Blockchain Nodes: What They Are and How They Work
Blockchain is a technology that allows the creation of decentralized, distributed, and immutable ledgers of transactions that are shared among multiple participants. Blockchain nodes are the devices, usually computers, that run the software of a specific blockchain network and help keep it secure and functional (Built In, 2020; SoFi, 2020). In this article, we will explain what blockchain nodes are, how they work, and what types of nodes exist.
What is a blockchain node?
A blockchain node is a device-stakeholder pair that participates in running the protocol software of a specific blockchain network (SoFi, 2020). A blockchain network is composed of multiple nodes that communicate with each other through a peer-to-peer (P2P) network, where each node can connect to any other node without intermediaries or central servers (Built In, 2020; SoFi, 2020).
A blockchain node has two main functions: to store and validate transactions and blocks on the ledger, and to execute and enforce the rules of the network (Built In, 2020; SoFi, 2020). Depending on their role and responsibility, nodes can have different types and requirements.
How does a blockchain node work?
A blockchain node works by following a set of rules or protocols that define how the network operates. These rules include how to create, validate, and broadcast transactions and blocks, how to reach consensus on the state of the ledger, how to handle forks or conflicts, and how to reward or penalize nodes for their behavior (Built In, 2020; SoFi, 2020).
A blockchain node communicates with other nodes through a P2P network, which allows them to exchange information and maintain consensus on the ledger (Built In, 2020; SoFi, 2020). A P2P network is more resilient, scalable, and censorship-resistant than a traditional client-server network (Built In, 2020; SoFi, 2020).
A blockchain node operates by performing the following tasks:
• Creating transactions: A node can create transactions by using its private key to sign a message that contains the details of the transaction, such as the sender, receiver, amount, and fee. The node then broadcasts the transaction to its peers, who relay it to other nodes until it reaches the entire network (Built In, 2020; SoFi, 2020).
• Creating blocks: A node can create blocks by selecting a set of unconfirmed transactions from its pool and hashing them together with some metadata, such as the timestamp, nonce, difficulty, and previous block hash. The node then tries to find a hash that satisfies a certain condition, known as proof-of-work (PoW). This process is computationally intensive and requires trial and error. The first node that finds a valid hash announces it to its peers, who verify it and accept it as the new block (Built In, 2020; SoFi, 2020).
• Validating transactions: A node can validate transactions by checking if they comply with the network rules, such as if they have a valid signature, if they have enough balance, if they are not double-spent, etc. The node then adds the valid transactions to its pool of unconfirmed transactions, waiting for them to be included in a block (Built In 2020; SoFi, 2020).
• Executing smart contracts: A node can execute smart contracts by running the code embedded in transactions or blocks that trigger certain actions or conditions on the ledger. Smart contracts are self-enforcing agreements that can automate various processes or functions on the network (Built In, 2020; SoFi, 2020).
What are the types of blockchain nodes?
There are different types of nodes in a blockchain network, depending on their role and function. Some of the common types are:
• Full nodes: These are nodes that store the complete history of the ledger and validate every transaction and block according to the network rules. Full nodes are essential for the security and integrity of the network, as they can independently verify the validity of any block or transaction. Full nodes also serve as peers for other nodes, relaying and receiving information across the network (Built In, 2020; Nodes.com, n.d.; SoFi, 2020).
• • Light nodes: These are nodes that do not store the entire ledger, but only a subset of it, such as the headers of the most recent blocks. Light nodes rely on full nodes to provide them with the necessary information to verify transactions and interact with the network. Light nodes are more suitable for devices with limited storage or bandwidth, such as mobile phones or IoT devices (Built In, 2020; Nodes.com, n.d.; SoFi, 2020).
• 2020; Nodes.com, n.d.; SoFi, 2020).
• Mining nodes: These are nodes that use their computational power to compete for creating new blocks and adding them to the ledger. Mining nodes are rewarded with newly minted coins and transaction fees for their work. Mining nodes are also full nodes, as they need to store and validate the entire ledger. Mining nodes are also known as validators or block producers in some networks (Built In, 2020; Nodes.com, n.d.; SoFi, 2020).
• Masternodes: These are nodes that provide additional services to the network, such as governance, privacy, or scalability features. Masternodes usually require a certain amount of stake or collateral to operate and are rewarded with a share of the network fees. Masternodes are also full nodes, as they need to store and validate the entire ledger (Nodes.com, n.d.; Shardeum, n.d.; SoFi, 2020).
• Authority nodes: These are nodes that have special privileges or responsibilities in the network, such as creating blocks or voting on network decisions. Authority nodes are usually selected by a predefined mechanism or criteria, such as reputation, stake, or performance. Authority nodes are common in networks that use proof-of-authority (PoA) or proof-of-stake (PoS) consensus algorithms (Nodes.com, n.d.; Polymesh Network, n.d.; SoFi, 2020).
• Lightning nodes: These are nodes that operate on a second layer network that enables fast and cheap transactions without congesting the main blockchain. Lightning nodes can open and close payment channels with other nodes and route payments across the network. Lightning nodes can also earn fees for facilitating transactions (Built In, 2020; SoFi, 2020).
