What Is a Node in Blockchain Technology?

Centralized computer networks run with rooms full of servers or similar types of computational infrastructure. These networks are centralized networks and have the advantage of easy maintenance, troubleshooting, and high levels of trust within the network. Decentralized blockchain networks still run several different servers; however, they are spread across a large geographical area and occasionally reach all corners of the globe. The individual servers of this network make up different “nodes,” which are beacons of computational power that execute, record, and create transactions.

A Quick Overview of a Blockchain Network

Blockchain networks are blocks of information stored on several geographically disparate servers called nodes. The information databases consist of a ledger of transactions that store important information regarding the ownership of digital assets. This distributed network of nodes, along with the consensus mechanism, makes blockchain networks extraordinarily secure and resistant to malicious attacks. This security is due to each node containing a partial or full history of transactions so that a node attempting to add or edit information must be verified by the other nodes on the same network. To do this, each node can communicate with the network nodes to verify the transactions' legitimacy.

Types of Nodes

Nodes perform three main functions. First, they check if a new transaction is valid and then can accept or reject it. Second, nodes on a blockchain cache the information for easy retrieval and comparison against the ledgers of other nodes. Finally, nodes transmit this information to other nodes on the same network, which allows all nodes to synchronize and stay up to date. There are several different types of nodes with varying levels of functionality; however, they all fulfill these essential functions.

Mining Nodes

Mining nodes are the workhorse of any blockchain infrastructure. The term “miner” may be confusing since it recalls memories of a man carrying a pickaxe and a box full of ACME dynamite. However, “mining” is merely branded terminology that refers to the creation of a given cryptocurrency through the service of verifying transactions. These computational nodes compete to verify blocks on the chain and win an award of a certain amount of a cryptocurrency. The blocks are confirmed by solving cryptographic math problems for which the miners are rewarded. This is where the term “proof of work” comes from, as there is proof that the transactions have been verified through the use of computational energy.

Masternodes

Unlike mining nodes, masternodes cannot add blocks to the blockchain. Instead, they hold the full copy of all transactions on a particular blockchain. As such, these nodes only serve to validate the transactions that are memorialized on an individual block within the blockchain. Masternodes are not necessary to every blockchain and only exist within the architecture of some networks. To work, these nodes must first have significant ownership of the blockchain’s currency. DASH, for example, is a network that uses masternodes and is a split-off from the Bitcoin blockchain with hardened security.

Building a masternode is also significantly more complex than regular nodes. It requires specialized knowledge of physical server infrastructure and decentralized computation. This computer hardware is far more expensive than a standard mining node and also requires more energy to run.

Light Nodes

Light nodes are on the other side of the complexity spectrum. These nodes only store part of the entire historical ledger of transactions (called blockheaders) and are used for their lightweight, agile capacity to process new blocks on the blockchain. Blockheaders are the headers or names that identify each block on a given blockchain. The ability to process the header only instead of the entire block is what makes these nodes more efficient than other nodes. However, lLowercaight nodes must rely on the infrastructure provided by other nodes to validate and retrieve information. 

Archival Full Nodes

Archival nodes are similar to master nodes in that they store the entire record of transactions on a blockchain. Generally, when someone refers to a node, this is the type of node to which they’re referring. These nodes act as the server substructure upon which the superstructure of the cryptocurrency, token, or NFT can exist. The primary responsibility of these nodes is to maintain consensus and add new blocks to the blockchain. In this way, they create a complete “archive” of the blockchain network that these nodes support.

Authority Nodes

Authority nodes are used by the blockchain networks that still retain an element of centralization. These authority nodes define a methodology for consensus. One of the key elements of blockchain is the consensus mechanism by which certain transactions are considered valid and others invalid. Because of the nature of blockchain, all nodes running a blockchain must maintain an absolute consensus. 

The number of authority nodes can be determined by the organization and engineers running the blockchain. In other cases, this decision may be left up for a vote by the community that uses the cryptocurrency. Either way, the centralized organization that founded the cryptocurrency would be responsible for the actual physical infrastructure of running the nodes.

Network Implications of Blockchain Nodes

Networks within blockchain technology are most often distributed, creating a geographically disparate network. Depending on the node type, someone with limited knowledge can easily set up the infrastructure. However, other complex nodes may need specialized knowledge to create the correct infrastructure.

On the bitcoin network in particular, many individuals set up nodes and mining operations in their homes. These setups are possible with consumer-level electronics and relatively little investment (less than $1,500). However, other networks require advanced knowledge and expensive hardware that only makes sense for corporations to own. Regardless of the type of blockchain, the network will inform the kind of node infrastructure one can set up.

Conclusion

Networks of interconnected nodes are what make the blockchain world go round. However, one common theme among nearly all blockchain networks is the decentralized nature of the physical nodes. While the physical infrastructure is an integral part of blockchain technology, many other subjects like consensus protocols and exchanges comprise blockchain. Wharton addresses the central components of blockchain technology in the Economics of Blockchain and Digital Assets course to help business leaders understand the next generation of technology. Blockchain shows enormous promise to transform how many businesses run, and Wharton is on the bleeding edge of professional education. For more information on the course or for next steps for enrollment, visit our information page.

‍