A blockchain exists out of blocks of data. These blocks of data are stored on nodes (compare it to small servers). Nodes can be any kind of device (mostly computers, laptops or even bigger servers). Nodes form the infrastructure of a blockchain. All nodes on a blockchain are connected to each other and they constantly exchange the latest blockchain data with each other so all nodes stay up to date. They store, spread and preserve the blockchain data, so theoretically a blockchain exists on nodes. A full node is basically a device (like a computer) that contains a full copy of the transaction history of the blockchain.
- Nodes check if a block of transactions is valid and accept or reject it.
- Nodes save and store blocks of transactions (storing blockchain transaction history).
- Nodes broadcast and spread this transaction history to other nodes that may need to synchronize with the blockchain (need to be updated on transaction history).
Type of Nodes in Blockchain
There are two main types of nodes – full nodes and light nodes. Another term to describe nodes is clients which supply wallet functions. Full ones contain а copy of the blockchain’s history, including all blocks created. Light nodes or SPV (Simple Payment Verification) nodes are all wallets that download only the headers of blocks and save hard drive space for users. Let us explore the different sub-kinds in detail.
Full Nodes
Full nodes act as a server in a decentralized network. Their main tasks include maintaining the consensus between other nodes and verification of transactions. They also store a copy of the blockchain, thus being more secure and enable custom functions such as instant send and private transactions.
When making decisions for the future of a network, full nodes are the ones that vote on proposals. If more than 51% of them don’t agree with the proposition, it gets skipped. In some cases, this can lead to a hard fork in which the community cannot agree on a certain change and thus go their separate ways, creating two chains. The most well-known example of that happening is the Bitcoin Cash Fork.
Pruned Full Node
One type is the pruned full node. The specific characteristic here is that it begins downloading blocks from the beginning and once it reaches the set limit, deletes the oldest ones, retaining only their headers and chain placement. For example, if you set a size limit of 550MB, you will store all the latest blocks that can fit in that hard drive space, but in order to get to that state, you would first have to go through the entire blockchain to validate all those previous blocks.
Pruned nodes are considered full nodes and thus can also verify transactions and be involved in the consensus.
Archival Full Node
Archival full nodes are what most people refer to when talking about full nodes. They envision a server which hosts the full blockchain in its database. As I already shared with you above, their main task is to maintain consensus and validate blocks. The difference between pruned and archival node is one – the amount of hard drive space they take up on your server or PC.
Archival nodes can be divided into a couple of subtypes – those that can add blocks to the blockchain and ones that are unable too.
Nodes Which Can Add Blocks
Let us begin by covering the main participants in the blockchain – nodes which can add blocks to it. They depend on the consensus rules being enforced and require at least one full archival node to operate.
Miners (Mining Nodes)
A concept you might already be familiar with, miners are actually nodes (either full or light ones) which aim to prove that they’ve completed the required work to create a block. Hence the consensus name Proof of Work. To complete the task, as I mentioned above, miners need to either be an archival full node themselves or receive data from other full nodes on the network to know the current status of the blockchain and the required parameters for the next block in line.
Participants in the process employ hardware components (be that CPUs, GPUs or ASICs) to solve a cryptographic problem. The first person to complete the task broadcasts his results to the network so it can be verified by full nodes and once consensus is achieved – he is granted the right to add a block to the existing blockchain. For their work, miners are rewarded a pre-defined amount of coins in addition to any transaction fees for the block. This set reward amount is called coinbase or a coinbase transaction. Considering it’s the first transaction in the block, it’s free of charge, as the miner himself created the block and included it.
Stakers (Staking Nodes)
Staking can be compared to having a traditional fiat money deposit. You buy coins and hold them, while in return you receive an interest back as a reward. While there are different takes on the Proof of Stake consensus mechanism, the main characteristic is that earning money can be compared to participating in a lottery. Staking is a game of chance, which while with a lower barrier to entry, offers less certainty compared to mining and can be confusing at times.
