November 2023 was an auspicious month for the Briger Family Digital Finance Lab at Columbia Business School. Thanks to an advanced computer located on CBS's Manhattanville campus, the lab's Bitcoin and Ethereum nodes went live.
Nodes are an important part of the digital asset ecosystem. They preserve a record of every transaction or programming instruction that's ever happened in a decentralized system and help parse the validity of new activity. Unlike mining (or, in Ethereum's case, staking), validating by running a node is a passive activity—there is no energy impact or financial cost. However, doing so is still an important activity for three reasons.
First, nodes are a great way to collect blockchain data. Data are the lifeline of academic research but can be hard to come by. Researchers must be experts at sourcing, collecting, and cleaning their data. Even then, there's always the question of reliability, particularly if the data come from a third-party source.
Public blockchains such as Bitcoin and Ethereum are the exception. Their data are always free, accurate, and updated in real time. The data gathered by the lab's nodes are already being studied by faculty and students. This data can be leveraged to better understand and improve blockchains or blockchain applications, such as in the study of transaction fee mechanisms or automated market-making protocols for decentralized exchanges.
Second, nodes are also useful for instruction. Part of the fun (and challenge) of teaching this topic is the fact that blockchain networks are living, breathing things. Most people are familiar with the price volatility of digital assets, but the method by which transactions are processed can be just as tumultuous, not to mention more interesting. Because the lab has its own nodes, instructors can show their classes what is happening in these networks in real time. These demonstrations are complementary to new instructional tools that have been deployed recently, enabling students to initiate their own wallets and on-chain transactions.
Last, the lab running its own nodes helps perpetuate the resilience and decentralization of these networks. By validating the entire history of transactions, nodes are the final gatekeepers of truth for Bitcoin and Ethereum. The decentralized nature of these networks makes them vulnerable to both internal and external threats. But any such attack must get past all the nodes enforcing the rules of the network, a daunting task considering there are thousands of independently operated nodes all over the world, including the lab's.
Eliminating single points of failure is one of the key innovations of the crypto domain. So is open participation, total transparency, global operation, and real-time settlement. For the lab, running its own nodes is the best way to take advantage of these features.
