funded in a non-colocated method.

Masternode owners are supposed to be able to band together for a DAO, or perhaps put limitations on the blockchain, or release funds for one thing or another. So someone participating in a masternode system could either run a validator node or a masternode (or both!).

Running a masternode allows a stakeholder to operate a node separate from his actual funds which are delegated to the masternode. This is a secure system because the node that is online 24/7 is not in the same computer as the funds that have been allocated to it. Attacking it is pointless if you are looking for someone's funds. 

Operating a staking node on the other hand, places the user’s funds on the same computer as where the validation happens. If you are doing this, you should be knowledgeable in good computer hygiene as well as run your computer with good protocols to keep it safe. An example of this would be to keep your crypto computer separate from the computer you use to browse the internet, use social media, or email. This way, if you get phished, they are not likely to find the computer with funds on it. Or your Microsoft Word file with your seed phrases, etc.(Yeah, I know some of you out there still do that, stop!)

However, Divi is going through a pretty big change. We are moving to a validator node only staking model, without masternodes. Why would we do this when the Masternode funding method seems to be a more secure staking model? 

1. Disagreements between Masternodes on Correct Block

After examining the above image, it’s clear that there are two networks. The masternode network and the staking network. While they work hand-in-hand most of the time, on rare occasions there can be disagreements between the two networks on what the correct block height is. The biggest problem was that the masternode list is not on-chain. Because of this, the masternode list must be propagated peer-to-peer. Consequently, on rare occasions, some disagreement could happen between stakers on the information received from masternodes about the correct masternode to be paid. This is important because every transaction is tied to a particular block and blockchain features are often activated at a particular block height. Not only does this cause instability but when there is disagreement there is also vulnerability to attack.

2. Instability of the Blockchain (e.g., Forks)

One major consequence of the issue listed on point 1 contributing to the disappearance of masternodes was the blockchain's instability, specifically in the

form of frequent forks. Forks occur when different parts of the network disagree on the correct choice of blockchain history. Those can be temporary (due to network connectivity) or permanent (due to differences in the validity of the blocks by two different parts of the network). When forks are permanent, this can lead to a fragmentation of the blockchain’s network. The result of this is that validators end up grouping themselves into different realities. Some groups will have one block height, other groups will have another. It’s a serious issue because there is no preferred choice of fork. Worse, if you make a transaction on a fork that doesn't end up being on the one that ends up being the “real” one, it will be as if that transaction never happened. This generally doesn’t result in loss of funds, but harms economic activity; it is a real pain. In general, temporary forks happen often (their frequency is different for each chain), even in Bitcoin, but they get resolved quickly. With masternodes, when they do happen they are more likely to be permanent, they often take longer to resolve and sometimes it takes some teamwork to make it happen.

3. Inability to Deploy Services on the Blockchain

Masternodes were initially introduced on the Divi Blockchain with the intention of providing services to the network. However, after a years-long effort to reduce the technical debt from DASH and PIVX, it became clear that the masternodes were no longer a viable path for providing on-chain services, and more modern ways of providing governance have become available. Masternodes were simply adding complexity and preventing innovation. Alternative solutions to keep the masternode system weren’t deemed justified due to their inability to completely address the issue as well as their downsides. One of those options was to have the masternodes list on-chain, but this would have had a major impact on the size of the blockchain moving forward, without completely removing all the risks. 

Further, the advancements that are being brought forth in Divi 3.0 were not possible with masternodes in place. We will be able to have features like subscriptions, where people can be paid without your wallet being open, but still under the conditions you define. Same for an on-chain escrow service, where you can set conditions for someone to receive an amount of Divi and they can see that it is available for their receipt. Without masternodes in the way making things more complicated, these and more features can become available.

The Solution: Staking Vaults

To address the challenges posed by the inclusion of masternodes, the Divi Blockchain will leverage the inherent capabilities of Staking Vaults, a feature that only the Divi blockchain has. Staking Vaults are specialized smart contracts that the Divi network provides, designed to offer a more accessible and user-friendly alternative to masternodes. With Staking Vaults, users can stake their DIVI coins, contributing to the network's security and consensus, in the exact same way validators do within a Masternode framework. However, Staking vaults have the same funding security model as masternodes, the validation node, and the funding location are in different places! So the main advantages of masternodes are implemented by staking vaults, completely obviating the small amount of utility masternodes had. Better yet, masternodes required a specific amount of funds to achieve a specific tier of masternode ownership. No longer! You can vault any amount of funds to the 8th decimal place if you want. 

Other advantages are down the road. Oracles are being made to provide governance opportunities through a DAO. The staking vault implementations and queries have been made simpler over the two years they have been around. Thus everything that a masternode provides have fully been displaced, while offering a more secure network, a simpler ecosystem, and a far more stable one with a low chance for forking issues.

The retirement of masternodes from the Divi Blockchain is a step towards the future. The invention of Staking Vaults offers us a promising improvement. Their extended agility compared to masternodes and their ease of access compared to staking on the desktop wallet offers a more inclusive and user-friendly alternative, with greater flexibility. This will allow Staking Vaults to replace the Masternodes in their role of network anchor all over the world with 24/7 reliability through their Cold and remote nature. With Staking Vaults, the Divi Blockchain is poised for growth, enabling exciting new features and opportunities for users. The replacement of masternodes marks a significant step forward in the evolution of the Divi ecosystem, setting the stage for a brighter and more accessible blockchain future.

This article is part of a series of articles regarding the migration to Divi 3.0. It will be executed in steps over several weeks, allowing for a seamless and efficient transition process. We urge you to pay close attention to the forthcoming updates, as they will contain vital instructions for the migration. There will be a gamification element incorporated, so we encourage you all to stay engaged! This should make the process more engaging and a rewarding experience for all node owners and the Divi family. You can find the introduction article as well as the list of articles of the series on this link.