If you are more than just the average crypto hodler, you’ve probably heard of miners and nodes. Both of these are integral to blockchain networks. Many might already know that miners are responsible for creating new tokens and processing transactions, but the function of blockchain nodes might be less clear.
What are Blockchain Nodes?
Nodes form the blockchain’s infrastructure. Each node stores blockchain data and is connected to all other nodes in the network. They communicate with each other to verify on-chain activity and add new blocks to the chain. While blockchain technology has evolved since Satoshi Nakamoto mined the genesis block, the functions of nodes are similar across all blockchains.
What do Blockchain Nodes do?
Store, Share, and Compare data to prevent attacks
The blockchain is a digital ledger that records all transactions on a given network. It is digital and immutable, meaning it’s cryptographically secured in a way that past transactions cannot be modified. These blockchains have nodes in order to ensure that the transactions and data entered onto the ledger are valid. A full node can store the complete history of the blockchain ledger and can share and compare data with other nodes in the network. Blockchain technology is considered to be very secure, and one primary reason is because nodes on the network constantly observe and verify activity to protect against fraud or malicious attacks.
Nodes can be globally distributed in large numbers
Nodes also allow a blockchain ledger to be distributed across many computers rather than being kept on a central server. Since nodes can run anywhere in the world, they can be globally distributed in large numbers. This boosts the resilience of the underlying blockchain network because if one node ceases to function or is hacked, other nodes will continue to run and maintain all of the network’s functionality.
Blockchain Consensus: Governance Through Nodes
A major idea of blockchain is that the consensus should drive and enforce the rules by which the network operates. For this to occur, the validity of information/data contained in the blocks must be confirmed prior to being transacted. Blockchain nodes communicate with one another to compare records and verify these transactions. Once the majority of nodes are satisfied that the transaction is valid, the transaction is then available for a miner to process. The miner will receive some form of compensation for processing the transaction.
Another aspect of nodes on most blockchain networks is voting on proposals for changes in the protocol. This facilitates democratic power sharing amongst community members and promotes decentralization. Blockchain finance has attracted supporters because it attempts to wrest financial control away from powerful, centralized organizations and make financial autonomy accessible to all.
So, Is Blockchain Trustless?
Blockchain is often described as a trustless system. Theoretically, cryptocurrency allows people to transact with one another without an intermediary and without needing to inherently trust each other. But the process is not entirely “trustless.” The reason we can ‘trust’ the system is because nodes on the network are constantly checking and verifying all activity. If the protocol rules are ever broken, the nodes will stop communicating with the ‘bad’ actors. Any actor that is deemed to be broadcasting incorrect information to the network will essentially be frozen out. This punishment can be temporary or permanent depending on the offense. Therefore, the system distributes trust out to numerous nodes instead of concentrating it within a central entity.
Are Miners Bitcoin Nodes?
Autonomy, authority, and security are elements that make blockchain appealing. Nodes are a key component because they, not miners, decide what the protocol rules are. In fact, miners only process transactions that nodes decide are valid.
So What Do Miners Do?
Miners can be considered a type of node, but they also:
- Participate in the creation and distribution of new coins/tokens
- Secure the blockchain
- Process data/transactions
There are differences between different blockchain networks: Although the Bitcoin network uses miners to create all of its native cryptocurrency, some other networks produce tokens by a process known as staking. These networks are usually Proof-of-Stake. For more information on the subject of token creation, see Crypto Minting vs. Mining: What’s the difference?
Different Types of Blockchain Nodes
Sometimes also called lightweight nodes (or “light nodes” on the Ethereum network) because they do not store the entire blockchain ledger. They only download part of a blockchain’s history to verify a certain transaction. Partial nodes can include or exclude a transaction from the blockchain, and they will only receive information and transactions that are relevant to their operations.
Full Nodes (or Fully Validating Nodes)
These store the entire ledger. They download every block and transaction on the network and constantly test the validity of on-chain activity. Trust is not necessary between two people — the buyer and the seller — because there are thousands of nodes verifying that both parties are able to execute their side of the bargain.
These vary depending on the blockchain. In a Proof-of-Work (PoW) model, a mining node uses computing power to solve puzzles. Some modern cryptocurrencies tend to use a Proof-of-Stake (PoS) model, in which coins/tokens are minted after an invested party “stakes” some value (most commonly native tokens) on the network.
Listening Nodes (Supernodes)
This is a full node that communicates information to any other node that wants to create a connection and observe. A listening node functions as a source of data as well as point of communication. Unlike other nodes, listening nodes must run constantly and therefore usually possess more computational power.
Why Do People Run Nodes?
Sovereignty over your crypto keys is about keeping control of your property. When a user runs a node, they can personally verify what has occurred on the blockchain every time a transaction occurs. This is particularly important for businesses who want to evaluate the flow of their money.
It can be profitable to run a node, depending on what the network is. Running a node will sometimes be rewarded with distribution of the native token. However, the motivation is often not financial but ideological. Cryptocurrency supporters derive a sense of community with each other and running a node supports the blockchain, which in turn supports the wider community.
What Do I Need to Run a Bitcoin Node?
There are certain hardware requirements for running nodes. These vary and may be constantly updated depending on the blockchain.
A criticism of Proof-of-Stake blockchain networks, particularly in the DeFi sector, is that oftentimes only wealthy investors are able to run nodes and participate in voting, staking, and mining. This is because a minimum investment cost prevents most people from participating. Proof-of-Work systems do not usually have this problem, and in the case of Bitcoin, there is very little specialized computational equipment needed to run a full node. Even a personal laptop computer is usually enough to run a node on the Bitcoin network.
How Many Blockchain Nodes Are There?
Ethereum currently possesses just under 6000 active and listening nodes, while Bitcoin is estimated to have over 10,000. Both networks have most of their nodes in North America and Europe. The region with the highest concentration of nodes is southeast Asia. This geographical node distribution holds true for most cryptocurrencies.
The exact number of functioning Bitcoin nodes is currently unknown. This is partly because Bitcoin nodes can operate privately. According to Cointelegraph, the Bitcoin network had 11,558 active nodes on Jan 20, 2021. Of these, some are fully validating nodes, some are miners, and some are partial nodes.