Full Bitcoin Node
At a mixer on Sand Hill Road in late 2017, surrounded by CFOs and investors, an Internet OG whispers in my ear. It’s one word - blockchain. He nods, raises an eyebrow, and moves on.
I know this guy, because he drove network file system (NFS) adoption for Sun Microsystems in 1998. He was responsible for licensing the software to all parties across the computing industry. I was the product manager for NFS the very next year, after it had blown up as a multi-vendor standard. There wasn’t much to do with the product except to talk about it. It had already won.
The next year, I began to investigate real world applications of blockchain at Node Worldwide in San Francisco. Among many projects, I partnered with Seth Goldstein on the Founder Funding pitch prep workshop and John-Michael Scott on the BloxNexus podcast. Two use cases kept coming up - censorship-resistant cross-border remittances and creator control over Internet contributions.
Over the next few years, I had the chance to investigate multiple platforms upon which such applications might be built (including EOS, Ethereum, Stacks and others). One could see the momentum building, but I was suspicious. From my early experience at Sun Microsystems with open networking, it was obvious that I should gravitate towards Bitcoin.
Already the open standard for peer-to-peer payments without a counterparty, I was excited to see the momentum building for a layer two Lightning Network suitable for micropayments. In both cases, multiple motivated parties were collaborating on the standards for the purpose of creating real world value. In particular, the Lightning Network looked to be the foundation for those two use cases that kept coming up.
So there I was, attending the Pacific Bitcoin Conference in Santa Monica, Nov 10-11, 2022, when FTX collapsed. An entire industry had blown up (to the upside and now the downside). The bubble had burst. However, the crowd at this show was not phased. The price of BTC-US would dip a bit with selling pressure from its use as collateral in the crypto schemes. But the price found its floor and stayed firm.
Running A Full Node
The price floor was the signal I needed. Bitcoin had survived yet another bear cycle. Knowing this might be the best time to initiate a position, I committed to acquire and store 1 Bitcoin in cold storage, dollar cost averaging over the next twelve months.
A friend suggested that I run my own node. Of all the reasons given for doing so, four of them had me convinced.
- Privacy - Keep your addresses and transactions private.
- Trust - Remove the risk of a 3rd party altering the true state of the network.
- Governance - By the node version you operate, you tell others what network rules you prefer.
- Redundancy - Hosting a "full" node helps ensure others can access a complete copy of the chain when/if needed.
After ten days, two laptops, hours of Google search results and meticulous documentation of my many experiments, I had not one but two nodes up and running. I felt like I had made it through an initiation. I was now a citizen of Bitcoin.
But I’m getting ahead of myself. The actual experience was more difficult than I expected, and more illuminating. As one who spends time running alpha code, I should have known better. The open source community may move quickly to solve problems, but doesn’t typically have the time to clean up after itself. Documentation is often out of date. Certain “issues” may go unaddressed for years. The only thing you can do is jump in with both feet, stay patient, and ask questions.
Here's what happened. I downloaded Bitcoin core on an older MacBook with an external hard drive. After opening it in Finder, Bitcoin started to initialize the blockchain on my system. While it chugged away, I started to tell people what I was doing. I soon found out what people think of Bitcoin in my friend group. They're either a hard core Bitcoiner, have no idea what is going on, or think the whole thing is for criminals.
Arguments Against Bitcoin
My high net worth (HNW) friends argued most vociferously that Bitcoin is for criminals. I did some research to figure out my talking points. Early adoption of Bitcoin was driven by a desire for privacy, which was often used to mask illicit transactions for drugs, money laundering, ransomware and more. But over time, the transparency of the open ledger made it fertile ground for federal investigators.
In Tracers in the Dark, Andy Greenberg describes the work that has turned criminals away from Bitcoin and towards alternatives like Monero. What was once a strong argument against Bitcoin is now less so, particularly given the amount of money laundering and illicit transactions still made with USD through banks and $100 bills.
The second argument I heard was "Bitcoin isn't backed by anything. It has no inherent value." As the argument goes, the US can tax its citizens. Bitcoin is just a fiction. But I push back. Bitcoin has steadily grown in value for over 14 years. It's actually backed by transaction fees. It has utility.
Poking around Ycharts, I find that the average transaction is around $90,000 executed for a fee in the range of $1-2. At 300k transactions per day. that’s a fee base of roughly $450k per day (or $164m per year). It may not be huge, but it's real.
