Setting Up a Bitcoin Node
Near the end of 2021, I set the goal to dive in deep and learn about crypto, blockchains, NFTS, and decentralized finance in 2022. I was introduced to a friend last December that was into bitcoin, so we grabbed drinks one night to chat about it.
I specifically remember telling him that I understood that “blockchain technology” was a big deal but I wanted to learn more and understand how I could make money in “cryptocurrency.” Fortunately, he wasn’t a “go with the flow” kind of guy and stopped me.
Instead of pretending like blockchain is a big deal, he said, “Well, blockchain technology has been around for decades and most people who are serious about looking at crypto ultimately make their way back to bitcoin. Bitcoin and ‘crypto’ aren’t the same.” I now know that truer words have never been spoken.
He recommended I check out The Investor’s Podcast (specifically the “Bitcoin Fundamentals” episodes with Preston Pysh) And encouraged me to listen to all 58 episodes (there are now 94 at the time of this writing) straight through.
I binged on these during my 75 Hard workouts and was sold on bitcoin.
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Bitcoin Nodes
In the last paragraph below, I’ve linked to some helpful bitcoin resources if you want to learn more about what bitcoin is, how it works, and why it attracts smart, macro-economic types and not just tech geeks.
But the point of this post is to share how I set up my own bitcoin node at home. So here it goes.
What is a node?
Let’s begin with what a bitcoin node is, and understand that I’m going to be discussing full nodes, specifically (I’ll explain). At its most basic level, a bitcoin node is a computer that runs the bitcoin software and has a full copy of the bitcoin blockchain (basically the ledger of every bitcoin transaction ever recorded) downloaded to it. This full copy of the ledger is what make it a “full node.”
So, I now have a mini computer running the bitcoin software with a full copy of the blockchain that is connected to my home router. Best we can tell, tens (perhaps hundreds) of thousands of other people are doing the same thing. These nodes all connect to each other via the Internet.
When somebody wants to make a bitcoin transaction (e.g., send some bitcoin to a friend), these nodes receive the transaction information and store it in what is called the “mempool” – basically a list of pending transactions.
You’ve probably heard of bitcoin miners. Miners are different type of node and are basically very high-powered computers that take a group of those transactions from the mempool and try to be the first to create a new “block” of those transactions to add to the blockchain (again, just a ledger). When a miner succeeds in doing so, they are rewarded with some new bitcoin (i.e., they’ve “mined” it) and the information about this new block is then passed back to the nodes.
The nodes then validate the block and, if valid (i.e., the miner followed the rules of the bitcoin protocol and all transactions were valid), they add the block to their copy of the blockchain. The nodes then sync with one another to ensure that each has a recent copy of the blockchain. The more nodes that exist, the more secure the network because nobody can have central control. This is the value of what you may hear people refer to as bitcoin’s “decentralization.”
Setting Up My Bitcoin Node
Ok, so hopefully that gives a bit of context for what I’m talking about with all this node business. Besides just helping to secure the bitcoin network, running a bitcoin node also gives you privacy because you can use your own node to validate your transactions instead of relying on a third-party. But that is a whole other thing I won’t get into. Point is, there are several benefits to running a full node.
Again, at its simplest, a bitcoin node is just a little computer that runs the bitcoin software. There is a software called Umbrel that I used to make setting up my node easy.
Umbrel is an operating system that you can install on a computer, sort of like you can run Windows or macOS. Umbrel has its own app store where you can download the bitcoin software to run your node. They also have step-by-step instructions on how to do everything: what parts to buy to set up your node computer, how to install the Umbrel software on the computer, and how to connect it to your network and kick it off.
The steps are basically as follows.
Build a Bitcoin Node
The computer is simple. It is a Raspberry Pi 4 and power supply (basically a mini computer), an SD card (that has the Umbrel software on it), and an external hard drive (that stores the full copy of the bitcoin blockchain).
I also bought a Raspberry Pi case and an enclosure for the hard drive to protect them both. I needed an ethernet cable to plug in the node to the back of my router (so it is connected to the Internet – no wireless capability on a Raspberry Pi).
Putting this together took about 5 minutes. Super simple.
Install Umbrel
Before putting the SD card into the Raspberry Pi, I plugged it into my computer so I could install Umbrel on it.
You have to download the Umbrel software as well as a program called Balena Etcher. The latter is just a tool used to “flash” (i.e., install) the Umbrel software on the SD card.
