diff --git a/src/impl/dash/coin/coin_state_maintainer.hpp b/src/impl/dash/coin/coin_state_maintainer.hpp
index c91645e3d..2acf09a73 100644
--- a/src/impl/dash/coin/coin_state_maintainer.hpp
+++ b/src/impl/dash/coin/coin_state_maintainer.hpp
@@ -29,6 +29,7 @@
 
 #include <impl/dash/coin/node_coin_state.hpp>    // NodeCoinState
 #include <impl/dash/coin/mn_state_machine.hpp>   // MNState
+#include <impl/dash/coin/block.hpp>            // BlockType
 #include <impl/dash/coin/transaction.hpp>        // MutableTransaction
 
 #include <core/uint256.hpp>
@@ -93,6 +94,26 @@ class CoinStateMaintainer {
         republish();
     }
 
+    /// Header / think path (block connect): fold a newly-connected block's
+    /// special txs into the DMN list incrementally, mirroring dashcore's
+    /// RebuildListFromBlock (MnStateMachine::apply_block). This is the LIVE
+    /// driver that keeps the masternode set the embedded coinbase pays current
+    /// BETWEEN full mnlistdiff snapshots -- on_mn_list_update() stays the
+    /// authoritative resync and is UNCHANGED. MN-readiness is refreshed from
+    /// the post-apply list size: a block that empties the set (all collateral
+    /// spent) drops the bundle to the dashd fallback rather than backing a
+    /// template with a phantom payee. Returns apply_block's ApplyResult.
+    MnStateMachine::ApplyResult
+    on_block_connected(const dash::coin::BlockType& block, uint32_t height) {
+        auto r    = m_state.mnstates().apply_block(block, height);
+        m_have_mn = m_state.mnstates().size() != 0;
+        if (!m_have_mn)
+            demote();
+        else
+            republish();
+        return r;
+    }
+
     /// Reorg / MN-list gap / mempool flush: invalidate the live bundle so the
     /// next get_work falls back to dashd until a fresh tip rebuilds it. The
     /// stashed tip params are dropped -- a reorg means the old prev_hash is no
diff --git a/test/test_dash_coin_state_maintainer.cpp b/test/test_dash_coin_state_maintainer.cpp
index 2bdcc4e14..7ef267b99 100644
--- a/test/test_dash_coin_state_maintainer.cpp
+++ b/test/test_dash_coin_state_maintainer.cpp
@@ -25,6 +25,7 @@
 #include <impl/dash/coin/embedded_gbt.hpp>
 #include <impl/dash/coin/mn_state_machine.hpp>
 #include <impl/dash/coin/mempool.hpp>
+#include <impl/dash/coin/block.hpp>
 #include <impl/dash/coin/utxo_adapter.hpp>
 #include <impl/dash/coin/rpc_data.hpp>
 #include <impl/dash/coin/transaction.hpp>
@@ -45,6 +46,7 @@ using dash::coin::WorkSelection;
 using dash::coin::MNState;
 using dash::coin::Mempool;
 using dash::coin::MutableTransaction;
+using dash::coin::BlockType;
 using dash::coin::build_embedded_workdata;
 using ::core::coin::UTXOViewCache;
 using ::core::coin::Outpoint;
@@ -223,3 +225,68 @@ TEST(DashCoinStateMaintainer, InvalidateReorgRequiresFreshTipToReArm) {
     EXPECT_FALSE(fb);
     EXPECT_EQ(sel.work.m_height, H + 1);
 }
+
+// ========================================================================
+// on_block_connected() -- incremental MnStateMachine::apply_block live-wire.
+// #674 populated the DMN set only via the bulk mnlistdiff snapshot
+// (on_mn_list_update). This slice drives apply_block per connected block so
+// the set the embedded coinbase pays auto-maintains between snapshots, while
+// the dashd RPC arm stays the fallback when the set can no longer back a payee.
+// ========================================================================
+static std::vector<std::pair<uint256, MNState>>
+single_mn_coll(const std::vector<unsigned char>& payout,
+               const uint256& coll_hash, uint32_t coll_idx) {
+    MNState s;
+    s.isValid = true;
+    s.nRegisteredHeight = 2300000;
+    s.nLastPaidHeight = 0;
+    s.scriptPayout.m_data = payout;
+    s.collateralOutpoint.hash  = coll_hash;
+    s.collateralOutpoint.index = coll_idx;
+    return std::vector<std::pair<uint256, MNState>>{{raw256(0x01), s}};
+}
+
+// A block with no special txs touches no DMN records: apply_block registers
+// nothing, the set is unchanged, and the embedded bundle stays live.
+TEST(DashCoinStateMaintainer, BlockConnectNoSpecialTxPreservesReadiness) {
+    NodeCoinState st;
+    CoinStateMaintainer m(st);
+    m.on_mn_list_update(single_mn(p2pkh_script(0x30)));
+    m.on_new_tip(H - 1, PREV_HASH, BITS, MTP, DASH_PUBKEY_VER, DASH_P2SH_VER, CURTIME, VERSION);
+    ASSERT_TRUE(m.live());
+
+    BlockType blk;
+    blk.m_txs.push_back(make_spend(raw256(0x90), 0, 500000000, 1));  // cb (idx 0, skipped)
+    blk.m_txs.push_back(make_spend(raw256(0x91), 0, 400000000, 2));  // plain spend, no collateral match
+    auto r = m.on_block_connected(blk, H);
+
+    EXPECT_EQ(r.registered, 0u);
+    EXPECT_EQ(st.mnstates().size(), 1u);
+    EXPECT_TRUE(m.live()) << "no-op block must not drop the live bundle";
+}
+
+// A block whose non-coinbase tx spends the sole MN's collateral removes it
+// (apply_block pass 2). The now-empty set cannot back a masternode payee, so
+// the maintainer drops the embedded bundle and get_work falls back to dashd.
+TEST(DashCoinStateMaintainer, BlockConnectCollateralSpendDropsToFallback) {
+    NodeCoinState st;
+    CoinStateMaintainer m(st);
+    const uint256 coll = raw256(0x55);
+    m.on_mn_list_update(single_mn_coll(p2pkh_script(0x30), coll, 3));
+    m.on_new_tip(H - 1, PREV_HASH, BITS, MTP, DASH_PUBKEY_VER, DASH_P2SH_VER, CURTIME, VERSION);
+    ASSERT_TRUE(m.live());
+    ASSERT_EQ(st.mnstates().size(), 1u);
+
+    BlockType blk;
+    blk.m_txs.push_back(make_spend(raw256(0x90), 0, 500000000, 1));  // cb (idx 0, skipped)
+    blk.m_txs.push_back(make_spend(coll, 3, 400000000, 2));          // spends the MN collateral
+    m.on_block_connected(blk, H);
+
+    EXPECT_EQ(st.mnstates().size(), 0u);
+    EXPECT_FALSE(m.live()) << "collateral spend emptied the DMN set; bundle must drop to fallback";
+
+    bool fb = false;
+    WorkSelection sel = st.select_work([&]() { fb = true; return DashWorkData{}; });
+    EXPECT_EQ(sel.source, WorkSource::DashdFallback);
+    EXPECT_TRUE(fb) << "empty DMN set must route get_work to the dashd RPC fallback";
+}