Questions: Incentives for nodes, Creation of blocks & Miners profitability

[Cromaz]

Hello Blockchain Friends,

I almost finished Blockchain & Bitcoin 101. For me it’s not coming to full circle. Here are three topics I have questions on. It would be awesome if someone can help me in understanding the whole thing! Thank you in advance!

Incentives for nodes:
Where is the incentive for the nodes if they check the transactions on consensus rules and store them in the mempool? Do they do it for free :)?

Creation of blocks
What defines a block and how is it created? Why it must be “found” by the miner, and why or how is it hidden? What is creating and hiding the block? I understood the miners just take the transactions from the mempool with the highest fees and put them together. So what is stoping the miner to create a smaller block to mine on? Why didn’t it happen the years before, that the blocks get full, if you just wait for more transactions you could mine on a full block?

Miners profitability
Maybe I have a misunderstanding, but as I remember, the successful miner will be rewarded for mining the block by finding the nonce limited by a target. The reward will be ALL THE FEES?! + Block reward. So all the other miners did their work for nothing?

[Alko89]

@Cromaz

Where is the incentive for the nodes if they check the transactions on consensus rules and store them in the mempool? Do they do it for free :)?

Mempool is just a temporary storage for transactions and nodes are responsible to share transactions between the nodes in the network so a miner can put it in a block. Yes nodes do that for free. But if you have to send a transaction to the network somehow. You do this first by sending it to your own mempool and to the nodes you are connected to.

@Cromaz

What defines a block and how is it created? Why it must be “found” by the miner, and why or how is it hidden? What is creating and hiding the block?

A block has a defined structure that consists of the header, that contains the merkle root of transactions, previous block hash, magic number, timestamp and nonce and is part of the mining process; and block data that consists of transactions.
The block is not hidden, a miner constructs a block and then starts to search for the correct nonce to find the hash that fits the target requirement.

@Cromaz

So what is stoping the miner to create a smaller block to mine on? Why didn’t it happen the years before, that the blocks get full, if you just wait for more transactions you could mine on a full block?

Nothing, there have been empty blocks mined in the past, but there is no point in making them because miners basically loose money by doing that since they don’t get the money from transactions that should be part of the block. If the mempool is empty and there aren’t enough txs to fill a block, miners will construct a block from the transactions available. If a miner would rather wait to fill the block to the full, another miner will do it instead.

@Cromaz

So all the other miners did their work for nothing?

Yes, its basically a race to find the block first and the winner takes it all.

[Cromaz]

Thank you so much Aleš! Now it’s much more clear to me. Have a nice evening.

[MattL]

I’m still confused on incentives for Nodes. I get that Miners are incentivized with block rewards of BTC and Fees. What’s in it for someone to be just a Node and not a Miner?

[Alko89]

There are many reasons to run your own node. Some use it to connect their SPV wallet to their node, giving them more privacy, you can also use it for development, running a Lightning node, your own explorer…

[Fabrice]

Benefits of using Blockchain - Discussion

1) Helps the Network 2) Keeps you safe 3) Allows you to choose 4) Gives you a higher degree of privacy 5) It’s not that hard 6) It’s not that expensive Running a full node is the only way you can use Bitcoin in a trustless way. You will know for sure that all the rules of Bitcoin are being followed, for example that no bitcoins are spent not belonging to the owner, that no coins were spent twice, that no inflation happens outside of the schedule and that all the rules needed to make the syste…

[MattL]

Makes sense. Thanks!

[MattL]

Thank you. That helps a lot.