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What are nodes in crypto?

Jul 14, 2022

How do Crypto Nodes Work?

What is a crypto node and how does it work? These questions are very common in the crypto space since they’re often mentioned across the web.

In simple terms, a node is a device – often referred to as a “client” – that runs a copy of a blockchain. They can update it after any new transaction. If you want to know what is a node in cryptocurrency, this is how it works – in general terms:

The user who runs the node needs a device;
This device needs enough storage space – according to the crypto node and the kind of node, as we will see later – to get a copy of the blockchain;
The node uses pieces of software to synchronize with the network;
The node needs to be registered – it can happen thanks to a wallet and often to a certain deposit of tokens in the crypto wallet;
The node collects data and broadcasts them to the rest of the network.

To give a practical example – for all those who want to know how to run a Bitcoin node – this is what you need to run a node of the blockchain of the first crypto:

A device with recent versions of operating systems;
At least 7 gigabytes of free space and 2 gigabytes of RAM;
A very good internet connection and at least 6 hours a day to run the node.

If you want to know how many Bitcoin nodes there are, the number reached almost 16,000 nodes – you can easily find an updated crypto nodes list of reachable Bitcoin nodes.

Virtually anyone can run a node, and they are usually run by users who want to fully support a crypto project – for instance, those who invested in crypto and want to have more control over the project, also to better understand how their crypto can gain value over time.

Not all nodes are the same, and their differences may depend on the node category or the kind of project.

Consensus Algorithms

There are several consensus algorithms in the crypto space, but the most common are two: proof-of-work (PoW) and proof-of-stake (PoS).

In both cases, nodes work as we’ve described so far, but some clarifications are needed.

When it comes to PoW, we don’t find only nodes, but also miners. For instance, let’s have a look at a Bitcoin node vs. miner. While miners add blocks to the blockchain and need to gather the data collected by nodes, nodes don’t necessarily have to be also miners.

When it comes to PoS, we don’t find miners, but validators: they’re those able to add new blocks, often they’re chosen according to the number of tokens they stake – different consensus mechanisms use different strategies – but they’re selected among nodes. Actually, if compared to PoW cryptos, the nodes of PoS blockchains consume less energy and it’s easier to set up a node.

Why are blockchain nodes important?

Blockchain nodes are important because they carry out the most important functions needed to keep a blockchain distributed and secure.

They’re the single points of the network that allows the full ledger to be decentralized: in fact, a blockchain could virtually be formed by a single node, but think of the security troubles that this can create.

The more the nodes, the more secure the blockchain is: if a single node is attacked, the other nodes have a copy of the ledger that can ensure that the functioning of the blockchain is not affected and that all transactions are still recorded and can still be verified.

So, in a nutshell, nodes are those that make it possible for the blockchain to work and allow all traders to safely process on-chain transactions without losing their funds.

Types of Cryptocurrency Nodes

We can classify crypto nodes into several categories:

Online nodes: these kinds of nodes constantly broadcast data across the network and have a complete copy of the ledger;
Offline nodes: these nodes are not constantly synchronized with the rest of the network, and each time they rejoin it they download only the latest copy of the ledger;
Full nodes: these nodes are those that always store a complete copy of the ledger – the blockchain – on their devices, so they require a lot of storage space, especially if the blockchain records many transactions;
Lightweight nodes: these nodes are different, and require less storage because to verify transactions they simply download the headers of blocks;
Masternodes: these are the most complex versions of crypto nodes. These kinds of nodes not only verify transactions and transmit data, but have a major role in the very management of the blockchain: they can be involved in the decisional process, and decide the future of the blockchain project. For this amount of responsibilities, those who run masternodes are usually rewarded with interest rates – so, it often represents a string of crypto passive income other than hodling, but they also have to deposit a certain amount of tokens in one wallet address, in order to cover possible problems raised by security issues. We will talk more about this in a while, giving you a practical example that shows how Dash works.

How to Set Up a Crypto Node

Setting up a crypto node may take several forms, and they depend a lot on the type of node you want to run.

Virtually anyone who owns a computer, with sufficient memory and a good connection can run a node. Full nodes require more space than lightweight nodes, and the resources needed depend especially on how many transactions the blockchain you use processes.

To give a practical example, let’s use Ethereum. The project allows anyone to run a node, but users can choose different ways to set up their crypto nodes according to their technical capabilities.

For instance, if you don’t want to do anything technical and would like to run a node as if it was an app with an intuitive design, Ethereum developed DAppNode, which allows you to purchase hardware that gives you access to the blockchain and its benefits.

On the other hand, if you want a less expensive option and you’re comfortable with coding, you can build your own version of the program and set up the software.

This is just one of the many examples to set up a crypto node, and as we mentioned your efforts depend on the blockchain and the type of node you want to run.

In fact, if you want to run a masternode, it could be much more complicated.

Let’s give a practical example with Dash. Also in this case, users have different options to run masternodes.

You can choose to delegate all the operations needed to manage the masternode, as well as delegate your voting rights – so, in this case, you’d just need to own 1,000 DASH in your wallet.

But if you want to fully control your masternode, you should:

Own at least 1,000 DASH – better if you keep them in a hard wallet for security reasons;
Choose a server to run a masternode, better if it’s a private server (a VPS, or cloud server);
Download the application to connect to the server you chose and configure it;
Use your wallet to verify that you’re able to run the masternode.

All this process, even if we listed just the main points, requires a lot of storage and coding capabilities.

So, when it comes to nodes, setting them differs a lot according to the blockchain you choose and the type of node. Today, the crypto space is able to address also the needs of those who want to run nodes – especially when it comes to masternodes, you’re often rewarded to run it – even if they don’t know anything about coding. But usually, there is a trade-off between autonomy and expensiveness.

FAQ

What are nodes in a blockchain?

Nodes in a blockchain are those parts of the network that store data, validate and broadcast transactions.

How many blockchain nodes are there?

To know how many nodes there are for different blockchains you can visit those websites that collect such data – like Bitnodes for Bitcoin, which registers over 16,000 Bitcoin nodes.

What is a node in Bitcoin?

Bitcoin nodes work as any crypto node: a computer that runs a Bitcoin node stores data, validates transactions, and manages to broadcast the copy of the ledger to the network.