Even now, 12 years after Bitcoin’s birth, many people still put an equal sign between Bitcoin and blockchain. This oversimplification marginalizes other very important technologies that Bitcoin is built upon. Creating in turn an impression of blockchain being some kind of a holy grail technology, when in reality, its implementation by itself would not be that useful in most of the cases.
Today I wanted to talk about one of the other technologies that together with blockchain lays the foundation for most of the cryptocurrencies. Today we will talk about peer-to-peer and the nodes.
Let’s start by naming all the most important solutions that Bitcoin implemented as the first successful cryptocurrency. Bitcoin would not be possible if we took out from the equation any of these…
Here are the most important building blocks of Bitcoin (commonly called bitcoin’s tech stack):
- Proof-of-Work consensus mechanism
Most crypto projects will use some variation of each of these 4 technologies, based on their use case and specifications. When it comes to peer-to-peer, the more nodes there are in the network the more decentralized the cryptocurrency will be.
But what exactly is a node?
It is a computer that runs the network protocol, stores all the blockchain data (yea, right from the first block) and supports the network by making sure that everyone plays according to the rules.
Nodes talk to each other to determine the current state of the blockchain. They ensure that only correct transactions are added to the blockchain. Each node will check every new block to ensure that all the transactions are valid. If, for example, there is a wallet spending money it doesn’t have, the node will dismiss the block that contains this dishonest transaction. Together, all the nodes have to reach consensus and agree on one, true state of the network at each time.
If you want to interact with the blockchain you need to speak to the node. Whether you just want to get some information or you want to send a transaction you have to do it by first communicating with the node (or with a 3rd party that aggregates the data collected from the nodes). You can choose to talk to any of the network’s nodes and always get the information you need.
What is more, in public blockchains (like Bitcoin and Ethereum) anyone can run a node. It’s usually not that easy though, requiring a lot of technical expertise and hardware.
In most cases the nodes are spread all around the world.
Currently there are almost ten thousand full bitcoin nodes around the world
Here’s a really cool live map showing all the active BTC nodes – https://bitnodes.io/nodes/live-map/
In comparison, at the time of writing these words there are over live 5,500 Ethereum nodes and more than 75,000 active Ethereum validators (machines that validate each Ethereum block) and only 21 Binance Smart Chain validators. As you can imagine, this huge difference in the amount of nodes/vaidators between ETH and BSC is something one should not ignore.
Where is it coming from?
When CZ (Changpeng Zhao – the owner of Binance) realized the potential of Decentralised Finance on Ethereum he did not wait. In a brilliant move Binance launched Binance Smart Chain by just copying the Ethereum blockchain, cutting the new block time from 13 to 3 seconds and increasing its capacity. CZ decided that BSC would compromise on decentralisation in order to be (way!) cheaper to use and faster than Ethereum. This tradeoff between centralisation and scalability is something all the cryptocurrencies have to think about and tackle. The rivalry and differences between BSC and Ethereum are very interesting and I will write a whole article on this subject soon.
For now, let’s get back to the nodes and peer-to-peer.
Why is this tech so important?
The real peer-to-peer blockchain with thousands of nodes allows the network to be fully decentralized and basically immune to many vulnerabilities of centralized, server-based networks.
The most common issues with these centralised networks include:
- Single point of failure (if the server goes down the clients cannot access the data they are looking for). An example of malicious actions that take advantage of this flaw is DDOS attacks when multiple systems flood the bandwidth of a targeted server preventing it from working properly.
- Data ownership issues. Remember the Cambridge Analytica Scandal when Facebook shared without consent users’ personal data to be predominantly used for political advertising? The big players like Facebook and Google harvest and sell incomprehensible amounts of data about their customers (us). Our personal information—who we are, what we do, what we like—is being sold to whoever is willing to pay for it.
- Limited accessibility. You only have access to the centralized network if you are allowed to and your access can be revoked at any time.
The peer-to-peer networks based on blockchain technology are censorship-resistant and provide us with an accessible and secure way to make transactions, send and store data. They do it all without the need of 3rd party involvement or oversight, allowing for transparency and a high degree of freedom for all participants.
The nodes keep the record of true history that cannot be deleted or changed.
I hope that by now you understand the importance of peer-to-peer as the building block of cryptocurrencies. Together, with the other 3 technologies (blockchain, cryptography, consensus mechanism), they allow for the creation of a new economy and network money. In the next articles I will talk more about the other technologies as well as about the future (not so distant) implications of this breakthrough approach. If you like what you read here make sure to check out my other articles https://pb-40891.medium.com/ and my book – https://www.amazon.com/dp/B08RJFSJCC
Also remember to let me know in the comments below about which crypto technology would you like to learn next!