Thread by @_benkaufman

I’ve received many questions about full nodes. What is a full node, what it does, and what’s so important about it? So here’s a thread for anyone wondering why they should run their own #Bitcoin full node? 🧵👇

1/ Let's start with what is a full node? In simple terms, it's not very different from a database, mapping bitcoins to their owners. Every #Bitcoin transaction updates the current state of the database, deleting the old owners and assigning the new ones.

2/ To stay up to date with the latest changes, the node communicates in a "peer to peer network" with other nodes and asks them for new transactions and blocks.

3/ When a new block arrives, the node will validate that it complies with a certain set of rules (the "consensus rules") and if this validation process pass, the node will update its database with the changes in ownership caused by the new transactions in the block.

4/ These "consensus rules" can be of a wide range, from the limit of the size of the block, to the check that no transaction (excluding the initial subsidy awarded to miners) can spend bitcoin which do not come from a current owner in the database.

5/ This database of the current state is called the "UTXO set". Every node in the network must maintain a full copy of this set to be able to verify new blocks and transactions, since without this, it won’t know who are the current owners of each bitcoin.

6/ The blocks themselves, however, can be discarded after used for updating the UTXO set (in rare cases they might be needed, but we will ignore this here for simplicity), this is what differentiates archival nodes - which keep old blocks, from pruned nodes - which discard them.

7/ Now that we have some idea what a full node is - a copy of the current "list of owners" of all bitcoins - we can continue to the bigger question, why should I run a full node?

8/ In some cases, when a node is maintained and configured for that purpose, running a node might help maintain the network's connectivity and reliability. Yet this is NOT why people should run a node, since for this task, even a small portion of the network users would suffice.

9/ Another common fallacy is that just running your node helps securing the network, because it is validating all transactions. However, this validation has no direct effect on the rest of the network. You could run a million nodes, yet it’ll do nothing to improve security.

10/ The only reason you should run your own #Bitcoin full node is to use it to verify your own transactions, the transactions you receive. Your node is verifying all transactions, and the entire transactions history, only since it’s necessary for validating your own transactions.

11/ But why is verifying your own transactions so important? Because without that, you cannot know if what you received are "real" bitcoin. That is, bitcoin that others will accept from you as valid when you spend them.

12/ When you receive a new transaction, what you should ask yourself is: "when I decide to spend the #bitcoin I received, would other people accept my transaction as valid? or would they reject it, leaving me with coins no one wishes to accept?"

13/ If you cannot know that, you cannot tell whatever other people will later accept this transaction, or reject it for not complying with the rules of the network. Let's consider how it could play in practice:

14/ Suppose you are using a #Bitcoin wallet app, and that app gets information about your transactions from the company's servers. The question is, how can you know if the company did not provide you with transactions other #Bitcoin users will consider invalid.

15/ One could say it is possible to verify by comparing information across multiple sources, like verifying your transactions on multiple block explorers. This, however, leads us to 2 possible scenarios.

16/ Either those other sources are not used by many other people, in which case the assurance you can get is quite small.
Or these sources are indeed so popular that a significant majority of other users is also trusting them to verify their transactions.

17/ But while this "solves" your individual problem for validating a transaction will be accepted by others, it introduces a much bigger risk to all #Bitcoin users.

18/ In such a case, where a few popular services serve as the "source of truth" for validating transactions for most of the #Bitcoin network, it becomes possible for those services to plan and execute a change in the consensus rules without most users even knowing it.

19/ For example, they can decide that from now on, every block must include a 10 #Bitcoin "fee", created out of thin air, to an address they control.

20/ Miners would have to comply, or those "big nodes" will reject their blocks, making them spend money on producing blocks most users will not accept, and so making their block reward worthless. (or the nodes could even eliminate the role of miners altogether)

21/ And the small minority who do run their own nodes will have to face the choice between accepting the new rules the big nodes have dictated, or continue with the old rules which will reject those new rules blocks, but will leave them using a network most people no longer use.

22/ So what we end up with is a system where the rules of the network can be dictated by a handful of businesses, who now yield a nearly unlimited power over the consensus rules of #Bitcoin - since the majority on economic activity on the network is blindly following them.

23/ Going back to the main question, when you don't run your own node, you either risk getting stuck with “fake” coins no one will accept, or you end up in a centralized system no different from the banking system of today.

24/ Verifying your own transactions, which requires using your own node, is the only way you can influence the rules of the #Bitcoin network.

25/ By refusing to accept a transaction which do not comply with your rules, you can discourage others who may want to do business with you from accepting such transactions themselves. When a large part of the network does the same, this influence becomes stronger.

26/ #Bitcoin is not a democracy. Even with the whole world is telling you to comply with their chosen rules they cannot force you to. But on the other hand, you cannot force anyone else to agree to your rules.

27/ #Bitcoin is a collection of individual choices and preferences. Would I rather use a certain set of rules and be able to transact only with those other people who chose the same? Or would I rather switch to another set and be able to transact with those who chose that one?

28/ This absolute freedom in reaching consensus may sound unstable and chaotic, as "everyone can do as they pleases", but by also making it impossible to coerce others, it has actually proven to be the most stable and carefully balanced mechanism ever used.

29/ While anyone *could* decide they will only accept blocks which reward them a fee, for example, nobody would do so, since they know well that if they do, they'll find themselves alone stuck with their “fee coins" nobody is will accept, rendering them worthless.

30/ Running your own node then is important first of all because of the personal interest of ensuring the #Bitcoin you receive are "real", and will be accepted by others.

31/ But secondly, it is also your way to protect the value of the network, not because you verify everyone's transactions, but because you verify your own, increasing the economic network effect your rules have.

32/ To summarise, running your node is important to protect yourself - and helping others use their own nodes is important to protect the value of the network as a whole.