Using Balena Etcher is very easy and within a few minutes, Umbrel was flashed to my SD card. I removed the card and placed it into the Raspberry Pi. My computer was ready to connect to the network.
Connecting to My Home Network
Next, I took my node computer, powered it up, and plugged it into the back of my router via ethernet cable. This made it accessible to manage from my regular computer and also enables it to the connect to the broader Internet to make contact with other nodes. If you’ve ever had a Sonos or Nest device or Ring doorbell or anything like that, the concept is similar: you are connecting a new device to your network that you can then manage from you phone or computer.
I was out of ethernet ports on the back of my router so I bought a little switch to extend the number of ports I have.
Within about five minutes of being plugged in and connected to my router, I could type http://umbrel.local into the URL bar of a browser on my laptop (had to be connected to the same network as the node computer, of course) and access my new little Umbrel computer.
Installing Bitcoin Core
When I first accessed my new Umbrel computer, I had to enter a name and create a password. This just took a second, and then I could get in and access the Umbrel app store.
From there, I found the Bitcoin Node app and downloaded it. It was then easy to kick off the sync and it took a little over five full days before I could do anything. That is because the entire bitcoin blockchain (approaching 500 GB of data) was downloading to my node.
Once the download completed, however, I was golden. After eight months of growing my conviction around bitcoin, I was finally running my own node: a true rite of passage for a bitcoiner.
In the coming days, I’ll connect a wallet to my node so I can validate my own transactions and I’ll play around with running a Lightning Node (a whole other topic for a whole other post). For now, I’m just glad to be adding value to what I believe will one day be the world’s most important monetary network.
Bitcoin Resources
This was a bit of a deep dive if you didn’t already know much about bitcoin. If that is the case for you, I’d encourage you to learn. It’s a long rabbit hole, but the further you wade in, the more your conviction will likely grow.
Here are a few of the resources that I’ve found most helpful:
Bitcoin Fundamentals with Preston Pysh
As I mentioned, I listened straight through Preston Pysh’s Bitcoin Fundamentals (part of The Investor’s Podcast) at the beginning of the year. Some episodes were very basic, some a little technical, some heavy on macroeconomics, but all helpful and informative. Again, bitcoin isn’t just for a bunch of nerds – it is also a lot of serious economists and financial minds (and not just opportunistic private equity firms)..
The Bitcoin Standard by Saifedean Ammous
The Bitcoin Standard is considered to be the bitcoin Bible by many. Saifedean is one of those serious economists (i.e., of the Austrian school, not a Keynesian) I mentioned that likes bitcoin. It’s a fascinating read, and you begin to realize the absolute mess (e.g., war, obesity, breakdown of families) that can reasonably be traced to our current “fiat standard” of money; that is, government-run money.
What Bitcoin Did with Peter McCormack
Peter seems to be one of the nicer bitcoiners out there and is open to having a range of guests on his show (i.e., not exclusively libertarians or Austrian economists). He strikes me as a bit less knowledgeable on economics and technology than many other prominent bitcoiners so he is willing to ask good questions when he isn’t tracking with his guest. That is a compliment, not a criticism.
Cory Klippsten
Cory Klippsten is the CEO of Swan Bitcoin (I’m a customer) and is someone I follow on bitcoin Twitter and to whose newsletter I subscribe (it’s awesome, I highly recommend for anyone). He is a bit less gentle in his approach to criticizing non-bitcoin cryptocurrencies and other projects he views as scams. People argue with him, but he always comes out on top when the thing he called a Ponzi or a con collapses because it turns out he was right.
Those are probably the primary resources that I’ve gleaned the most from. If you listen in to either podcast I mentioned, you’ll bump into most of the others that have influenced my thinking around bitcoin – Michael Saylor, Marty Bent, Dylan LeClair, Greg Foss, Adam Back, and many more.
Again, I’d encourage you to dig in and do some homework on your own. I’m not a financial advisor so you shouldn’t listen to me. But I also suspect that your financial advisor doesn’t understand bitcoin or thinks it is the same as all of the other “cryptos.” It’s not.
Best wishes in your bitcoin journey – let me know if I can help you in anyway.
Are you a bitcoiner running your own node? If not, is this helpful or interesting? Send me your thoughts at michael@theothermichaeljordan.com. I hope to hear from you.
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