The distributed and decentralised nature of cryptocurrencies is often touted as the leading plus point, but how many of us actually know what that means? We are all used to hearing about the benefits, such as security, personal control, and a sense of freedom that comes from knowing no one party can dramatically change things.
The problem is that the technical side of things can feel out of reach to many of us, but it doesn’t need to be that way. By breaking things down into simple steps, we can build up a much clearer picture of what cryptocurrencies are and how they work.
Doing so is important both in terms of personal growth and improving our understanding as traders, and crypto nodes are one of the key topics we need to cover. In this short guide, we’re going to cover the basics so you can really start improving your understanding.
What is a Crypto Node?
Every cryptocurrency is built on top of a blockchain network that allows it to function. You can think of the blockchain as the ledger or record book that keeps a secure record of every transaction. For the blockchain to function, it needs an entire network of interconnected computers that are constantly talking with one another and sending and sharing information. These computers function as crypto nodes, with each node responsible for keeping an up-to-date copy of the ledger. It’s the distributed nature of the ledger that means no one person can log in and change anything regarding the cryptocurrency.
Nodes For Enhanced Security
Every node is connected to a common blockchain network for the purposes of storing a copy of the ledger. Each node will have to transfer the latest information to every other node on the network and cross-reference the information so that no central authority can make unilateral changes. It’s this process of collective verification that ensures the network is both fully transparent and completely tamper-proof. This creates a backbone for the blockchain system to function, but it’s also important to note that not all nodes are created equal. There are several different classes of nodes, and they each have a distinct role to play.
Different Node Classes
What we have described so far is a full node. A full node stores a secure copy of the full history of the blockchain and will validate every new block before it is added to the digital ledger. This optimises security and integrity, ensuring that the cryptocurrency can hold a certain value at a certain time.
There are also light nodes, which take on a subset of the information — namely, block headers — so that less storage space and computational power are needed. They offer high levels of efficiency and can help streamline certain corners of the network. These will then operate alongside validator nodes that do much of the heavy lifting when it comes to validating transactions and creating the new blocks that result from each transaction. They are vital for understanding how the cryptocurrency is being used and distributed around the network.
Mining nodes complete the picture and involve high levels of computational power being used to solve very complicated mathematical puzzles. These mining nodes are used to validate transactions and create new blocks, and are typically rewarded for their efforts with partial coins.
The Future of Nodes
Data security and information integrity are the two hottest topics in the world of nodes, and they primarily rely on computational power. Specialist systems that are designed to take an institutional approach to powering blockchains will continue to move cryptocurrencies away from some of the DIY legacy systems that arose during infancy. In the years ahead, we can expect nodes to become more powerful, flexible, and customisable in terms of how they operate.
