We have cryptocurrencies, and some function through smart contracts on the blockchain network. That we understand, but what are cryptocurrency nodes and where do they fit into the equation? Join us as we attempt to understand in the simplest of terms.
From this video we learnt that nodes maintain the transactions of their respective cryptocurrencies. Each cryptocurrency has its own set of nodes to maintain the transaction of that particular coin. But what are they exactly? Nodes are computers or servers running the respective cryptocurrencies software, requiring internet access and an IP address. They form a network to transfer and verify information. Through this network, digital currencies can be sent securely. Each node in the network has its own role, depending on the functionality it wants to support.
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All nodes participate in a network, and in return for verifying and storing transactions they earn a small fee in the relevant cryptocurrency. This is known as mining or forging. Each node is equal, but has their own role depending on the functionalities they want to support. Generally, there are 4 major services: routing, mining, storage and wallet services.
Discover and connect to other peers in the network. This type of node validates and transmits transactions and blocks, and keeps the network connection alive by passing information.
Stores a local copy of the entire blockchain database, known as a full node. Requiring a large amount of hardware storage space, this node can independently verify transactions without any external references.
Create new blocks to add to the blockchain. This node runs special mining software in order to solve a cryptographic puzzle, to win mining rewards. This node adds new transactions to the blockchain.
Called simplified payment verification (SPV) nodes, this node does not require a full copy of the blockchain but instead relies on other trustworthy full nodes, aka pool servers, to provide necessary information. This node has space and power restrictions.
A node require a large amount of computing and processing power. Professional miners have had to seek alternative devices to support the demands of processing power required, leading them to invest in CPUs (central processing units) and GPUs (graphics processing units).
This article offers an insightful comparison between the two.
In conclusion, nodes are devices on a cryptocurrency’s blockchain network, running the relevant software. These nodes determine that the transactions are valid, maintaining the blockchain database, and ensuring that it functions and survives.
“Each cryptocurrency runs on its own blockchain network, and has its own set of nodes to maintain the transaction of that particular coin. These devices, or nodes, in the network have their own role, depending on the functionality it wants to support“
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