Bitcoin node count drops to a 3-year low despite rising prices

Bitcoin node count drops to 3 year low despite price hike - 1551355411 bitcooin 1024x575The total count of Bitcoin nodes fell below 47.000 on Monday May 4, a level that has not been seen since 2017. The technique used for counting was based on estimates determined by the famous Bitcoin developer Luke Dashjr.

Its data show a steady decline in the number of operational nodes from a peak of over 200.000 in January 2018. A decrease in the total number of nodes means that fewer people participate in the validation of new transactions and the storage of copies of the history of the shared network transactions.

The new node count comes at a time when there are increases in the price and mining power.

The methodologies for counting nodes

The calculation of the number of Bitcoin nodes is generally based on estimates rather than concrete data and opinions on the best methodology to derive these estimates differ. Dashjr's estimate is based on a boring and undisclosed proprietary methodology that could compromise the reliability of the data if it were released, according to its creator.

Another well-known Bitcoin node count, provided free of charge by Bitnodes, shows new multi-year lows in the number of Bitcoin IPv4 nodes in mid-March. This helps to confirm Dashjr's data. However, since November Bitnodes data has shown a spike in nodes using onion services, making it more difficult to locate the node operator.

Why do the knots decrease?

Curiously, the latest bitcoin bull cycles have been preceded by significant spikes in the new Bitcoin nodes that are online, according to Dashjr estimates. But since April 2019, the estimate of the total node count has steadily declined despite regardless of the times when price actions were relatively bullish.

The incredible fluctuation of the quotation prices or recent market freezes may have caused some investors and node operators to lose interest and close their nodes. After a price crash, many Bitcoin users "lose interest and stop opening their wallets or running their nodes," said Jameson Lopp, CTO and co-founder of Casa, a bitcoin storage security company.

Lopp considers Bitcoin nodes that continue to function despite market behavior as "nodes of last resort". Furthermore, according to Dashjr, "The execution of a [Bitcoin] node continues to become more and more difficult with the size of the blocks that exceed the rate of technological improvement".

How many knots are enough?

Full Bitcoin nodes do not mine new bitcoins. Instead, they store individual copies of the blockchain to protect the accuracy of the universal registry and allow users to verify the transactions issued on the network.

A drop in nodes may not be a problem for the network, provided that the "enough" nodes to keep the network up and running are operational, said Matt Corallo, a full-time open source bitcoin developer at Square. And figuring out how many knots are enough is "super difficult," he said.