Ever wondered what software is needed to run a Bitcoin node and what function this piece of hardware has among the entire global network? If so, then you have come to the right spot! In the next minutes, I will explain everything related to this topic.

So what is a Bitcoin node actually? To keep things simple, a single Bitcoin node can be seen as a computer that runs with the latest version of the Bitcoin Core software . Furthermore, this single node has a full copy of the entire Blockchain database on it. It is important to know that every Bitcoin node in the entire network has the exact same copy of this Blockchain database. In other words, all nodes on the network are equal and function on its own which keeps the entire network secure.

What is a Blockchain or distributed ledger?

Like I explained above, a single Bitcoin node is part of a bigger network which is called a distributed ledger of running nodes. This network can be seen as a network of computers that are running autonomous, without central server ‘guarding the network’. In other words, all nodes are equal and there is no central server or authority which has full control over the entire network. This is what makes this kind of network unique.

A blockchain uses blocks of data which are called a chain. Furthermore, these blocks are part of a decentralized network of computers. The data is secured by cryptographic principles and are related to each other. When data is added to a block, a timestamp occurs and the record cannot be changed anymore. In other words, data that is added to the network is immutable and definite. To put things simply, Blockchain is an ever-growing datasheet of transactions in the form of related blocks.

How does a Bitcoin node enter the network

In most cases when a Bitcoin node enters the network for the first time, it’s probably hidden behind a firewall. In this case, the node is limited in the connections it wants to use on the network. To be in full force the node has to be made public first. A way to do this is to setup port forwarding. After this step the Bitcoin node is fully functional and other nodes on the distributed network are able to connect to it.

This comes to the next question, which is what does a Bitcoin node do within this decentralized network of computer nodes?

What does a Bitcoin node do?

The Bitcoin node functions as an entity within the entire network which validates transactions from users to miners and also to store the entire Blockchain. Validation of transactions takes place all the way back to the beginning, which is the genesis block. First, nodes synchronize with each other and even if a Bitcoin node is offline for some time, it’ll download the latest data from other nodes once it gains access to the internet. Also, the nodes check every transaction and hash generated by miners to see if transaction data corresponds to hash generated by miners.

The nodes also confirm that all data complies with the Bitcoin protocol. Any invalid or false transaction that doesn’t conform to the Bitcoin protocol is rejected. Once mined and added to the Blockchain, it’s very hard and costly (could cost as much as $30 billion to falsify one transaction) to change the record held by nodes. The function of a bitcoin node should be validation and storage.

What does an SPV node do?

Above I explained that the common function of a full bitcoin node is to validate transactions on the chain. This validation process is very important to make sure that the decentralized network of Bitcoin acts in a trustless way. But there is more, which are called SPV nodes or Bitcoin light wallets. These are nodes that don’t store the entire Blockchain data on their local drive. Instead, they validate block headers only and are not involved in any validation on-chain. This quick way of validation is a method used by mobile wallets like Breadwallet.

Since there are thousands of nodes worldwide, the Bitcoin network is very hard to shut down. Any false or suspicious node can be identified very quickly and will be put in isolation by the rest of the network. One of the big benefits of this network is the open culture. Anyone can join, you only need a working internet connection and a storage device with sufficient space.

What is the difference between a miner and a Bitcoin node?

As explained above, a Bitcoin node mainly validates transactions on the entire decentralized network. The big difference with mining is that a miner creates blocks in the blockchain which the nodes will store. Basically, the miner works on transactions by coming up with the best combination (hash) to store that information. Furthermore, miners spend about 10 minutes working on a problem. This in contrast to nodes that keep that result forever by storing it in the blockchain database. Miners don’t need to know about prior blocks (except for the prior one) with very few exceptions.

Bitcoin miner vs Bitcoin node

To summarize, a miner is completely different than a common node. Both are used in the decentralized network but have separate functions. To put things simply, a Bitcoin node validates and a miner calculates.

A Bitcoin node functions as a wallet

It’s not very common but if you want to be your own bank and be in full control running a Bitcoin full node could be it. Most Bitcoin users won’t choose this option, because you have to download the entire blockchain(227 GB) and synchronize with it at all times. Also, when running your own Bitcoin node you have to make your IP address public. As a result, all kinds of (unwanted)traffic will be targeting your node which lacks privacy issues.

But isn’t Bitcoin all about being your own bank in the first place? That’s correct and to do that a better solution would be using a hardware wallet or storing Bitcoin offline.

Bonus video with Jimmy Song: What is a Bitcoin Full Node

Conclusion

When you choose to run a Bitcoin node the entire ecosystem will profit from it because the network will be stronger and therefore more secure. Unfortunately, like mining, the incentive is very low and you can barely profit from it. Why do people still choose this option? The idea behind Bitcoin is decentralization and being in control of your own money. Running a Bitcoin node simply helps the network and removes the need for trust which is a typical property of a centralized network.