Masternodes are services operated by token holders that help to host and maintain a blockchain. They resemble staking, in that coins are held in a wallet and rewards are given for the services they provide, but masternodes are required to fulfill more obligations on the network and so require a much larger reserve of coins. In return, the rewards for operators are bigger and more regular than with staking. Masternode holders are also afforded more privileges when it comes to the direction of the project, like being allowed to vote in proposals. Masternodes must be online 24/7, and so a Virtual Private Server (VPS) is usually required. Like staking, masternodes can prove a good source of passive income, although the upfront costs and setup process can be prohibitive.