Masternodes

from Wikipedia, the free encyclopedia

Masternodes are servers in the network of a cryptocurrency. They save blockchains in real time and synchronize the data with other masternodes.

overview

In a network for blockchains there are two types of nodes (English for "nodes"): The "normal" nodes are participants that operate the mining and generate the cryptocurrency. Masternodes, on the other hand, manage the network and save the respective blockchain. They are essential for the operation of the network and ensure stable operation. Therefore, an initiative of private investors created incentives in 2015 to make more masternodes available.

A certain amount of coins must be deposited on masternodes so that they become masternodes, work and thus maintain the entire system. How high this is depends on the respective cryptocurrency and its specifications. This creates a barrier that avoids centralization or monopoly . Thus, not a few actors or even an individual can control a large part of the masternodes, especially since the deposited coins must remain untouched.

Masternodes belong to the category of paid full nodes . They must be permanently available on a server, as no remuneration is paid to the masternodes in the event of a connection interruption.

Depending on the blockchain, masternodes have different functionalities, but above all the following have in common:

  • Private send
  • Instant send
  • Coin mixing
  • Participation in the politics of the coin with the help of voting rights

Demarcation

In contrast to normal nodes, which only save their own transactions in a hash block , a masternode saves the entire blockchain and communicates its changes to the other masternodes. This is necessary so that the entire network always has current data and is "up to date". One speaks of a "Proof of Service" (PoSe).

Areas of responsibility

The main task of masternodes is the processing of transactions, the data of which they receive from the normal nodes. These transactions are checked in the masternodes and, if verified, forwarded to the rest of the network.

Private send

In private send transactions, the privacy of the sender is protected by concealing their identity through so-called coin mixing. This means that the so-called inputs in a wallet, the digital purse, can no longer be clearly assigned to a single user, but are mixed with those of two other users.

Instant send

Instant Send allows almost instant transactions that are comparable to the speed of a credit card payment. The entire transaction is not executed before it becomes valid. Instead, the coins are initially marked as "spent" and blocked in order to prevent a second spend ("double spend"). Now the payment confirmation can already be given, while the actual deposit in the blockchain is delayed.

Governance and voting

Due to the decentralized structure of a crypto currency network with masternodes, there is no fixed regulatory body that can alone make network policy decisions. Since the operators of the masternodes de facto provide the network, they also have voting rights and thus form the decision-making body as a whole.

Proposals or topics to be discussed are known as proposals . When voting, each operator of a masternode can either agree to the proposal, reject it or abstain. Every masternode operator can also submit proposals and vote on them. The developers of the network then correspond to the result of the vote and implement the proposal or not. This process is called decentralized governance .

Taxation of masternodes

Since previous specialist literature on the subject of taxation of income from crypto currencies is based on the oldest and best-known crypto currency Bitcoin , the question arises of how income from the operation of a masternode should be taxed. In contrast to other cryptocurrencies, Bitcoin does not pay for the operation of a masternode. As a rule, however, an individual consideration should lead to this income being allocated to “other income”.

Differentiation from commercial activities

Income from mining operations is often assigned to a commercial activity. Masternodes belong to the same network as normal mining nodes and also receive their income from participating in it, which is why such a classification can also be expected here. As a result, the following obligations arise:

  • Registration with the responsible trade office in accordance with Section 14 Paragraph 1 Sentence 1 Trade Regulations (GewO)
  • In the case of natural persons or partnerships and exceeding the exemption amount of EUR 24,500: payment of trade tax
  • Derivative (§ 140 AO in conjunction with §§ 238 and 241a HGB) or original (§ 141 AO) accounting obligation

According to Section 15 (2) of the Income Tax Act (EStG), a commercial activity exists if the following four criteria are met:

  • Intention to make a profit
  • sustainable activity
  • Participation in general economic traffic
  • independence

Of the various negative criteria, at least one is not met, as it is a type of private asset management.

Differentiation from income from capital assets

Due to the obligation to store a certain amount of the cryptocurrency on the server, there is the possibility of adding the income from the operation of the master node to the income from capital assets. In this case, § 20 EStG would apply. However, this is also not the case, since the taxation facts do not apply. The operator of the masternodes has no claim to capital repayment, there is no dividend and there is also no capital claim for legal tender.

Assignment as "other income"

According to the subsidiarity principle , the income from the operation of a masternode is to be assessed as other income if all other types of income are not applicable . Section 22 No. 3 EStG defines “other performance” as a performance that includes doing, tolerating or omitting. Regular maintenance of the server and the tolerance of its use by the network meet these criteria. Income above the tax exemption of EUR 256 per year is therefore taxable under other income.

Individual evidence

  1. ↑ BERENTSEN, A./SCHÄR, F .: Bitcoin, Blockchain and Cryptoassets . 2017, p. 255 .
  2. ↑ Tax special: How do I tax masternodes? July 21, 2018, accessed May 8, 2019 .
  3. ↑ Masternodes365.com: What is a Masternode? Definition and explanation. Retrieved May 29, 2019 .
  4. ↑ Masternodes: What are the economic and tax implications? In: CryptoTax. April 20, 2018, accessed on May 29, 2019 (German).
  5. ↑ Kathleen Händel: Blockchain Nodes - Definition and Functioning of Nodes. June 19, 2018, accessed May 26, 2019 .
  6. ↑ What is PrivateSend? In: Dash Embassy DA-CH. Retrieved on May 29, 2019 (German).
  7. ↑ What is InstantSend? In: Dash Embassy DA-CH. Retrieved on May 29, 2019 (German).
  8. ↑ Masternodes - money through network protection. January 31, 2018, accessed June 6, 2019 .
  9. ↑ Masternodes and Voting. In: PIVX. Retrieved July 6, 2018, May 29, 2019 (UK English).
  10. ↑ Taxation of masternodes - taxation of cryptocurrencies. Retrieved May 8, 2019 .
  11. ↑ Mazars: Master Nodes taxation - Mazars - Germany. September 14, 2018, accessed on June 6, 2019 (German).
  12. ↑ Bitcoin and Taxes. In: CryptoTax. Retrieved June 6, 2019 (German).