What Are Nodes in Crypto?

A blockchain node is a small server exchanging information with the entire network. Nodes are critical for keeping security and maintaining consensus.

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Each blockchain network is run and secured by a network of nodes. Typically, as more and more people get involved in the cryptocurrency sector, the number of nodes for a given blockchain network will increase, even though not every new user runs a node. But downloading and running software for a node to connect with any given blockchain network is a basic but slightly technical way for new users to participate in a blockchain community. 

Blockchain nodes all run the same software and check information and transactions relayed on their network, which generally involves receiving or sending large amounts of data. 

Thus, in order to properly function, most cryptocurrency nodes need to run on computers with large amounts of memory as blockchain-based transaction records usually represent vast amounts of data. Running a node is usually available to any user for most major cryptocurrencies, although some networks require a significant financial investment or equipment to run a node.

How do Crypto Nodes Work? 

The goal for most blockchain networks is decentralization, which means distributing control and enforcement of the network’s rules from centralized bodies in traditional finance to a distributed network of nodes. These nodes are tasked with maintaining the protocol’s usability, security, and reliability for all users.  

Nodes communicate and agree on the state of their network through a consensus mechanism that allows the protocol’s rules to be enforced. For example, Bitcoin creator Satoshi Nakamoto introduced a Proof-of-Work consensus mechanism built with SHA-256 cryptography for a distributed peer-to-peer network of users and transaction processors. 

Each network’s consensus mechanism allows for the process of all participants “achieving consensus,” which means everyone acknowledges which transactions are legitimate without relying on a central entity to control validation and security. Not every user needs to run a node, but all nodes reach this consensus amongst themselves to make the blockchain secure for all users. 

Consensus Algorithms

As the previous section discussed, consensus refers to nodes agreeing on a network’s adherence to a blockchain’s operating rules so that everyone knows the data stored in blocks are valid. The mechanism for nodes to reach this form of agreement is called a consensus algorithm. All the rules and requirements for a blockchain network are built into its consensus algorithm, which is used by each node.

Most networks run their own consensus algorithms. The original consensus algorithm used for Bitcoin is a Proof-of-Work (PoW) algorithm. Other blockchains created after Bitcoin use alternate algorithm types, like Proof of Stake (PoS), Delegated Proof of Stake, Proof of Space and Time, and many others.

Types of Cryptocurrency Nodes

There are several types of blockchain nodes that serve different functions based on what type of consensus algorithm the blockchain uses and what role the node operator serves in the network.

Here’s a short list of major types of nodes with a short description of each node type’s role.

  • Pruned or Lightweight Node: a node that only records a partial history of the network to save data storage space.
  • Full Node: a node that records a copy of its network’s entire transaction history. 
  • Mining Node: a node that typically stores only a partial copy of the blockchain’s history and also proves completion of the mining work needed to process transactions and create new blocks.  
  • Masternode: a node that serves to validate and record transactions under networks with non-traditional consensus algorithms. 

How to Set Up a Crypto Node 

When it comes to running a blockchain node, the user simply needs to pick which network they want to help maintain and secure then find and complete the network’s process for installing and running a node. 

There are three ways to run a node: 

  • Use a hosting service provider with cloud-based nodes
  • Run a node on a personal computer 
  • Purchase a pre-installed product for easy installation

Running a node on a personal computer often requires fulfilling several different criteria so the software can operate properly. Nodes for most blockchains like Bitcoin can be run on a basic personal computer, but there are some specific requirements to meet for the computer that runs a node. One of the most important criteria is meeting the minimum hardware requirements so the node has ample memory and processing power. 

For example, some requirements for installing a Bitcoin node include: 

  • The latest version of Windows, Mac OS X, or Linux 
  • 500 GB or more of free disk space available (minimum read speed of 100 MB/s) 
  • SSD capable of performing: 68 MB/s random write and 30.9 MB/s random read.  
  • At least 112GB capacity 
  • Minimum of 8 GB of random access memory (RAM) 
  • Broadband Internet connection with a download speed of at least 400 kilobits (50 kilobytes) per second 

After all of the criteria for deploying a crypto node, including space to store blockchain data, are met and a successful copy of the blockchain’s existing transaction ledger is made, the client starts the blockchain synchronization process:  

After that is all settled, node operators only need to maintain and monitor their node.  

Learn More About Crypto Nodes 

The first steps to running a node can be a little confusing, just like everything else in the cryptocurrency industry. But instead of letting users feel adrift in a sea of knowledge, FTX is proud to offer an easy-to-use platform and educational blog to guide everyone’s journey into cryptocurrency markets. For new traders or seasoned veterans, FTX makes it easy to build and learn about your portfolio.  


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