Summary: LocoNet Termination is required for LocoNet to work. One device on LocoNet must provide this termination so that other devices can communicate. Without termination LocoNet devices cannot pass messages between themselves. If you wish to construct a Standalone LocoNet, termination is required.
This topic is not related to Bus Termination
One device, usually a command station, functions as the master, providing LocoNet termination. The LocoNet is terminated when a current source is present on the LocoNet wires (3 & 4), which enables communication between devices. Without this current source communication would not be possible.
There can only be one device providing termination on the LocoNet.
Other devices which can function as a master include
Third Party Devices
DIY LocoNet Termination
It is possible to build your own LocoNet Termination device. What is required is a 12VDC power supply and a 15mA current source. The 12V supply is connected to the Rail Sync pair (Positive connection) while the ground wires are connected to the negative terminal. For LocoNet termination, a 15mA pull up termination is required on lines 3 & 4. This is done with a simple current source circuit.
For more details, see the RR-Cirkits Notebook.
A search of the web will also reveal numerous solutions.