What Is a Node in Crypto?

How Does Node Work?

Cryptocurrency node (from Latin nodus – node) is a node in the network that processes or produces transactions. It can be any server or computer connected to the blockchain network. You can run a blockchain network node on your own machine or rented server.

Who Can Run a Node?

To become a validator in the main network of any project, you need to get a lot of coins. This can be done in several ways:

Buy them on the exchange, which is  expensive.

Participate in the testnet and get these tokens for free.

The best testnet participants, validators, who maintain a server and update the system on time, receive a delegation from a fund or a project in the form of coins. You cannot sell them, but you can stake them. And the more tokens you have, the more reward you have.

Benefits of participating in testnets:

You receive rewards for participation in the testnet in the form of coins or some currency. You do not have to become a validator, you can participate in the testnet, get tokens and sell them on the exchange.

You can become a validator, or delegate coins to a large validator and receive interest.

Why Do Projects Need Nodes Testing?

For developers, this is an opportunity to test the capabilities of the blockchain using a testnet: no need to hire testers. At the same time, people testing the project on the testnet will continue to support this project, unlike hired testers.

Ultimately, these are thousands of  technically savvy followers – people who test the project. If the project gives coins, then the person is likely to be attracted. And this is the backbone of a dedicated community.

What Are Testnets Types?

Technical testnet. This is real network testing with load testing, scripting and so on. As a rule, such testnets are closed and no more than 200 people can participate.

Ambassador programs. This is pure marketing, the purpose of which is to promote the social activity of the project and popularize it. Tasks include translations of articles, posting on social networks, creating video, photo and audio content about the project. You get test tokens which are then converted into mainnet tokens.

Mix of technical testnet and ambassador programs. You need to install a node, run scripts, post videos or content on social networks. This is the most common type of testnet.

What happens to your node after the testnet? Is it being transferred to the main network?

In general, if you participate in the testnet and get coins for it, it is logical to stay in the mainnet. But it is not always the case. The coins received from the project are usually not enough to stake and validate the network, or with this amount of coins, your node may not produce a single block in a year. In fact, you will not receive anything for a year on the main network, because in order to make a profit you must have enough coins.

It may be more profitable not to participate in the main network, but to delegate your money to a large validator and receive profits in proportion to the money invested. This is sometimes much more profitable than setting up a node yourself. In general, maintaining the main cryptocurrency network is much more difficult and expensive.

How Do I Get a Crypto Node?

What do you need to raise a node and what are the costs? To raise a node, you only need servers and their smooth operation. The cost of a validator comes down most often to renting a server or paying for electricity if you have your own server or PC that can be converted into a server for a node.

In addition to the technical side, you will need to register in the project chats and be an active user. You also need minimal knowledge of Ubuntu. It's not difficult, manuals for raising the nodes of various projects will be in the "Nodes and Testnet" section of the site. Most often, it all comes down to copying a single line of command into the terminal.

The cost of the server depends on the node you want to raise. Each node has its own minimum requirements for server resources. It is impractical to buy a physical server or PC for test nodes. But if you have it, then you can put it to work. The easiest way is to rent virtual servers, it is not expensive.

The cost of a server to raise a node ranges from $10 to $40 per month on average. It all depends on the requirements of the project.

What is better to use to raise a test node, a rented server or a home PC? Most often, you need a productive machine. By home PC, we mean any hardware in your home, it can be a server, a regular PC or a laptop.

What you need to provide a home server or PC on which the node will stand:

Uninterrupted internet and power connection.

Minimum technical skills to solve problems or update node scripts.

Payment for internet and electricity.

Maintaining testnet can take weeks or months, so it's best to use servers. Monthly payment for such servers will be your only cost. On average, the testnet phase takes 3-4 months.

Physical servers are relatively inexpensive. Otherwise, you need to buy a PC. If you decide to buy hardware, you need at least an 8 core processor, 16 GB of RAM, 500 GB of SSD.

Even with such hardware, you won't get to many projects that require a more powerful PC.

And the last argument in favor of renting servers is the ability to rent the required number of servers for several projects. It is unlikely that you will be able to collect so much iron.

For the cost of one normal PC, you can pay for servers on the Internet for several years and not worry about its performance and configuration.

We recommend renting servers, as 98% of all testnet people do. It's fast, simple and not expensive. They pay off very quickly.

Do Bitcoin Nodes Make Money? 

There are two two types of consensus: Proof Of Work and Proof Of Stake. The Proof Of Work consensus allows you to calculate a block using mining equipment. The more powerful your equipment, the faster and more blocks you can calculate and, respectively, you earn more. This is how Bitcoin works.

Modern cryptocurrencies running on the third generation blockchain work according to the Proof Of Stake protocol. Now all new projects work on this protocol. For the Proof Of Stake protocol to work, you do not need to mine anything, you need to stake or lock a certain number of coins. The more coins are staked, the more blocks you produce.

It is for testing networks developed on the Proof Of Stake protocol, on which modern projects work, people are needed who can raise a node on their servers, get a demo coin and become a test network validator. This allows developers to test the operation of the network or its individual features.

Are Crypto Nodes Real?      

How long will the topic of nodes and testnets be relevant? This trend is just beginning to develop. While projects will be released on the Proof Of Stake protocol, they will need test networks and people raising nodes and validating these test networks. Projects on the Proof Of Stake protocol are just starting to develop.

Can You Make Money From Nodes?    

Earnings from raising a node depends on the project and the time of your participation in the test network. A lot depends on the perspective of the project you choose. Earnings on raising nodes is equal to several thousand dollars per month on average, if we take an interval of a year (of course, if everything is done correctly and consistently).

What Is the Best Node to Buy?    

The prospects for a single project are difficult to predict. The most optimal strategy would be to participate in as many projects as possible at the testnet level. At the same time, in the best projects in which you receive the most rewards, you can go to the working network or mainnet and become a validator of the working blockchain network.

First of all, evaluate the funds that are invested in the project and the development team. If the project has top funds or even medium-sized funds, they will give money for development and marketing. It is important to look at how long the funds have been giving money. If for a long time, then most likely they have already been spent on development, and if recently, then there will be enough money for a testnet.

Separately evaluate the team, what kind of team it is, whether they had similar projects before. Also evaluate how the development is going, whether they have development stages and project papers. The analysis is similar to the ICO analysis, only at an earlier stage.

 

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Author
Maxim Katrich
11.10.2022
Crypto enthusiast, editor of BitOnfeed, expert on the NFT industry.
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