Bitcoin Focus: A Guide to Blockchain Nodes

By: Dickson Arinze

September 5, 2022 2:09 PM

Bitcoin (BTC) is a decentralized peer-to-peer network comprised of nodes that run Bitcoin software and accept proof-of-work (PoW) consensus rules to confirm and publish transactions on the blockchain. Blockchains are trustless since they operate without a third party.

Traditional payment methods are certified by centralized parties like banks and payment processors who examine if the spender has enough money to make the purchase.

Traditional third-party payment systems are replaced by a network of node operators and miners in the Bitcoin blockchain.

Learning about nodes helps explain how transactions are settled. Anyone can become a Bitcoin node operator by installing Bitcoin Core software, making the blockchain transparent, unchangeable, and decentralized.

Identifying a Bitcoin node

Bitcoin nodes are network cornerstones. These nodes monitor the blockchain and its transaction history to prevent double-spending, or non-legitimate transactions.

Any machine downloading Bitcoin software to join the network is a node. The most popular full node client and software is Bitcoin Core; its newest release is on GitHub.

A node contains the whole history and chronology of the Bitcoin blockchain, which is like a ledger. Nodes contribute to the security of the Bitcoin network through the consensus mechanism, rejecting any transaction that defies the rules.

Count bitcoin nodes. It's hard to count the number of active Bitcoin nodes because users can connect confidentially.

One source contradicts another's data. According to some sources, there are slightly over 13,000 Bitcoin nodes. Popular Bitcoin Core developer Luke Dash Jr. anticipated 83,000 active nodes in Jan. 2021 and 50,000 in 2022.

During the 2017 bull market, approximately 200,000 Bitcoin nodes were running. The more active and connected Bitcoin nodes are, the more decentralized it is.

What are bitcoin nodes?

The backbone of blockchain networks is Bitcoin, which pioneered the technology. Therefore, understanding Bitcoin nodes will help you comprehend most blockchains. The functional aspect is the same despite different protocols and restrictions.

Blockchain nodes guarantee network transactions and blocks are authentic and follow protocols. The data and network must be reliable.

A master and miner nodes provide a blockchain's infrastructure. They get more block rewards because they consume more network resources.

Unlike ordinary or miner nodes, master nodes don't add new transactions or blocks to the blockchain. Later in the article, these nodes are explained further.

What are blockchain nodes?

The nodes validate and disseminate transactions. "Pending" transactions are added to the blockchain's worldwide ledger by miners or mining pools.

Instead of confirming each transaction, miners group them into blocks. The confirmed block is transmitted to all nodes to check if it's legitimate and follows the network's regulations.

When validated, nodes join the new block to the previous series of blocks, forming a blockchain and settling transactions.

Different kinds of blockchain nodes

Since transaction verification and broadcasting are time- and resource-intensive, lightweight and complete nodes help speed up the validation process. Full nodes download the entire blockchain history to confirm transactions, while lightweight nodes merely download the header data.

The three main types of Bitcoin nodes are full, light, and mining.

Full nodes

They're called "complete nodes" since they check that all Bitcoin regulations are followed. Full nodes must authenticate that all Bitcoin transactions are legitimate and prevent double-spending, meaning the bitcoins processed must not have been spent elsewhere.

Full nodes must download every transaction ever conducted, all new transactions, and all block headers while holding data on every unspent transaction output until it's spent.

This is why full nodes must download the complete blockchain history, every block and transaction, and confirm they're respecting Bitcoin's consensus rules.

They'll check that blocks only create a specific number of bitcoin (currently 6.25 per block, until the next halving of 2024). They can guarantee transactions and blocks have the correct data. format or that a transaction output isn't double-spent in a blockchain. An invalid transaction or block is rejected.

Consider whole nodes as servers. If you run a node, you rely on the server to broadcast transactions. If you don't, someone else's node (server) validates transactions. In Bitcoin terms, running your own node means gaining sovereignty over your own money.

Light Nodes

Light nodes merely download transaction data, act as wallets, and link to full nodes. They download only the block header, which contains a hash reference to the previous block, the mining time, and the nonce of prior transactions.

Full nodes process the entire blockchain, but light nodes only process small portions. They are appropriate for nodes with less storage or processing power and are cheaper to own than full nodes.

A light node verifies Simplified Payment Verification transactions in blocks (SPV). It keeps the blockchain network decentralized but doesn't validate all transactions or store a copy of the blockchain.

Mining Nodes

Other than storing the blockchain, mining nodes use mining equipment and software to solve complicated computational problems to mine Bitcoin and add new blocks to the blockchain.

Until 2010, a home CPU could be a miner node. As the Bitcoin network grew, a CPU was no longer enough to mine the cryptocurrency. Therefore, more expensive and energy-intensive mining equipment was essential.

Mining nodes compete to be the first to create a new block and get 6.25 BTC for it.

Bitcoin miner node vs. full node

Full nodes and miner nodes are both crucial to the Bitcoin network. While a miner will run a node, a full node runner won't be a miner. The ordinary Bitcoin node validates transactions and blocks, whereas the miner node provides the mining gear to solve complicated mathematical problems to build a new block and upload new transactions into it.

Despite widespread belief, miners have limited influence. They could restructure the blockchain and add or remove transactions, but it wouldn't be worth the effort. A powerful miner may assault Bitcoin, although full nodes rely on miners for only a few functions. Other blockchain nodes includes:

Masternodes manage the blockchain and validate transactions. No new blocks can be added.

Lightning nodes connect to and interact with the main blockchain and Lightning Network.

The primary distinction between a Lightning node and a Bitcoin node is that the Lightning node only verifies transactions that interact directly with it.

How to setup and run a full node

Multiple clients offer software to download the Bitcoin blockchain. The most full nodes are on Bitcoin Core.

Download the Bitcoin Core software to operate a node and let it copy the full blockchain from other nodes. Your node will then be ready to validate each block.

Step by step process on how to deploy a full node:

To set up a new node, use the IBD (Initial Block Download) to synchronize it to the network on the first run. Bitcoin Core's download uses a lot of space, but you can reduce it with a few simple steps.

Cloud nodes are an option. By installing Bitcoin Core in the cloud, storage and processing are outsourced.

Once you download the Bitcoin blockchain, new blocks are added every 10 minutes. The Bitcoin website has information on building and running a node on various operating systems.