Bitcoin Nodes 101

Nodes play an essential role in keeping Bitcoin secure, decentralized and transparent. They are a fundamental part of blockchain technology, but very few people understand exactly how they work.

As part of our "Prosper 101" series, we explore what a node is, how nodes work and why they're so important.

What is a Node?

A node is a device (usually a computer) that forms part of a blockchain network. Nodes run the protocol's software to validate transactions and keep the network secure. They operate without needing to rely on centralized entities and are one of the key mechanisms in ensuring decentralization.

In theory, the more active nodes on a network, the more decentralized it is – a malicious actor would need to control at least 51% of nodes to create negative impact to the network with their actions.

How Do Nodes Work?

Nodes maintain a distributed ledger, known as the blockchain. When a transaction occurs, it is received by a node, which then broadcasts it to the network. Other network nodes verify the validity of the transaction before it is added to a block. A block of transactions is only added to the chain once the rules of the consensus mechanism are met.

Types of Blockchain Nodes

There are a range of different blockchain nodes available. Each blockchain network has a slightly different system for verifying transactions, and so you won't find each type of node on every blockchain.

• Full Nodes – Maintain a complete copy of the ledger, downloading and storing a copy of every block and transaction.
• Light Nodes – Operate on devices with limited storage and processing power (smartphones, for example). Light nodes only download the portion of the ledger that contains information relevant to their transactions.
• Miner Nodes – Verify transactions and add new blocks to the chain, completing complex mathematical problems to create new blocks. Miners nodes require specialized hardware and software.
• Pruned Nodes – A type of full node that doesn't store the blockchain's entire transaction history. Pruned nodes delete older data while retaining the information necessary to ensure network security.
• Validator Nodes – Similar to miner nodes but on a Proof of Stake network. Validator nodes are chosen to validate blocks based on the amount of funds they've locked into the network.

What is the Purpose of a Node?

Blockchain nodes store the data that a blockchain needs to operate effectively. Sometimes, this includes the entire distributed ledger and the transactions within it. Nodes help to ensure transactions are processed correctly and efficiently, preventing double-spending and contributing to the security of the network by verifying (and rejecting) blockchain transactions.

Nodes communicate with one another to ensure consensus and enable peer-to-peer transactions, removing the need for third-party, centralized entities.

Bitcoin Nodes

Bitcoin nodes work in much the same way as those described above. The specific process of transaction completion is outlined in the Bitcoin whitepaper, "Bitcoin: A Peer-to-Peer Electronic Cash System":

1. New transactions are broadcast to all nodes
2. Each node collects new transactions into a block
3. Each node works to complete the cryptographic puzzle
4. When a node completes the puzzle, it broadcasts the block to all nodes
5. If all transactions are valid, nodes will accept the new block
6. This acceptance is shown by nodes creating the next block in the chain

Bitcoin uses a Proof of Work (PoW) consensus mechanism, with mining nodes requiring significant computational power in order to solve the network's complex mathematical problems. However, not all nodes on the Bitcoin network perform mining tasks. For example, full nodes verify and confirm transactions without financial rewards.

Conclusion

Every aspect of the Bitcoin blockchain is designed with security and decentralization in mind. Bitcoin nodes allow users to participate in the network, whether that's by maintaining a complete copy of the ledger or validating new transactions. It is the perfect example of a trustless, decentralized financial system.