Why Bitcoin Full Nodes Remain Unpaid

News and Analysis

Full nodes are the backbone of the Bitcoin ecosystem. They verify transactions, but also maintain decentralization and users’ confidentiality. Yet, there is no direct monetary incentive for running a full node, which has its costs and risks.

In this feature, we take a look at the existing non-monetary incentives to set up and run a private node and the reasoning behind this apparently irrational design decision in the first cryptocurrency. 

What’s a Full Node?

A node in a distributed network is a connected device running certain software, serving as a point of interaction and connection. There are four types of nodes in Bitcoin: full nodes, supernodes, mining nodes, and light nodes. 

  • Full nodes verify transactions and blocks in the blockchain. Each time a transaction needs to be made, full nodes check with the transaction history to see if the coins can be spent. Along with the actual instructions as to how to do its job, a full node stores the entire blockchain since the genesis block. 
  • Supernodes, or listening nodes, are similar to full ones but have a lot more connections. They serve as relay stations to help full nodes communicate with each other. 
  • Mining node is what it says on the box—a node of a miner. These get the blocks of verified transactions, do the PoW computation, and build upon the longest chain in the blockchain.
  • Light nodes, also known as thin nodes, do not store the entire blockchain. They store just the block headers received from supernodes. Light nodes serve as endpoints in communication within the blockchain.

Since the device with a full node has to store the entire blockchain and communicate to a large peer-to-peer network, there are certain system requirements to meet.

According to Bitcoin.org instruction, the recommended minimum spec for Bitcoin Core node involve desktop or laptop hardware with:

  • Recent versions of Windows, Mac OS X, or Linux.
  • 200 gigabytes of free disk space, accessible at a minimum read/write speed of 100 MB/s.
  • 2 GB of RAM.
  • A broadband Internet connection with upload speeds of at least 400 kilobits (50 kilobytes) per second.

Notably, you can run a full node on a Tesla car.

All in all, running a full node in Bitcoin isn’t free at all and requires a certain level of technical skill from the operator. 

Additionally, there are certain problems associated with such nodes. For one, setting up such a node in a jurisdiction unwelcoming to cryptocurrencies is a risk. And even if the local laws are friendly, a full node can be targeted in case of a disruptive attack on the Bitcoin network.

Still, the network is working fine and there are at least enough full nodes for it to operate at the current scale.

Why Run a Full Node?

There are two main reasons to run a full node. One is to voluntarily contribute spare resources to the network, the other is to have a trusted full node for one’s own transactions.

Any person or company using Bitcoin for transactions, speculations, or investing is interested in the good health of the network. Therefore, they are interested in having more devices to verify transactions and making the network more decentralized. 

On the other hand, for a business or a person that deals with Bitcoin, a full node is the way to achieve higher levels of privacy and security. Generally, by using a third-party wallet you rely on a service to relay your transactions back and forth. With a full node, you’re in full control.

As a bonus, a full node lets you choose the chain in case of a hard fork.

Why Is There No Monetary Reward?

Full nodes are no less important for Bitcoin than miners. Still, miners collect the transaction fees and block rewards while full nodes get no money whatsoever. The network wouldn’t be possible without full nodes and it can’t grow if there aren’t enough of them. 

Notably, even Microsoft suggested adding the reward back in 2012. 

“[Bitcoin’s] cryptographic fundamentals have largely held up even as its usage has become increasingly widespread. We find, however, that it exhibits a fundamental problem of a different nature, based on how its incentives are structured,” reads Microsoft’s announcement. 

Surely, this apparent unfairness should’ve been addressed by now.

Right now, full node operators are basically getting only one reward, which is a trusted full node to use. There is no particular reason for messing with the code to run a “bad” node. Others won’t listen to it, undermining the whole point of having a node. Moreover, there is no point in operating multiple nodes at once, as it is with mining. Whatever an operator does, no actions that would harm Bitcoin decentralization or the information processed are encouraged.

If a monetary reward for full nodes was to be introduced, the case would be entirely different. Now you suddenly have a reason to deceive the system and run as many nodes as you can without actually contributing to decentralization and fairness of the network. As one of Reddit users puts it:

“If you did it right now in a naïve way, then people would just run one node connected to the Internet via thousands of IP addresses to get a lot of the reward,” the post reads, ”it’s not clear how you would coordinate/enforce this reward, since the state of the entire network isn’t global or in the blockchain.” 

In order for a hypothetical Bitcoin with full node rewards to work properly, there has to be a system that would somehow prevent operators from cheating, which doesn’t exist in Bitcoin. Notably, there are systems that reward full nodes, such as Dash, but this creates a whole new set of challenges.

It is likely that Bitcoin as we know it will not have the monetary reward for full nodes, leaving this job for altruistic community members and businesses dealing with the cryptocurrency. 

And if it was to change, it probably won’t be the same Bitcoin anymore, anyway.

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