As we pointed out in our overview of how Bitcoin and other cryptocurrencies can impact business strategy, a Cambrian Explosion in innovation in cryptocurrency related products and services is underway. The uptake in cryptocurrency interest by institutions has been so large that it is probably prudent for all businesses to review their internal strategies regarding cryptocurrencies, not just as financial assets but as a way to improve internal innovation and positioning for the future.
This post provides executive level insights into a component of the Bitcoin and Ethereum ecosystems called a “node” and recommends every company and government organization now consider running both a Bitcoin and an Ethereum node.
Introduction To Nodes
The Bitcoin ecosystem is made up of users (which control accounts and manage their keys), Miners (which operate computers to prove transactions are legitimate and update the global blockchain), and node operators, which are like the security guards on the network. Nodes validate all transactions that occur on the Bitcoin network and ensure that no Bitcoin can be double spent under any circumstances.
Most public discussion and press around Bitcoin focuses on the users and miners. Node operators seem to get no glory! But they are very critical to the functioning of the overall network. Nodes help the Bitcoin network by accepting and validating transactions and blocks from other nodes, and then relaying them onto other nodes.
Ethereum is a different network of nodes, but borrows from the Bitcoin node concept. The big difference between Bitcoin and Ethereum is that Ethereum is programmable. There are far more use cases for Ethereum.
Why Run Your Own Node?
The number one reason to run a Bitcoin or Ethereum Node is to be help the community with the important functions outlined above. It is especially important for any organization that will benefit from the Bitcoin or Ethereum ecosystems to run a node as a way of supporting the security and functionality of the networks. But there are many other benefits as well, including:
- Running your own node can help focus organizational learning and deepen collective understanding of the new cryptocurrency architecture and its features. It is this understanding that can help inform your business strategies.
- Having direct access to your own node will enable organizational technologists to more quickly evaluate emerging solutions in the blockchain space and providing a way to directly connect to blockchain data for experimentation for internal research.
- Running a node is a way to empower those in your organization who wonder if leadership believes in the future of Bitcoin and Ethereum. If you believe, you should run a node and be proud of it.
- Having direct access to your own node provides enhanced security and privacy features since the blockchain can be interacted with without any third parties (including ISPs or service providers or cryptocurrency exchanges) directly observing the interaction. Of course all blockchain transactions are visible to the entire community, but it will be harder for other entities to pull together additional information around the transaction by direct node access, minimizing risks of unintentional leakage of your information.
- A full Bitcoin node will enable running additional programs that can improve the ability to rapidly send and receive Bitcoin (for example, the Lightning Network).
How To Run Your Own Node
Running a cryptocurrency node is easy. Just about organization can do it. It only requires a computer meeting some minimal memory and data storage capabilities running a special software package maintained by the community. Instructions for setting up the node are available on the Bitcoin.org site and can be easily followed by any of your technical team with any hands on computer management experience. Once set up, the system will begin an initial block download that will take some time (it is roughly 350 gigabytes of data). After that initial download the system will essentially run itself, communicating with other nodes to make sure it is up to date and is contributing to the security of the overall blockchain. The computer just needs to be kept on and it will function.
Since it is a computer connected to the Internet it should be configured to reduce risk of unauthorized access. The simplicity of the architecture of a Bitcoin node can make it easier to lock the system down, but this is definitely an area you will want to check and then, like with all other systems in your organization, monitor to ensure risks are continually mitigated. We also recommend reviewing more specific advice on how to mitigate risks in the cryptocurrency domain at: Web3 Security: How to Reduce Your Cyber Risk).
The Differences In Bitcoin Nodes and Ethereum Nodes
Most of the above is also relevant to Ethereum nodes. There are differences in the data size and some architecture specifics, but the biggest difference at the node level will be a great number of applications that can be run on the Ethereum node. We will review some of those applications in a future post.
It takes so little in terms of resources to run a node it should be something any of us using Bitcoin should consider doing, especially organizations like businesses and governments that will be benefiting so much by the transition to a world with a better system for fairness in commerce.
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