Due to the absence of a centralised authority to verify transactions in the cryptocurrency space, there has to be a system to ensure that all transactions are valid, and that no cases of fraud or “double-spending” are present. To solve this, blockchain has turned to nodes to make the cryptocurrency ecosystem secure and safe.
So what are nodes? Before we dive into the issue at hand, we need to have a basic understanding of how blockchain enables cryptocurrency to function worldwide.
Blocks
Just like vehicles make up a crucial part of our transportation, blocks are the driving force behind a blockchain. Blocks essentially facilitate and contain transactions. One block can contain many, many transactions. In fact, as of June 2022, the average Bitcoin block can hold as many as 2000 transactions.
Miners
Now, the next logical question will be as follows: who creates these blocks? There is a specific group of people, called “miners”, who mine blocks. This is a process that requires tremendous computing power (which we will talk about later), and the miner who is able to mine the block will be awarded with a certain amount of Bitcoin for their efforts.
Cryptocurrency transactions are therefore made possible through their “vehicles” (blocks) and their creators (miners).
Computers
Because cryptocurrencies operate on a decentralized P2P (Peer to Peer) network, blockchain transactions operate based on the consensus of the community. This means that in order for blockchain to function, there must be somETHing to validate and verify transactions. Such is the job of nodes.
What are nodes exactly? In short, they serve three main functions:
1. They determine if a block of transactions is legitimate by accepting or rejecting it.
2. They save and store information regarding transactions.
3. They broadcast and transmit transaction information to other nodes.
Based on this definition, every computer in the blockchain network is a node because they can connect with other computers to receive and verify information about the blockchain.
There are different types of nodes in the blockchain network. We will go through each node and their respective functions below.
Full Nodes
Full nodes act as servers in the blockchain network. They form the backbone of a blockchain network. They maintain the consensus between other nodes and verify transactions. In order to do this, full nodes have a record of every single transaction in their databases.
However, becoming a full node requires a substantial amount of computing power and incurs a huge amount of cost. For example, Bitcoin core full nodes have certain technical and hardware requirements. These include:
• Desktop or laptop hardware running recent versions of Windows, Mac OS X, or Linux
• 7 gigabytes of free desk space, accessible at a minimum read/write speed of 100 MB/S
• 2 gigabytes of memory (RAM)
• A broadband Internet connection with upload speeds of at least 50 kilobytes per second
• An unmetered connection, a connection with high upload limits, or a connection you regularly monitor to ensure it doesn’t exceed its upload limits. Download usage is around 20 gigabytes a month, plus around an additional 340 gigabytes the first time you start your node.
• 6 hours a day that your full node can be left running. (You can do other things with your computer while running a full node.) More hours would be better, and best of all would be if you can run your node continuously.
As seen, performing such functions may be exhausting for a node’s memory and space. As a result, some full nodes are able to delete older blocks and only hold recent transactions up to a certain size limit. Such nodes are called pruned full nodes, and they save hard disk space for their users.
Lightweight Nodes
As suggested from its name, lightweight nodes, otherwise known as Simple Payment Verification (SPV) nodes, do not hold full copies of the blockchain. They do not verify and validate transactions, hence they do not contribute to the security of the blockchain.
SPV nodes are more commonly found in cryptocurrency wallets. They communicate with the blockchain by relying on full nodes to provide them with the necessary information to determine if a particular transaction has been validated.
Mining Nodes
As aforementioned, miners are responsible for creating new blocks to facilitate transactions in the blockchain. Miners compete with other miners to solve an encrypted data puzzle that will produce new blocks. The first miner to solve the puzzle and publish the block to the blockchain is rewarded with cryptocurrency. Because said tasks will require massive hardware and technical requirements, mining nodes are basically another version of full nodes.
A miner may choose to work alone (solo miner) or join a mining pool, where miners will get a share of the price once a block is successfully mined. Mining pools in China have essentially monopolised the Bitcoin market, mining roughly 70% of Bitcoin transactions worldwide.
Masternodes (or Supernodes)
A masternode is a full node that is much more equipped than normal nodes. It not only contains a full copy of the blockchain ledger, but also takes on other responsibilities. It communicates and sends information to any other node that wishes to establish a connection with it. Additionally, a masternode has the capability to facilitate events, such as voting events, execution of protocol operations and compliance with the laws of the blockchain. Given its importance in the blockchain economy, a masternode typically needs to run 24/7. Due to its numerous functions, a masternode will consume a lot of electricity, space and memory.
Not everyone can run a masternode for fear that some users may abuse the masternode and potentially destroy the blockchain ecosystem. As such, reliable users have to deposit a set amount of cryptocurrency as collateral. For instance, running a masternode on the DASH blockchain requires a minimum of 1,000 DASH (which is more than 43,000 USD at time of writing). This brings some form of centralization and authority in an otherwise completely decentralized economy. Projects such as DASH and ETHereum have made use of masternodes in their system.
In Conclusion
We return to the question: what are nodes? To answer this question simply, they are extremely important parts of the blockchain ecosystem. Given the decentralized nature of blockchain, nodes are indispensable as they serve vital functions to enable the safe circulation of the economy. A large number of nodes is beneficial to ensuring that there is no foul play in the system. A node that tries to violate blockchain rules can be easily found out by other honest nodes.
Even though the costs of running a node may outweigh the benefits, nodes are essential in maintaining a healthy blockchain ecosystem. For readers interested in running their own nodes, some platforms such as Blockdaemon, Strongblock and Vapornodes etc. provide users with cheaper and more affordable options to run nodes.