The end goal is to determine, based on a pre-defined set of rules and luck chance factored in, who will be next to create a block and get rewarded. Factors include coin age (how long you’ve had your coins), how many you have and their ratio to available ones in the network. In staking, you don’t need any expensive machinery, you only keep your crypto wallet online 24/7, which can be done with a device like the Raspberry Pi.
To be able to stake, you will need to become a full archival node, i.e. download the core wallet for the coin and keep the entire blockchain on your device. If you’d like to explore the concept more in-depth or learn which the top staking coins are, you can do so by visiting the www.staking.com.
Authority Nodes
The blockchain nodes I’ve gone over up to this point all can join a network and perform their tasks without anyone giving them permission. That is the essence of a blockchain – its decentralized nature. Unfortunately, there are few drawbacks to this approach and the solution involves employing some level of centralization to gain benefits like increased speed. Consensus algorithms include Delegated Proof of Stake, Delegated Byzantine Fault Tolerance, Proof of Authority and others.
Networks that make use of such algorithms need to define a fixed number of authority nodes. How many and who they’ll be is voted on by the community or defined by the development team. The task of these nodes is, as with full nodes, is to create and validate blocks, while at the same time distributing information to users on the network. All participants, not chosen to be an authority node, will be running lightweight nodes (light nodes) which depend on the broadcasted data to be able to operate on the blockchain.
Masternodes
Compared to full nodes, masternodes themselves cannot add blocks to the blockchain. Their only purpose is to keep a record of transactions and validate them. Whether it will be miners or stakers, they’re the ones writing blocks on the blockchain. An added benefit, however, is that by running a masternode, you not only secure the network but can earn a share of the rewards for your services.
To establish a masternode, you will need to lock away a certain sum of funds as collateral. You are expected to be online 24/7 and hosting on a Virtual Private Server is considered good practice. If you’d like to learn more on how to set up your own masternode or which the best masternode coins are, you can check out masternodes.com.
Lightweight (SPV) Nodes
Another type of blockchain nodes, used in day to day crypto operations, is the lightweight node or Simple Payment Verification (SPV) node. You’ve probably come across it already, but you’re most likely familiar with the “light wallet” definition.
These types of nodes communicate with the blockchain while relying on full nodes to provide them with the necessary information. As they don’t store a copy of the chain, they only query the current status for which block is last, and broadcast transactions for processing.
Having in mind the above features, it’s clear to see that running SPV node doesn’t require many resources, but it does sacrifice security for the sake of convenience.
Lightning Nodes
Lightning nodes are a very interesting concept. They fit into the constraints of neither full nodes nor lightweight nodes as I’ve presented them to you so far.
The idea behind them is to establish a connection between users outside the blockchain. This way, the load on the network is reduced, transfer times are shortened significantly and there’s increased usability of crypto coins. Transaction fees are really low in the lightning network – the equivalent of roughly 10 to 20 satoshi in general.
The way it works is by opening a separate payment channel between entities. Take for example a bagel shop and Bob. Bob and the shop create something like a safe-deposit box (a multi-signature address) to which they both have separate keys. Bob deposits his funds and uses them to pay for bagels. Each transaction is agreed upon by both sides and happens pretty much instantly. Once he’s had enough bagels or simply runs out of money, he or the shop can close the connection, take the latest balance sheet and broadcast it onto the network.
This way, instead of waiting for each transaction to be confirmed and filling the network with space-wasting data, parties can interact between each other and lower the load on the blockchain. Furthermore, if someone else wants to deal with the same party, the lightning network will search for a path with the least number of intermediaries and lowest transfer fees, thus reducing wait times.
This way, instead of waiting for each transaction to be confirmed and filling the network with space-wasting data, parties can interact between each other and lower the load on the blockchain. Furthermore, if someone else wants to deal with the same party, the lightning network will search for a path with the least number of intermediaries and lowest transfer fees, thus reducing wait times.