Bitcoin Node Initialization Update
Meanwhile, the node isn't up yet. It’s been a week now. Bitcoin core is only half way through its initialization, and it's making very little forward progress. The emphasis on the 480 GB blockchain to download had me too concerned about network bandwidth requirements. What I did not expect was the absolute slog of validating the blockchain itself.
What was happening? A quick review of the system’s activity showed 4-5x more disk than network utilization. The process of validation required more speed than was available from the HDD. I bought a new solid state drive (SSD) and started over, this time using a faster system with an Intel i9 CPU and 32GB RAM. This faster system would ultimately take only 36 hours to finish the initial blockchain download and validation.
Now though, I have a profoundly different perspective. I am validating a replica of the blockchain just like the other 15,000 nodes already visible (bitnodes.io). That means I am part of a resilient, redundant network of nodes that each held a copy of the entire bitcoin economic history. And by running the latest software I am making a governance choice to run a node in consensus with all the others.
As a citizen, I now have a responsibility to make better informed choices. Running a full node provides greater motivation and time to understand the technology and its use cases. More than ever, I am now intrigued by the ability of this layered network to create real world value beyond the crypto casino. The journey begins.
Real World Value
I'm a business person by training and a product manager by experience. Thus, any new technology must deliver real world value to catch my interest. What can Bitcoin do? What unmet need does it satisfy? What value can be created with it?
First, Bitcoin core is destined to be a settlement layer between nations and institutions who don’t trust each other. The technology is fit for purpose in this use case. It has already proven to be the best digital store of value here. As Lyn Alden says in her Lightning Network paper,
“it provided access to a tank-like medium of exchange network that could exchange value globally without centralized intermediaries to stop it, and with a better combination of monetary immutability, censorship-resistance, and liquidity than the countless imitators that followed in its wake.”
With its ability to transfer large amounts instantly and securely, Bitcoin competes against the likes of Fedwire to settle accounts between large institutions. As Saifedean Ammous writes in chapter 10 of the Bitcoin Standard, Bitcoin can only handle about 500,000 transactions per day. That's actually a feature, not a bug. If used as payment rails for global international settlements, 850 central banks could each have one daily transaction with every other network bank. With the exquisite feature that no single one of them would need to be in charge.
The simple fact is that the Bitcoin network was (and continues to be) in use for this purpose today by the crypto whales. Institutions (and individuals) are using the system for settlement of large accounts. Though the crypto community may have crashed to earth under the weight of its opacity, that wasn't the fault of Bitcoin. Others will follow their lead in the next bull cycle and build better businesses with Bitcoin as the foundation. Who knows, a few developing countries might start to interact directly with each other.
Second, because Bitcoin core supports so few transactions per second people have argued against its use as a unit of account for the world. The Bitcoin community even spent time and energy from 2015-2017 arguing over a block size increase to enable payments on a much larger scale. At the time, the small blockers "won" as it made fewer demands on the nodes required to validate the network.
Still though, the community knows it needs a payments layer. That has led to the emergence of the Lightning Network as a layer two on Bitcoin. This open standard allows thousands of individual nodes to operate together in a mesh for the delivery of micropayments quickly and securely around the world. This serves not only cross border remittances but also p2p payment of content creators online with no intermediaries to distort the experience and choices. Not huge yet, but it's growing.
Call To Action
Despite these very positive developments, external forces continue to attack Bitcoin. While some Bitcoin maxis may decry inscriptions and ordinals as the attack vector, this is misguided. Wide open discussion and individual innovation in Bitcoin is a feature not a bug. Let them play. Node operators and transaction fees will decide the outcome.
No, the real issue is twofold. First, FUD from mainstream media dominated by entrenched financial monopoly interests establishes “brand” associations that must be knocked down one by one. Second, volunteer Bitcoin software developers and maintainers are being sued for their participation. These are not wealthy people with secret agendas. They are generous souls motivated by the hope of sound money.
What to do? What’s my personal call to action? As a product manager, I can spend my time in discussions with developers to understand better the next generation of Bitcoin improvements and advocate for what best serves community interests. As a pleb, I can stack Bitcoin in cold storage, zap sats on Nostr, thank Jack Dorsey for the Bitcoin Legal Defense Fund and write to my legislators. I advise you to do the same.