Blockchain nodes are an essential part of cryptocurrencies and the decentralized aspect of the space. You may have come across this technical term among the already long list of challenging web 3.0 words that are essential to understand; so lets examine exactly what a blockchain node is. Stick around and our team will have you an expert on this topic.
A blockchain node is a computer running the protocol software of a given blockchain; nodes serve as a way to govern the infrastructure of the blockchain. Blockchains typically have numerous different types of nodes that provide a range of different functions – like maintaining the blockchains’ record of transactions.
Let’s break this down further. Each blockchain node runs the given blockchain consensus algorithm that is used for that specific chain. For example, the protocols Bitcoin nodes run is known as the “Bitcoin P2P Protocol”; in this particular protocol, full nodes – one of the most common types of nodes – are required to store all blockchain related data on the device running the protocol (i.e. all transactions that have occured).
Full Bitcoin nodes will reject blocks – or sets of transactions – that do now follow the consensus rules. This ensures the network is secure; as a general statement, the more nodes there are, the more decentralized and secure a given blockchain is. Nodes significantly increase the level of difficulty for hackers.
More nodes means there are more computers storing the history of transactions making it harder (or essentially impossible) for anyone to lie about a transaction.
Other functions of nodes are to broadcast updates of new transactions to other nodes to ensure the history of transactions are correct. This helps ensure all block transactions are up to date.
There are many different types of nodes aside from masternodes (or full nodes) that are running on the “Bitcoin P2P Protocol”. There are nodes that require less RAM (unlike the full node). There are nodes that only download blocks that need transaction verification and not all transactions.
This begs the question – how are nodes different then miners? Before we get into that, our team wants to preface that more information on why you experience transaction fees, like those from miners and centralized exchanges can be found in the article here.
Nodes are different from miners in the sense that nodes can be run, without receiving rewards (unlike miners in most consensus algorithms), to act as a broadcast for transactions. This means nodes run without creating new blocks or new transactions.
Any miner is running a full node as in order to verify transactions, miners need to have a transaction history to look at (in order to ensure legitimacy). Miners run the consensus mechanism that rewards them for adding new blocks to the blockchain or verifying transactions.
So the main difference between the two is that nodes do not have to be miners – because nodes can receive and broadcast information. That being said, miners must run full nodes to ensure the miner can know which transactions are legitimate (and therefore which ones to verify).
Most simply, miners create new blocks while nodes maintain the records and ensure everyone is following the same consensus algorithm (or playing by the rules) to guarantee network stability/strength.
The consensus mechanism a blockchain uses ensures that all nodes are in sync and are made to execute transactions based on majority consensus.
Miners must have their transaction approved by an active node before the transaction goes through and before the transaction is broadcast to the entire network.
Lets dive further into this topic.
How Do Crypto Nodes Work?
Nodes are essential for cryptocurrencies but also the DeFi space as a whole.
Blockchain nodes work by continuously running the blockchain’s software and storing all data; nodes maintain the infrastructure and records of the blockchain. All transactions occur after the majority of nodes approve of anything – i.e. smart contract transactions – on a given blockchain.
All transactions transpire because of the approval of a node – this includes: transactions from miners, transactions from smart contracts, and even dApps (decentralized applications or sites that are connected to the blockchain).
Transactions occur by sending an approval request to all active nodes. There must be a majority consensus for anything to be approved on the blockchain.
As an illustrative example: Jessica could be sending Rodrigo 2 $BTC, but in order for this transaction to go through, thousands of nodes will have to verify the details of this transaction. These nodes will first verify that Jessica has the 2 $BTC in her wallet and then a miner will verify the transaction with an active node. Each node that verifies this information will then pass that same information on to other nodes until a general consensus has occurred and the transaction completes.
There are numerous different types of nodes across different blockchains and anyone can run a node; people can also leave or join this process as they please.
This leads our team to the next question.
Do Crypto Nodes Make Money?
As a general statement, there is no monetary reward received for running a node. Crypto or blockchain nodes maintain the record of transactions and help strengthen the infrastructure of the blockchain. Running your own node provides a range of different benefits.
These benefits include being able to verify transactions yourself as the node will continuously update the record of transactions.
