Dash (DASH) is a privacy-centric digital currency with instant transactions. It is based on the Bitcoin software, but it has a two-tier network that improves it. Dash allows you to remain anonymous while you make transactions, similar to cash.
Anyone can run a masternode. The objective is to have enough decentralization to ensure that no single person controls a significant fraction of the masternodes. However, to avoid bloating the network with unnecessary masternodes or encouraging reckless operators, there is one condition that needs to be fulfilled: proof of ownership of 1000 Dash. The coins don’t need to be in the masternode, but they need to be kept in a certain way that is transparent to the entire network. If the owner moves or spends those coins, the masternode stops working and payment ceases.
Masternodes are paid by the network for the PrivateSend, InstantSend and governance services they provide. 45% of the block reward is paid out to the masternodes, 45% to miners and 10% to the budget. In practice, half of the reward from a normal block goes to the miner and half to the masternode. Then, every 16,616 blocks (approximately 30.29 days), a superblock is created that contains the entire 10% payout to the budget proposal winners. Masternodes are selected for payment in each block (approximately every 2.6 minutes) from a deterministic masternode list, and moved to the back of the list after payment. As more masternodes are created, the duration between payments increases. If the collateral behind a masternode is spent, or if a masternode stops providing services to the network for more than one hour, it is removed from the list until normal service resumes. In this way, masternodes are given incentive to provide efficient and reliable services to the network.