Nodes are computers on the Bitcoin network that run the Bitcoin software, relay transactions, and verify that all transactions follow Bitcoin's consensus rules. Nodes are designed to be lightweight so that anyone on the network can run a node, and in fact, users are incentivized to run their own nodes to maximize the network's decentralization and their own security and privacy.

A node could be as simple as a computer running Bitcoin Core or could be a dedicated hardware device from companies like Start9 or Umbrel running additional services like Electrum and Lightning. Once up and running, nodes listen for transactions on the network, verify that all transactions follow Bitcoin's consensus rules, and relay critical data like mined blocks and chain state to other nodes on the network. Unlike centralized networks and services where all clients connect to centralized servers, nodes operate in a peer-to-peer (P2P) fashion such that the network is resilient to censorship and nodes going offline.

Bitcoin wallets talk to nodes to load transaction history and available balances. If you don't run your own node and connect your wallet to it, your wallet will connect to any number of publicly available nodes for this information. If the node your wallet connects to has malicious intent, it could log and track your wallet addresses and balances and potentially connect it to your location via your IP address, potentially making you a target. By connecting your wallet to your own node, you can keep your transaction history and balances private. Additionally, a malicious node could disobey the Bitcoin consensus rules and lie to you about the validity of transactions in your wallet, making your wallet think you have more Bitcoin than you really do or that the recent high value payment someone sent you was confirmed when it really wasn't. Running your own trusted node to verify your Bitcoin holdings is like having your own personal goldsmith to verify the validity of your gold.

For beginners with low amounts of Bitcoin holdings, the risks of potentially connecting to a malicious node aren't enough to justify the added complexity of running your own node. However, as your Bitcoin holdings increase, your value of security and privacy rises, or as your desire to use Bitcoin's more advanced functionality grows, running your own node becomes essential.

If you'd like a trusted partner that can tailor guidance to your specific needs and guide you on your Bitcoin journey, schedule a call with us.