Running a node also allows you to contribute to the overall security of a blockchain’s network; the more nodes running on a given blockchain the more secure and decentralized the blockchain will be.
Many people run nodes – especially if they are making numerous transactions on a given blockchain network – for a variety of different reasons. Some reasons include seeing how the process works and contributing to the overall governance of the blockchain.
When Bitcoin changed (or upgraded) to Taproot, which helped in the scaling of transactions, all people running a Bitcoin node had the opportunity (were not forced) to upgrade their node during this soft fork update.
A prime example of the governance of a blockchain that nodes allow for is when the SegWit update occurred for the Bitcoin network. SegWit was an update that increased network transaction size without increasing block size or blockchain space.
In order for SegWit to occur, over the entire network, 95% of nodes running on the Bitcoin network need to update to SegWit. Our team should note this number is typically a general consensus or over 50% of nodes agreeing upon a given change or update.
Another unique feature of running a full node is that any laptop or computer – including typically configured Windows and Apple computers – can contribute to the security of the blockchain. With an internet connection and a minimum of just 2 GB RAM, anyone can run a node.
If you are interested in learning about mining on the typical Windows and Apple laptops, our team has a full article covering our experience and the likelihood of meaningful financial gains, which we will link here.
To get a complete understanding of nodes, it’s important to also look at the different types of nodes.
What Are The Different Types Of Blockchain Nodes?
There are two main types of nodes; there are Full Nodes, run by miners, which encompass all transactions including blocks created. There are also Light Nodes, which are nodes that only possess essential data to process transactions. These nodes are typically connected to full nodes.
When you create either a full node or a light node you receive a wallet and is it possible (and safe) to keep your personal funds on this wallet.
While there are generally two main types of nodes, there are typically 9 different types in total.
What Are The Main Blockchain Nodes?
The fundamental blockchain nodes include: Full Nodes, Pruned Full Nodes, Archival Full Nodes, Authority Nodes, Miner Nodes, Staking Nodes and Master Nodes.
It is important to note that each blockchain has different nodes – often with subtle differences – however this is likely to morph over time as blockchains continue to innovate and evolve. Eventually the types of nodes will be very different. However, at this point in time, many would argue that there are nine main blockchain nodes.
It is still important to remember that all nodes run the blockchains consensus algorithm (or software) and contribute to the infrastructure of that blockchain.
Allow our team to break down each of the nine nodes.
Full Nodes are nodes that have and broadcast all transactions on the blockchain including blocks created; this is the node that all miners run. Full nodes maintain the blockchains’ consensus algorithm with all other nodes, contribute to governance, and act as a server.
Pruned Full Node
Pruned Full Nodes are similar to full nodes in the sense that they store all information at the start however they delete older information as time goes on. These nodes have a predetermined amount of storage.
This means a Pruned Full Node with 50 MB of storage will only store transactions or block sizes of a total of 50 MB with the most recent transactions pushing out older information (and therefore deleting any older info that is past 50 MB).
Archival Full Node
Archival Full Nodes store all information (like a Full Node) but also the network state through the blockchain’s history; this makes Archival Full Nodes bigger in size when compared to a Full Nodes. All the relevant history – at all stages – of the blockchain is contained in the Archival Full Node.
Archival Full nodes store information from day one while Full nodes store all relevant information. Typically, Full Nodes will only store 128 blocks of data while Archival Full Nodes will store all data. Additionally, Archival Full Nodes do not have to participate in block verification which is something that Full Nodes have to do.
Authority Nodes are nodes that have the power to decide which new nodes are allowed to join the consensus algorithm and are commonly found in blockchains that have a vetting process like a Delegated Proof of Stake consensus algorithm.
A Delegated Proof of Stake consensus algorithm has a fixed number of elected nodes or delegates that are responsible for a range of different functions (eg. verifying transactions). In this consensus algorithm, those who hold more of the blockchain’s governing token will have more voting power and therefore a higher reward than the other delegates or witnesses of the particular transaction.
Miner Nodes are responsible for solving complex computational math problems that allow for transactions to be approved on the blockchain. For example, in a PoW (proof of work) consensus algorithm – which is the one Bitcoin uses – the first miner to verify a transaction receives a reward.
