Why You Need a Blockchain Node Provider

To start with, let’s discuss what the blockchain is in terms of decentralized applications building. Blockchain or distributed ledger is a permissionless decentralized network that contains replicated, shared, and synchronized digital data geographically spread across multiple computers.

Unlike centralized databases, blockchains can’t be controlled by centralized entities (administrators). This, in turn, means that no participant can corrupt the process of data storage, transfer, exchange within the blockchain. Technically, the information is stored in the form of the chain of blocks; the encrypted and immutable consequence of data pieces. The blocks contain the information about transactions that take place between the accounts of this or that blockchain. Nobody can replace the next block with the previous one or voluntarily add a new block: it would be rejected by its peers within the network.

When network participants ‘add’ new blocks to the chain, they agree about the fact that the information about the transactions occurred during this or that block is valid. Simply put, every new block in the blockchain is the agreement signed by all computers active within the blockchain: ‘Hereby we agree that account A has transferred X tokens to account B so that both accounts have their balance changed’.

Once blockchain nodes participants add a new block to the network, it is permanently connected to the previous one. Every next block contains the information about the previous one (so called header); it guarantees the security and censorship-resistance of the entire system. The integrity of blockchain systems are protected by the sophisticated toolkit of hashes, i.e. secrets used to encrypt the data about blocks and transactions.

What does this mean for applications developers? Blockchains can be used as the elements of reliable, censorship-resistant, attack-resistant, and transparent decentralized back-end for apps. Imagine Google Cloud or AWS without centralization, but with battle-tested security and encryption: for instance, Bitcoin works like clockwork for over 12 years without a second of downtime.

Different blockchains work in accordance with different rules; we called them ‘types of consensus’. Bitcoin, a first-ever blockchain works on Proof-of-Work consensus or PoW, so does Ethereum. This means that millions of computers in their networks are trying to solve puzzles in order to ‘mine’ a correct hash for the next block. Net number of hashes the computers (miners) send to the network is called hashrate. Imagine, right here, Bitcoin network participants worldwide are sending 200 quintillions of hashes every second to protect the integrity of its network.

In Proof-of-Stake, validators - network participants responsible for proper confirmation of transactions and adding new blocks - are keeping network integrity by their stakes, not by computational power contributed. Say, in an upcoming Ethereum 2.0, validators will be required to stake (lock for a predetermined period of time) 32 Ethers; should one of them somehow fail in the validating process, he/she will be penalized and lose share of the stake. Largest Proof-of-Stake (PoS) network Cardano (ADA) works similarly.

Despite the different blockchains having different consensus designs, each of them in its daily operations relies on the distributed infrastructure of nodes. We can better imagine a node as a server (actually, a computer) operated by a specific software. Unlike centralized databases, nodes are equal to each other and contribute equally to the process of block validation and therefore, to the confirmation of blockchain transactions.

That said, blockchain nodes are geographically distributed elements of computational (hardware and software) infrastructure required for blockchains to operate. Each blockchain adheres to its own node architecture design.

Public nodes and self-hosted nodes: Which option is a smart bet for 2022?

To ensure balanced, attack-resistant and decentralized consensus - by ‘decentralized’ in this particular case we mean ‘protected from whales domination and 51% attacks’ - every blockchain relies on its own ecosystem of nodes. Every ecosystem boasts different ‘levels’ of nodes with different rights. This feature is also designed to ensure maximum resource-efficiency for every participant of node consensus.

As we have already mentioned, every blockchain has its own design of node infrastructure. However, typically, blockchains use ‘regular nodes’ and masternodes that leverage more powerful computers and bear greater responsibility. Let’s talk about the most popular nodes hierarchy design with light nodes, full nodes and archive nodes.

Light nodes or read-only nodes are the smallest and most flexible elements of every blockchain infrastructure. Their rights are limited: they can just check the state of the blockchain, i.e. light nodes can ‘see’ the balances of accounts, the content of blocks, the status of validators and so on. In their operations they need to get synchronized with full nodes. Light nodes work with minimum software/hardware requirements as they store small pieces of information. For the majority of blockchains, light nodes can be set up in less than one hour even on a low-key computer.

Full nodes or masternodes not only store the full information about the blockchain, but also can adjust and save it. Every piece of information stored in the blockchain is added by full nodes or miner nodes (in Proof-of-Work blockchains). While preserving the blockchain state, the full nodes are synchronized with each other. They store a large amount of information; for instance, Ethereum full node size in Geth implementation is over 750 GB. Technically, full nodes store the copies of all transactions that took place in this or that blockchain.

Also, archive nodes store the entire history of the blockchain operations since its first-ever mainnet block. Say, with the Ethereum archive node, we can track the history of all blocks, balances, accounts, miners and hashes since July, 2015. Primarily, we need such nodes for R&D and analytical purposes.

Simply put, the majority of blockchains consist of light, full and archive nodes that have different rights and obligations in transaction verification. It takes high-end hardware, sophisticated software and engineering skills to run full and archive blockchain nodes.

Since the inception of blockchain technology, crypto enthusiasts have been running various nodes on their own. For doing so, they received bonuses in native cryptocurrency of this or that blockchain. Also, to deploy a decentralized application - non-custodial exchange, decentralized lending protocol, on-chain game, or NFT marketplace - developers need the access to the blockchain.

In the first phases of the DeFi revolution, it was reasonable to run a self-hosted node. In order to have your own node operating, you need to lend a server or data center, customize software, periodically update it, and so on. Also, some server infrastructure providers don’t allow the installation of node software due to regulatory and technical restrictions.

That said, running a self-hosted blockchain node might be an interesting and profitable hobby but it takes too many resources and skills nowadays. It still makes sense for the validators who are only interested in getting rewards for their contribution to distributed computational infrastructure. For blockchain developers of 2022, running self-hosted nodes is unnecessary. Now they can book an API endpoint created and maintained by a blockchain nodes provider.

As such, developers don’t need to rely on self-hosted nodes any longer: blockchain nodes providers can do all the heavy lifting and allow blockchain teams to better focus on development and marketing tasks.