I've started working on my guide which covers the path to financial sovereignty/ privacy with Bitcoin.
What follows is the work-in-progress of part 1, which still misses the manuals of installing a full node / pruned node / locally hosted Blockchain explorer.
Please have a thorough look, the most constructive feedbacks will each receive a 1000 sat bounty.
Step One: Employ Your Own Node
General Overview of A Full Node
The common full node (or node) lies at the heart of the Bitcoin protocol. These nodes actively participate in the network by validating incoming transactions and blocks, and maintain connections to other nodes in order to propagate validated transactions and blocks along to their peers, ensuring that information is efficiently disseminated to all parts of the network. Additionally, they also contribute to the decentralization, integrity, security and state of the blockchain by operating collaboratively yet autonomously from one another.
A full node contributes to Bitcoin's decentralization by maintaining independent copies of the blockchain and the Unspent Transaction Output (UTXO) set. These copies enable the node to autonomously verify transactions and blocks using its own transaction history and ensure that transaction inputs reference valid, unspent outputs.
Each node validates transactions based on policy and consensus rules, and blocks based solely on consensus rules.
-
Policy rules are defined by individual nodes and can vary among node operators. They encompass a set of conditions or rules determined by the node operator and may include specifications such as minimum transaction fees, blacklisting certain addresses, or setting spending limits.
-
Consensus rules are fundamental and unchanging rules that are hardcoded into the Bitcoin protocol. These rules dictate how the network operates and include parameters such as block size limits, difficulty adjustment algorithms, halving schedules, and rules governing the issuance of new coins.
Despite the absence of centralized control, the collaborative behavior of nodes following these consensus rules results in a shared consensus on the state, integrity, and security of the blockchain—albeit a dynamic one.
Unlike traditional centralized systems where consensus is predetermined and final, the decentralized nature of the blockchain means that consensus is constantly evolving and adapting. Therefore, consensus within the Bitcoin network is often described as 'emergent consensus,' reflecting its ongoing and emergent nature.
General Overview of A Pruned Node
A pruned node is essentially a full node that operates without a complete local copy of the blockchain, reducing storage requirements while retaining most functions of a regular full node. The key distinction between a full node and a pruned node is that the latter can only validate and propagate recent transactions and blocks, as it retains only the Unspent Transaction Output (UTXO) set along with the most recent transactions and blocks.
Additionally, a full node can be used to bootstrap fresh nodes by providing them with a local copy of the complete blockchain, which a pruned node cannot offer.
Similar to a full node, the pruned node begins its operation with a process known as the Initial Blockchain Download, or 'IBD.' During this process, the pruned node obtains, stores, and validates a complete copy of the blockchain from an already established node in the Bitcoin network.
However, unlike a full node, which stores and maintains the complete copy and Unspent Transaction Output (UTXO) set indefinitely, a pruned node only retains the UTXO set along with the most recent transactions and blocks. By discarding older data, the pruned node can function similarly to a full node, independently verifying, validating, and propagating recent transactions and blocks to other peers, all while significantly reducing storage requirements.
Incentives for Running Your Own Full Node
1. Enabling Personal Enforcement of Bitcoin's Consensus Rules and Forks
Running your own node not only contributes to upholding Bitcoin's consensus rules, thereby enhancing the integrity of the Bitcoin network, but also empowers you to actively support or reject proposed forks. These forks represent changes in Bitcoin’s consensus rules, and by running a node, you can choose to enforce either the new, modified consensus rules or adhere to the existing ones.
2. Enhanced Privacy and Security of Personal and Transaction Data
Every time you engage in a bitcoin transaction, your wallet software requests transaction information, encompassing details such as transaction history, inputs, outputs, and confirmations, either from your local node or from remote nodes.
Running your own node enables seamless integration of the node into your wallet software, empowering you to independently query, transmit, and verify transaction information directly relevant to your wallet. Utilizing your node in this manner ensures both the privacy and integrity of your transactions, as it conducts transaction verification locally, adhering strictly to its own ruleset, and thereby ensuring that transactions are validated accurately and securely without disclosing sensitive data to external entities.
On the contrary, querying remote nodes poses security risks, as these sources may be compromised, leading to potential manipulation of transaction data or dissemination of inaccurate information.
Additionally, it compromises privacy, as the servers and nodes of third-party services can access your IP address, query history, and therefore, your account balances and spending activity. Moreover, any personal information provided to establish the service, such as email address, phone number, or physical address, can be linked to your transactions and account balances, further compromising your privacy.
3. Enabling Utilization of A Locally-Hosted Block Explorer
Running your own node empowers you to combine it with a locally-hosted block explorer, allowing you to have full control over querying and analyzing blockchain data directly from your own node, enhancing your privacy, control, reliability, and security.
On the contrary, relying on third-party block explorers poses several risks that can compromise your privacy, security, and the accuracy of the information you receive:
-
Third-party block explorers often collect and store users' browsing habits and transaction data, including IP addresses, query history, and other user information, potentially compromising users' anonymity and privacy.
-
Moreover, trusting third-party services to handle your data securely leaves you vulnerable to potential security breaches. If the service is compromised, your sensitive information could be exposed to malicious actors, posing a significant security risk.
-
Additionally, third-party block explorers may present data in a biased or manipulated manner, potentially leading to misinformation or confusion among users.
The End, For now.
I'd like to hear constructive feedback in regards to the text above. I've tried to structure and word the text as compact, precise, factual and complete as possible, without getting lost in details too much.
I'm probably bordering the 30-hour-mark in regards to time invested in the above, and would really appreciate some input in regards to the correctness of it's contents, it's structuring, as well as what to add.
Remember: this is a work in progress. The next part will cover self custody, wallet software (HD wallets), hardware wallets, UTXO's as well as best practices in regards to safeguarding privacy et cetera
1,000 sats bounty