If you’re a Masternode operator, you have probably heard about hot and cold-hot masternode setups. This article aims to show you the difference between them and how to decide which method to choose to bring your Masternode online. Let’s start first with a short recapitulation of what each of them represents.
Masternodes Hot Setup
Ever since crypto exist as a digital currency, it’s been related to the Internet space. Hot wallets are constantly connected to it. Being online all the time hides its risks and if you’re exposing your Masternode collateral in this vulnerable environment, you might get compromised.
Why you should do that anyway? Unfortunately, most of the Masternodes are hosted on Virtual Private Servers (VPS), which aren’t secure enough to protect your funds. You’re supposed to run a 24/7 wallet to gain the rewards of your investment. What a hacker needs is simply your credentials (Account and password) to access your Masternode and steal your account.
Security tips to stick with when running a hot node
I would like to point the most commonly used security measures to protect your Masternode collateral.
- Change Your Password – When creating a VPS, you’ll receive an automatically generated password. It’s security wise to change it with another one. You can use www.passwordsgenerator.net
Hint: If you have more than one VPS use different passwords for each of them.
- Try to Stick with 90% Resource Usage – When using a VPS, which is basically a shared server, you’ll receive some resources allocated to you. If you’re using a 100% of them your VPS might get shut down for a set period of time.
- Stick to 1 Masternode per VPS – If you’re willing to have more than one Masternode, it’s strongly recommended to use a different VPS of each of them. Separating them will increase your security level, especially if you’re a new Masternode operator.
Masternodes Cold-Hot Setup
How to proceed to secure your Masternode in the open space? Well, close it, so no one would be able to access it. Cold wallets are exactly the opposite of Hot wallets – they’re not connected to the Internet, which makes them more or less a safe place to protect your funds.
Here comes the solution – your collateral isn’t necessary supposed to be in your hot wallet. You might keep your coins in a cold place and simply access them using a third-party.
Guide on How to Use a Cold-Hot Setup
A good example worth more than thousands of explanations, so follow the steps to get a general idea of how a cold-hot setup actually works.
Example
Let’s say you would like to run a cold-hot setup for a Dash Masternode.
- Step 1: Install Dash official wallet on your personal computer at home.
- Step 2: Put the collateral inside and lock your coins.
- Step 3: Choose and rent a VPS.
- Step 4: Download and synch the full Dash blockchain on the VPS.
- Step 5: Connect the VPS with your personal computer.
- Step 6: Close your cold wallet
It’s all done! Your coins are safe on your cold (not connected to the Internet) device and your Masternode is still constantly online (on the VPS).
Hint: Always encrypt the .dat file and back it up! It’s a mandatory measure to secure your funds.