Blockchain basics - nod

 

Blockchain basics - node

In this blog post, we are going to talk about the basics of Bitcoin blockchain technology. We will answer questions like:

• What is a blockchain node?
• What does a node do and why are they relevant?
• Is miner a node?
• What is the difference between a node and a miner?
• Why should nodes be up to date at all times?

Node is a crucial part of the blockchain. Without nodes, there is no blockchain as nodes are required to store data of the blockchain. You can read a little bit about blockchain in this article.What is a blockchain node?

As of the time of writing, there are about 9700 active Bitcoin nodes.

Full node

A full node is basically software that runs on a computer, most commonly Bitcoin Core is used for Bitcoin. It could be a server, laptop, or desktop PC, as long as it has enough storage and it can store all the historical data. Historical blockchain data are all the previous blocks on the blockchain. At the time of writing, Bitcoin the blockchain size is around 350GB. 

A full node assures that the rules of the blockchain are being followed. 

What does a node do and why are they relevant?

Node has four basic functionalities: 

1. Stores blockchain data
2. Accepts or rejects miner attempts of adding a new block to the blockchain
3. Synchronize with other nodes and transmits past blockchain data to newly connected nodes.
4. Generates wallet addresses and transactions

1. The node stores all past blockchain transaction information. With Bitcoin, each block consists of max. 2MB of data is added to the blockchain approximately every 10 minutes. Once the block is confirmed all nodes are updated and the total blockchain size and block height increases.

2. Once the miner attempts to submit a new block to the blockchain the node relays the block to all the other nodes on the blockchain. Nodes then either accept or reject the new block submitted by the miner.

3. Nodes also share past block transactions with other nodes who are trying to synchronize their nodes to the most recent one. All nodes store the same blockchain data.  Nodes prevent a single (or minority) of actors to take control of the network thus making it decentralized. 

4. A full node can generate wallet addresses and transactions on the blockchain.

Is miner a node?

A miner node is a full node that does additional work by validating transactions. All miners are nodes, but not all nodes are miners. 

A miner node will use hardware to guess the combination of letters and numbers required to submit a new block to the blockchain. Once a block is submitted, all the nodes will decide if the submission is valid or not.

Do not confuse a software miner or a miner running on your computer with a miner node. Miner node is most often run by pools to which other miners (not miner nodes) connect.

What is the difference between a node and a miner?

A miner cannot operate without running a node. But a full node is not necessarily a miner. 

In essence, a full node will receive, store and broadcast data to other nodes, while a miner node will do the same but it will also try to create new blocks of transactions and will attempt to broadcast it to other nodes which then either accept it or reject it. 

All mining pools are basically nodes where other miners connect their hashing power to.

Why should nodes be up to date at all times?

A node should always be in sync with other nodes. If a node is not synced with the majority of nodes it means it is falling behind and cannot be used to confirm blocks on the blockchain.

A fully synced node provides security, trust, and decentralization of the blockchain, which is a good thing. 

If a dishonest node tries to broadcast a false transaction for malicious attempts, the node will be disconnected from the blockchain by the honest nodes.

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How mining pools distribute rewards? PPS vs FPPS vs PPLNS

When placing a new order on NiceHash hash-power Marketplace, you must be careful to pick the right pool that suits your order.

In this guide, we will take a look at different payment methods (or reward systems) provided by mining pools and how they could affect your profits.

There are many different payment methods available, but we are going to throw some light on the most common ones:

• PPS - Pay Per Share
• FPPS - Full Pay Per Share
• PPLNS - Pay Per Last (N)umber of Shares

Pay-Per-Share (PPS)

This payment method is pretty straightforward. You get paid for each valid share contributed. Each share is worth a certain amount of BTC or any other mineable cryptocurrency.

Share worth is calculated based on the probability of the number of shares needed for a pool to find a block. If the pool statistically needs to send 1000 valid shares to find one block or 12.5 BTC (at the moment of writing), then each share is worth 0.0125 BTC. As the network difficulty changes, the price for each share is changed too.

It is worth noting that you will always get paid with the PPS payment method, no matter if the pool finds a block or not. This means that the pool can lose money if the pool luck is low, or earn money if the pool luck is high. Statistically, pool luck should be around 100%. (higher percentage equals higher pool luck).

IDEAL ORDER FOR PPS:  Low priced order for a longer period of time, which might not be mining constantly, but just when the price drops and attracts miners.

Full Pay-Per-Share (FPPS)

Full Pay-Per-Share or Pay-Per-Share Pus(PPS+) - these two are the same - they are very similar to ordinary Pay-Per-Share; the only difference is that the pool will also pay a transaction fee reward that is included if the block is found.

Typically when a pool finds a block, they split the BTC reward to the miners, but with the block reward, there also comes a transaction fee reward. This reward is collected by each transaction done on the blockchain (the fee you have to pay when making a transaction). With Full Pay-Per-Share, the pool will also pay the transaction fee rewards to the miners. For example, the Bitcoin block at depth 603308 had a fee reward of 0.49475167 BTC + 12.5 BTC block reward. (source: https://www.blockchain.com/btc/block/603308)

IDEAL ORDER FOR FPPS: Low priced order, which might not be mining constantly, but just when the price drops and attracts miners (lower price).

Pay-Per-Last N Shares (PPLNS)

Pay-Per-Last N Share system rewards miners only once the block has been found by the pool. This means that you will get paid only once the block has been found. Then the pool goes “back in time,” and checks for valid shares contributed before the winning block. This is called a time window. Miners get paid based on the valid shares that they have sent in that time window.

This method comes in handy for miners that do not hop from pool to pool and have a steady connection. Note that you may lose all your work (shares) if you disconnect from the pool before the block is found.

IDEAL ORDER FOR PPLNS: fix order on a big pool that has a high chance of finding a block within the order time limit. Or a standard order which will have miners connected for a longer time (at a higher price).

Conclusion

With the PPS and FPPS payment methods, you will get paid no matter if the pool finds a block or not. This is the most significant advantage over PPLNS. While on the other hand, PPLNS allows you to “gamble” in some way. If your order is sending hash power to a pool that happens to have a high block find at the time, you will most likely earn a lot more than on PPS or FPPS pool.

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