Blockchain Nodes: The Essential Foundation of Cryptocurrency Systems

What is (Node) and Why Is It Important

Currently, the term “node” has become a frequently encountered term in the cryptocurrency industry. Although many people still do not understand its true role within the blockchain network. A node is a computer or device connected to the blockchain network that primarily verifies the correctness of transactions and disseminates information across the network. Each node is assigned a unique identifier, making it easy to distinguish in a network with many nodes.

The core of blockchain is decentralization, and nodes are the mechanism that makes this possible. As the number of operating nodes increases, the threat from attackers decreases because controlling the majority of nodes is required to manipulate the network, which is very difficult.

How Do Nodes Work in a Blockchain System: Key Steps to Know

Step 1: Distribution and Propagation of Transactions

When a user signs a transaction, the data is sent to the network of nodes. The first node to receive it forwards it to other nodes, which then pass it on to others. This process continues until the transaction is included in a block or is completely rejected.

Step 2: Verification in the (Mempool)

After the transaction is propagated, it enters each node’s pool called the Mempool. This structure is similar to a queue waiting for verification. When the majority of nodes confirm the transaction is valid, it moves to the “Pending” state, meaning it is ready to be added to the blockchain. If evidence contradicts it, it will be canceled.

Step 3: Block Creation and Broadcasting

Once the transaction passes verification, miners or validators (depending on the network type) will add the transaction to a block. When the block is added to the chain, the transaction can no longer be altered. The new verification process can only be changed by the majority of nodes. On large networks, approval from thousands of nodes may be required.

Step 4: Incentives and Penalties

To ensure nodes operate correctly, they must be motivated and face penalties for misbehavior.

On Proof-of-Work (PoW) blockchains like Bitcoin, miners must use significant computational power to solve complex equations. If they add a valid block, they are rewarded with digital currency. This high energy cost incentivizes miners to maintain integrity.

On Proof-of-Stake (PoS) networks, validators must lock a large amount of funds as collateral. If they behave well, they are rewarded; if not, part of their collateral is forfeited. This system yields the same result: nodes are rewarded and penalized consistently.

Types of Nodes: Which One Fits Your Needs

Full Node: Complete Data Chain

Full Nodes store a complete copy of the digital ledger. This type of node forms the backbone of most blockchain networks. They store the entire chain history and communicate with other Full Nodes.

A key function of Full Nodes is to send chain copies to new nodes, as they are the backbone of the network. Most blockchain networks rely on these Full Nodes to operate fully. However, running such nodes requires substantial storage capacity.

Miner Nodes: Proof-of-Work Authorities

On Proof-of-Work blockchains like Bitcoin, (Miner Nodes) perform transaction verification and solve complex cryptographic puzzles to add blocks. They require commercial-scale computational power. However, this effort is rewarded with digital currency.

Validator Nodes: Proof-of-Stake Validators

On Proof-of-Stake blockchains, (Validator Nodes) play a similar role to miners: verifying transactions and creating blocks. However, they do not need to solve computational problems; instead, they are selected based on the amount of tokens they lock. Validators are also rewarded for creating blocks.

Light Nodes: Lightweight Alternative

Light Nodes do not store the entire blockchain but only download the ‘block headers,’ which saves significant storage space.

Their sole task is to verify transactions using simplified payment verification (SPV). Light Nodes are popular in blockchains with block size limits, such as Bitcoin.

The Triangle Relationship: Node, Blockchain, and Miner

All cryptocurrency systems are built on blockchain networks. Within these networks, critical functions like “Smart Contracts” operate automatically without intermediaries.

In cryptocurrency networks, data is not stored on a single node but across all nodes to prevent attacks and enhance security.

While Miners (and Validators) are groups responsible for verifying transactions and solving mathematical equations, once they complete verification, the block joins the blockchain, and they receive rewards in digital currency.

How to Set Up Your Own Node: 3 Steps

If you’re interested in supporting the blockchain network, setting up a node is a great way to participate. The basic steps are:

Step 1: Prepare Suitable Hardware
Set up a node on your own computer for optimal performance. Ensure you have sufficient memory, especially if you plan to run a Full Node.

Step 2: Download and Install Node Software
Download the relevant software for the blockchain you wish to support, then install it on your machine.

Step 3: Run and Maintain
Continuously run the software to keep your node operational.

Important Considerations:

• Hardware and Internet Connection: You need a device with enough storage and a stable internet connection.
• Upload Limits: Blockchain nodes upload large amounts of data. Make sure your internet plan can handle it.

Risks to Know Before Running a Node

Although operating a node has benefits, there are security risks to consider:

1. Malware Attacks

Unprotected nodes may be vulnerable to malware, which can steal sensitive information like private keys, leading to financial loss.

2. DDoS Attacks (Distributed Denial of Service)

DDoS attacks can overload a node with excessive data, causing it to stop working and disrupting the network.

3. Sybil Attacks

Attackers may create multiple nodes to attempt to control the network.

4. Chain Fork Attacks

Using outdated software can cause your node to fall behind the network, potentially resulting in financial loss for operators.

Summary: Why Are Nodes Indispensable

Nodes are fundamental to blockchain networks, playing roles in data storage, transaction verification, and system security. The more nodes operating, the more secure and decentralized the network becomes.

For those interested in supporting the cryptocurrency ecosystem, setting up a node is a valuable option. However, it is crucial to study the details and understand the risks beforehand. Once you understand how nodes work, why they are important, and the associated risks, you can make an informed decision about whether running a node is right for you.