Miner Nodes do not have to be running the PoW as these nodes are designed to carry out a given blockchain consensus algorithm or mining process. The PoW algorithm has received a lot of backlash because of its energy intensive use (as miners who are not first to verify the complex transaction use a lot of energy and neither contribute to the ecosystem nor receive a reward).
More on the PoW and PoS consensus algorithm can be found in this article linked here, where our team also discusses the amount of energy NFTs’ consume.
Staking Nodes are responsible for verifying transactions on the proof of stake (PoS) blockchain consensus algorithm; in PoS, staking nodes are randomly selected (based on predetermined factors like amount of the blockchains governance token that is locked up) to verify transactions.
The PoS blockchain consensus algorithm is different from the proof of work (PoW) consensus algorithm that Bitcoin uses. Proof of work is most notably different because of the energy consumption as miners are competing amongst one another to verify a transaction – with unsuccessful miners receiving no reward and simply consuming energy.
The proof of stake model works by having a number of participants lock up funds (or stake) in order to verify transactions – with those who stake more being more likely to be chosen to verify the transaction. Staking nodes will receive a reward – which is typically the governance token of that blockchain.
Ethereum notably switched from a proof of work to a proof of stake consensus algorithm in order to make the blockchain consume less energy.
Master Nodes function as a ledger, broadcasting all transactions on a blockchain; however, these nodes are unable to add new blocks as they only participate in verifying transactions. Master Nodes are typically incentivised to complete this work as they are guaranteed earnings for their services.
In order to run a Master Node, a significant amount of collateral (the owning of that blockchain’s governing token) is required. Running a Master Node typically requires more insight and knowledge as these nodes are more resource intensive and therefore more difficult to maintain and run.
Since Master Nodes are incentivised – financially – to complete the brandcasting of a blockchains ledger, the network’s loyalty is stronger and therefore there is more stability.
DASH is the blockchain that popularized master nodes. According to the DASH blog, “Masternodes must be backed by collateral denominated in Dash, and in return their operators receive regular payment for the services they provide to the network.”
DASH master nodes also have a say in other governance or infrastructure related topics. The DASH blog states, “… masternode operators are given the opportunity to vote each month on up to 10% of the block reward to fund community projects supporting the Dash ecosystem.” More on DASH Master Nodes can be found here.
Light Nodes are responsible for further validating the transaction of full nodes by downloading only the blockheader – or relevant data for the transaction – to verify exchanges. These nodes don’t enforce any rules of the blockchain or contribute to governance.
Light Nodes depend on Full Nodes to make the final census; however, Light Nodes are responsible for helping to verify transactions.
Lightning Nodes are responsible for enabling “off-chain” transactions; these types of nodes can only be run on certain blockchains like Bitcoin, Litecoin, and Zcash. That being said, Lightning Nodes run on a separate network (i.e. the lightning peer-to-peer network for Bitcoin’s blockchain instead of Bitcoin’s typical P2P Protocol).
The Lightning Nodes help in fixing the scalability aspect of the blockchain as they allow “off-chain” transactions to occur on different channels. This means that the lightning network allows you to exchange or transact multiple times (as long as the amount being sent doesn’t exceed the sender’s balance) without submitting a transaction as a block on the blockchain.
For example, if you ate at a restaurant and ordered multiple times, each transaction wouldn’t be broadcasted on the ledger – or in this analogy, to the bank – until you closed your tab (as long as you had enough funds to continue purchasing food at the restaurant). This is an illustrative example of how Lightning Nodes work.
Lighting Nodes check the validity of transactions without broadcasting it to the ledger until the tab is closed or all transactions have occurred.
Now that we have covered the nine different types of nodes, our team will cover some FAQ we have received.
What Happens Without Blockchain Nodes?
Blockchain nodes are an essential aspect to cryptocurrencies and the decentralized nature of them. Blockchain nodes are the governing infrastructure that makes decentralization possible; this allows blockchains to be controlled by nodes (or computers running a blockchain’s software).
Can Anyone Run A Full Node?
As a general statement it is possible for anyone to run a full node, without any specialized computer and without the blockchain’s native cryptocurrency. The only requirements are computers running recent versions of iOS or Windows, free disk space, small amounts of RAM, and an internet connection.
This differs depending on the blockchain the full node is being run on however running a full node can generally be done by almost everyone.
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