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7 days ago

What are Bitcoin nodes?

Running a Bitcoin node is not that complicated. While many people pay attention to what the miners are doing and why proof of work is so important for the network, they often overlook the fact that each node plays an important role. But what is a Bitcoin node, and what is it doing exactly? In today’s article, we like to shed light on one of the central components of the Bitcoin network.

What is a Bitcoin node?

Generally speaking, a node is a computer that connects to other computers which has to follow pre-defined rules and shares information. With Bitcoin, these rules are defined by Bitcoin’s protocol. Nodes are critical in a peer-to-peer network because they are needed to keep the network running. You might already have heard the term “full node”.

A full node is a computer in the Bitcoin network that hosts and synchronizes a full copy of the entire Bitcoin blockchain. Each full node validates transactions and blocks, and most of them accept transactions and blocks from other full nodes. So, their main task is to validate transactions using their copy of the blockchain and relay them to the rest of the network.

Light nodes – The more common version

Running a full node requires a lot of resources and is therefore not feasible with every device. This is especially the case when hard drive capacity is limited. To solve this problem and make wallets the most common application available on these devices, a light node is needed to do the job.

A light node doesn’t have a full copy of Bitcoins blockchain. They only download the block headers making them faster and also slimmer in terms of disk space. Light nodes are dependent on full nodes and will either connect to a public server that will help them syncing the network or to a specific full node defined by the user.

If you are using Electrum wallet, this is something you can try out. Because the software is a light client, it allows you to connect to a server or full node of your choice to interact with the network. The same goes for most software wallets that are available for your smartphone. There are only very few exceptions where a software wallet on a smartphone will act as a full node. At the time of writing, this would require more than 350 GB of free disk space.

Miners are also nodes

While they are sometimes perceived as apart from the rest of the network, they are not. Miners are also running nodes in the network, but they serve a different purpose. Instead of validating and propagating blocks and transactions, they are adding new blocks to the blockchain.

If a miner successfully finds a new block by solving a cryptographic puzzle, the rest of the network validates that block, and it becomes part of the chain. In return, the miner receives a reward, consisting of the so-called block reward and the transactions fees that are included in the block that the miner has solved.

Other types of nodes

Many other cryptocurrencies use a different technology than Bitcoin, and therefore the nodes can also have different functions. In most cases, the difference is created by using another consensus model. While Bitcoin uses proof of work, many other cryptos use proof of stake or even completely different models.

Masternodes

One example is masternodes. A masternode is a special type of full node. Aside from validating transactions and storing the blockchain, these nodes also offer services. Here are a couple of examples of what they do provide:

  • Instant transactions
  • Governance voting in the network/DAO
  • Private transactions

By providing these services, they strengthen the network and stabilize it. Unlike with other full nodes, a masternode often requires holding a certain threshold of the particular cryptocurrency in order to qualify for this special role in the network. The idea is that a masternode needs skin in the game to be trusted. Otherwise, it could try to hurt the network with malicious transactions. In return for providing these services and locking the coins, masternodes often receive a share of the block reward along with the miners.

Staking nodes

Proof of stake is a consensus model that does not require vast amounts of energy or hardware. Very similar to the masternodes a staking node is a full node that is required to have skin in the game; hence it is a full node that holds a certain amount of coins.

It also follows a similar idea as with masternodes. As a stakeholder, stakers have an incentive not to cheat and fulfil their roles honestly. Staking nodes participate in the creation, approval and validation of blocks. They are receiving a block reward similar to the miners.

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