What are nodes in crypto?

In a traditional sense, we all know nodes to be actual pieces of hardware or system used as a connecting point in a given network. Nodes allow for data to be created, received or sent via a communication channel. 

What about nodes in crypto? It actually plays a similar role: nodes produce and move data in a cryptocurrency network. They run the software and archive the network’s transaction history. Simply put, nodes are computers and their functions may vary depending on the protocol on which they operate. It’s what connects ‘blocks’ in the blockchain. Whenever a new transactional ‘block’ is formed, each node updates accordingly. Nodes play the role of a decentralized ledger which validates transactions on the blockchain. They also keep the network safe. 

To start off, let’s look at Bitcoin nodes as an example. Ultimately, all existing blockchains are in essence based on the framework of Bitcoin, which gave life to the new technology back in 2008. When we proceed with traditional payments, a centralized party is at play. In the Bitcoin blockchain, this party is replaced by miners and node users that operate on a distributed network. This can be achieved and accessed by downloading the Bitcoin Core software. Any computer with this software that joins the Bitcoin network is considered a node. They validate the transactions on the blockchain in a transparent and decentralized way and prevent illegitimate transactions. As mentioned, nodes are like ledgers that contain all the data on the Bitcoin blockchain. Through the consensus mechanism, the security of the network is ensured, as nodes stop transactions that violate the consensus rules.  

Blockchain nodes operate by validating and transferring “pending” transactions to the network until either a mining pool or a miner adds them to the blockchain’s ledger as blocks. Once confirmed, the block is distributed across the network and is sent back on all nodes, thus ensuring that the network’s rules are followed accordingly. After the validation process, the nodes attach the new block to previous blocks, which forms the blockchain and settles the final transaction. Despite node types varying from blockchain to blockchain, they all have the same function - to make sure that transactions within the network follow the given set of protocol rules. So if nodes had one mission, it would be to ensure that the data on the blockchain is reliable. 

Nodes are also divided into different types such as light nodes, full nodes, miner nodes, and various others depending on networks other than Bitcoin’s.

 Also known as lightweight nodes, these nodes only download the key header of a block, which consists of a summary of a block that contains a hash reference of the preceding block, time of mining, and ID number. Contrary to full nodes, light nodes don’t store all the data, they only download and process a small part of the blockchain. They do, however, play a role in making the network decentralized and are less expensive. They also heavily rely on full nodes.  

These nodes validate all transactions and ensure that they adhere to the protocol. They download all transaction data, block headers and the entire history of the blockchain. By doing so, full nodes prevent the network from the double-spending issue and check whether every transaction follows the network’s consensus rules, and if not, reject these transactions. Full nodes are also referred to as archival, as they are primary nodes that are the backbone of the blockchain’s network. These nodes host the entire blockchain and ‘archive’ information about every single transaction. Archival nodes can be divided into those that either can add blocks and those that cannot. 

Mining nodes also store all data of the blockchain. They also utilize equipment and software that is used to process complex mathematical problems that as a result adds new blocks to the blockchain, also known as mining. When Bitcoin just emerged, a simple central processing unit was enough to fulfill the task of a mining node, however, as the network grew more complex, the equipment and energy needed to mine Bitcoin grew as well. Miners use a full or light node to prove that they’ve created a new block in the blockchain.

A node that ‘prunes’ older blocks and saves space for the user on the hard disk. After downloading the full database, this node will erase all previous blocks and will only leave the recent transactions, as set by its size limit. So if a pruned node can only hold 100 MB of data, it will store the last 100 MB of transactions.

 Used for networks that aren’t entirely decentralized, these nodes are placed and determined by those who run the network or are voted by the community. Other than that, authority nodes have the same function as full nodes.  

Nodes that don’t have the option to add blocks within the blockchain. Masternodes validate and store transactions and may also give those who run the nodes to receive rewards. This would mean that users have to, of course, lock away the network’s native token. 

Nodes that are part of software that links the blockchain with the Lightning Network payment protocol. It allows exchanging the blockchain data and reduces pressure on the networks by providing faster and cheaper transactions. 

Whether you decide to set up a full node and contribute to the network’s security or not, understanding the way blockchain operates might be a useful perk in knowing where the technology is headed and how decentralization may revolutionize financial systems.Nodes are a critical aspect of a working blockchain network. They validate legitimate transactions, create a secure and transparent network and protect the blockchain against fraud and various other attacks.