How can people operate or own nodes?
Operating or owning a node depends on the type of node and the blockchain network. Generally, anyone can operate or own a node by downloading and running the software of a specific blockchain network on their device. However, some nodes may require more resources, such as storage, bandwidth, or computing power, than others. Some nodes may also require a certain amount of stake or collateral to operate, such as masternodes (Built In,2020; SoFi, 2020).
For example, to operate or own a full node on the Bitcoin network, one needs to download the Bitcoin Core software and sync with the entire ledger, which is over 300 GB as of November 2021. This may take several days or weeks depending on the device and internet connection. A full node also needs to be online and connected to other nodes as much as possible to stay updated and contribute to the network (Nodes.com, n.d.; SoFi, 2020).
To operate or own a light node on the Bitcoin network, one needs to download a light client software, such as Electrum, that connects to full nodes and requests only the relevant information for verifying transactions. A light node does not need to store or sync with the entire ledger, which saves storage and bandwidth. A light node can also be offline and still receive transactions (Nodes.com, n.d.; SoFi, 2020).
To operate or own a mining node on the Bitcoin network, one needs to have specialized hardware, such as ASICs (application-specific integrated circuits), that can perform the proof-of-work algorithm faster and more efficiently than regular devices. A mining node also needs to have access to cheap and reliable electricity, as mining consumes a lot of energy. A mining node competes with other mining nodes for creating new blocks and earning rewards (Nodes.com, n.d.; SoFi, 2020).
What are some examples of blockchain nodes?
There are many blockchain projects that allow users to run nodes, each with different features and purposes. Here are some examples:
• Ethereum: Ethereum is a blockchain platform that supports smart contracts and decentralized applications (DApps). Ethereum allows users to run full nodes, light nodes, mining nodes, authority nodes, and lightning nodes. Full nodes can use different clients, such as Geth or Parity. Light nodes can use clients like Metamask or Infura. Mining nodes can use software like Ethminer or Claymore. Authority nodes can use software like Cliquebait or AuraBFT. Lightning nodes can use software like Raiden Network or Loom Network.
• Polkadot: Polkadot is a blockchain platform that enables interoperability and scalability among different blockchains. Polkadot allows users to run full nodes, light nodes, validator nodes, nominator nodes, collator nodes, and fisherman nodes. Full nodes can use different clients, such as Polkadot JS or Substrate. Light nodes can use clients like Parity Signer or Polkadot JS Extension. Validator nodes can use software like Polkadot Validator Setup or Polkadot Secure Validator. Nominator nodes can use software like Polkadot JS Apps or Polkawallet. Collator nodes can use software like Cumulus or Moonbeam. Fisherman nodes can use software like Substrate Fishermen.
• Cardano: Cardano is a blockchain platform that aims to deliver scalability, security, and sustainability for smart contracts and DApps. Cardano allows users to run full nodes, light nodes, stake pool nodes, and relay nodes. Full nodes can use different clients, such as Daedalus or Yoroi. Light nodes can use clients like Yoroi Lite or Adalite. Stake pool nodes can use software like Jormungandr or Cardano Node. Relay nodes can use software like Cardano Node or Cardano DB Sync .
• Aptos: Aptos is a blockchain platform that aims to enable decentralized applications (DApps) for various industries, such as gaming, social media, e-commerce, etc. Aptos allows users to run nodes that support smart contracts, cross-chain interoperability, scalability, and security. Aptos nodes can also earn rewards for providing services to DApps.
• Sui: Sui is a blockchain platform that focuses on decentralized identity (DID) and verifiable credentials (VC). Sui allows users to run nodes that store and verify identity data and credentials on the blockchain. Sui nodes can also earn rewards for participating in governance and consensus mechanisms.
• Gala: Gala is a blockchain platform that supports decentralized gaming and NFTs (non-fungible tokens). Gala allows users to run nodes that host and play games on the blockchain. Gala nodes can also earn rewards for contributing to network performance and security.
What are the rewards for running nodes?
The rewards for running nodes vary depending on the type of node and the blockchain network. Generally, there are two types of rewards: intrinsic and extrinsic.
Intrinsic rewards are those that are built into the protocol of the network and are distributed automatically according to certain rules or algorithms. For example, mining nodes receive newly minted coins and transaction fees for creating new blocks; masternodes receive a share of the block rewards for providing additional services; full nodes receive security and privacy benefits for storing and validating the entire ledger.
Extrinsic rewards are those that are not built into the protocol of the network but are offered by external parties or incentives. For example, light nodes receive convenience and accessibility benefits for verifying transactions without storing or syncing with the entire ledger; DApp nodes receive utility benefits for using or providing services on the blockchain; governance nodes receive influence benefits for participating in decision-making processes.
Blockchain nodes are essential components of blockchain technology that enable the secure sharing of information across a decentralized network. Nodes have different types and functions depending on their role and responsibility in maintaining consensus and security of the ledger. Nodes can also operate or own nodes by running specific software on their devices and meeting certain requirements or criteria. Nodes can also receive various rewards for running nodes, either intrinsic or extrinsic, depending on their contribution to the network.
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