What Are Forks in Blockchain Technology?

Since Bitcoin is open-source, anyone can modify the software. You could add new rules or remove old ones to suit different needs. But not all changes are created equal: some updates will make your node incompatible with the network, while others will be backward-compatible.

“Bitcoin node” is a term used to describe a program that interacts with the Bitcoin network in some way. It can be anything from a mobile phone operating a Bitcoin wallet to a dedicated computer that stores a full copy of the blockchain.

There are several types of nodes, each performing specific functions. All of them act as a communication point to the network. Within the system, they transmit information about transactions and blocks

How does a Bitcoin node work?

Full nodes

A full node validates transactions and blocks if they meet certain requirements (i.e., follow the rules). Most full nodes run the Bitcoin Core software, which is the reference implementation of the Bitcoin protocol.

Bitcoin Core was the program released by Satoshi Nakamoto in 2009 — it was simply named Bitcoin at the time, but was later renamed to avoid any confusion. Other implementations can be used, too, provided they’re compatible with Bitcoin Core.

Full nodes are integral to Bitcoin’s decentralization. They download and validate blocks and transactions, and propagate them to the rest of the network. Because they independently verify the authenticity of the information they’re being provided with, the user doesn’t rely on a third party for anything.

If a full node stores a full copy of the blockchain, it is referred to as a full archival node. Some users discard older blocks, though, in order to save space — the Bitcoin blockchain contains over 300GB of transaction data.

What is cryptocurrency?

A cryptocurrency (or crypto) is a form of digital cash that enables individuals to transmit value in a digital setting.

You may be wondering how this sort of system differs from PayPal or the digital banking app you have on your phone. They certainly appear to serve the same use cases on the surface — paying friends, making purchases from your favorite website — but under the hood, they couldn’t be more different.

What makes cryptocurrency unique?

Cryptocurrency is unique for many reasons. It’s primary function, though, is to serve as an electronic cash system that isn’t owned by any one party.

A good cryptocurrency will be decentralized. There isn’t a central bank or subset of users that can change the rules without reaching consensus. The network participants (nodes) run software that connects them to other participants so that they can share information between themselves.

Centralized vs. Decentralized networks

Centralized is what you’d expect something like a bank to use. Users must communicate via the central server. Decentralized, there is no hierarchy: nodes are interconnected and relay information between themselves. The decentralization of cryptocurrency networks makes them highly resistant to shutdown or censorship. In contrast, to cripple a centralized network, you just need to disrupt the main server. If a bank had its database wiped and there were no backups, it would be very difficult to determine users’ balances. In cryptocurrency, nodes keep a copy of the database. Everyone effectively acts as their own server. Individual nodes can go offline, but their peers will still be able to get information off of other nodes.

Cryptocurrencies are therefore functional 24 hours a day, 365 days a year. They allow for the transfer of value anywhere around the globe without the intervention of intermediaries. This is why we often refer to them as permissionless: anyone with an Internet connection can transmit funds.

Why is it called cryptocurrency?

The term “cryptocurrency” is a mixture of cryptography and currency. This is simply because cryptocurrency makes extensive use of cryptographic techniques to secure transactions between users.

What is public-key cryptography?

Public-key cryptography underpins cryptocurrency networks. It’s what users rely on to send and receive funds.

In a public-key cryptography scheme, you have a public key and a private key. A private key is essentially a massive number that would be impossible for anyone to guess. It’s often hard to wrap your head around just how big this number is.

For Bitcoin, guessing a private key is about as likely as correctly guessing the outcome of 300 coin tosses. With current computers, you wouldn’t even be able to crack someone’s key before the death of the universe.