Bitcoin nodes are disappearing!

The Bitcoin network is powered by Bitcoin nodes. Nodes are dropping out of the network due to lack of compensation.

Identifying the problem and working towards a solution can instill the longevity of Bitcoin.

No matter how you measure the amount of Bitcoin nodes on the network, the total amount is dropping. In a matter of six months, we’ve seen about a 30% drop in active nodes.

Satoshi originally described nodes as the computers on the network that are finding the proof-of-work for its block. Once mining required more than a CPU to be profitable, the definition of a node changed.

While miners are technically nodes, as they run the Bitcoin core software, what we describe as nodes today are often relay nodes. Relay nodes operate to pass transactions and blocks from the sender node to their neighbors in the network, as well as host a full copy of the blockchain. Sometimes these nodes will be miners, sometimes these nodes are other relay nodes that are getting transactions closer to a mining node.

Economics of Mining is fueling the Problem

Satoshi did not predict the advent of mining pools. Mining pools work with a full node operating on the public network, receiving and transmitting data to other nodes. Behind the full node is the pool of miners, who do not act as nodes. Instead, they receive a piece of the work, complete it, and send it back to the full node. Mining pools are putting an enormous amount of computing power outside of the Bitcoin network.

This makes sense from an economical standpoint: spread the work out among highly specialized machines and chips. Storing the 27+ GB blockchain and requiring CPU cycles and network configurations to operate as a full node isn’t as profitable when the pool operators can do that for you!

Where does this leave us?

The only Bitcoin nodes relaying the information are the pool operators, Bitcoin holders running a full bitcoind wallet, online Bitcoin service providers, and enthusiastic hobbyists. This leaves us with pools that are somewhat centralizing the proof-of-works and wallet balances with some nodes spread out geographically pushing packets back and forth.

It strikes me as an oversight that node operators don’t get any sort of compensation. Its one part of the bitcoin ecosystem that runs without any sort of incentive, and the participation rate can be seen in declining number of nodes.
— Adam Kornfield source:

While the centralization of mining is an upcoming problem of its own, as the network grows there will be an increasing demand of full nodes to ensure transactions reach the miners, pooled or not. Node operators do not have any financial incentive to keep the nodes running, unlike the miners.

Bitcoin miners will not willingly give up their profit to the nodes supplying them with the inputs they use to generate financial rewards from. Technical achievability aside, if the pool I’m mining in decides it will donate an extra 2% to the node network many of the miners will leave for a pool with lower fees.

Fixing the Problem

Mirroring the Restaurant Model

At a restaurant, hosts take the guests to their table. Once seated, the waiter takes care of the table’s needs. After that’s taken care of, the host sees them out and the job is complete.

If we project the Bitcoin proof-of-work network onto the restaurant model, the relay nodes serve the purpose of the host, and miners of the waiters.

The only difference is that at the end of the night at a restaurant, the tip earnings are split among the wait and host staff. Bitcoin miners do not share their earnings with the nodes transporting the transactions.

If mining pools are going to stay and not contribute to the node network with their full potential as planned by Satoshi, the Bitcoin core software needs to incentivize full nodes to host copies of the blockchain and relay blocks throughout the network by sharing the mining fees or block rewards.

Give them Silver

With countless altcoins floating around, why not repurpose one into a coin representative of the relaying nodes contributions to the Bitcoin network. Take Litecoin and make it the silver of cryptocurrencies. Almost all altcoins are exchanged only with BTC, for a reason. Some exchanges are already trading between altcoins and LTC.

As a miner I would accept Litecoin for operating relay nodes.
—Chris Shepherd, HashRabbit Founder

A subcurrency purposed for compensating lower tier Bitcoin support requires less computing power & resources to operate, yet still has a value associated with it should relay node operators phase out. Relay nodes have low system requirements, and could be compensated for operating as a relay node for a multitude of services: Bitcoin, Litecoin, Tor, etc.

Competitiveness in Bitcoin mining isn’t going anytime soon, and neither are mining pools. Relay nodes are an unpredicted part of today’s Bitcoin and need to be compensated. If the Bitcoin core software does not include support for nodes, and mining pools won’t support them, let’s repurpose an altcoin that the community establishes to represent support systems not directly involved with hashing and building the blockchain.

Bitcoin is the Internet’s gold. Litecoin should have a purpose, the Internet’s silver. Paying tribute to r/outside, Dogecoin can be the copper of the Internet ☺

Is Litecoin really the best option?

Probably not. A new altcoin would need to be created. Litecoin developers are almost nonexistant and Litecoin developers are very conservative when it comes to changes to their coin.

Thin is sexy

There’s a reason everybody is using cloud hosted Bitcoin wallets, nobody wants to hold onto a 25+ GB blockchain copy, nor do they want to wait for it to update when they go to send money.

I was discussing the “Silver coin” solution today with Adam McKenna, founder of Multipool, and the topic of a thinner client came up. Requiring an update to the Bitcoin protocol, the concept of a full blockchain store can be extracted away and home wallets can operate as pass through nodes to still support the network and fluidity of transactions, without the storage overhead of hosting the blockchain. WiFi enabled mobile devices would also be able to operate as relay node without utilizing precious flash storage.

There’s no reason replication of static data has to be part of the wallet, we have plenty of ways of doing that. If we could leverage thin clients to also participate in strengthening the network, we’d be in good shape.
— Adam McKenna

The size of the Blockchain is often touted as a problem that Bitcoin core developers and much of the community is very aware of. Sure, pruning the blockchain periodically will reduce its size, but also wipes the history of transactions and changing of hands for a Bitcoin, which is pretty cool in my opinion.

Coupled with a magnet link to the latest blockchain copy, thin wallets would provide an unprecedented level of contribution to the Bitcoin network that most Bitcoin consumers are not interested in investing time and resources to support.