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Why Ethereum Node Hosting Providers Are Better Than Setting Up Own Nodes?

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By , Updated On July 20, 2022

Ethereum Node hosting providers are a better option than setting up your own node. In the blockchain world, nodes are one of the most important components. Despite their significance, most people barely have a grasp of the concept.

Understanding Blockchain Nodes

In summary, a blockchain node is a computer program that lets users connect with the rest of the blockchain. Nodes can be thought of as blockchain browsers since you cannot access any data on the blockchain without them. There are two ways to use nodes, the first is to set up a full node, and the second is to find a trustworthy Ethereum node-hosting provider who will do the work on your behalf.

If you are wondering whether to host your own node or use a provider, here is an in-depth look at what it entails. This way, you can make an informed decision.

The Challenges of Hosting Your Own Node

When you host your own node, it means that you become a validator for the upgraded Ethereum blockchain. You will be in charge of verifying transactions and maintaining the integrity of the network.

The Ethereum 2.0 genesis blockchain block was launched on December 1, 2020. Over 16,000 validators transferred 524,288 ETH into a deposit contract before the November 24, 2020 deadline. Those that decide to host a node have to stake at least 32 ETH. Various other costs come into play such as gas fees.

Those who participate in validating Ethereum 2.0 transactions will not be able to withdraw their ETH until the existing Ethereum main net docks with the new blockchain, which could take several years. Once you become a validator, there are rewards sent for contributing to the network’s upkeep.

You Need to Have Technical Knowledge

Becoming an Ethereum 2.0 is a complex process that requires one to have great technical knowledge. If you go into this process not knowing how exactly it works, you could make some expensive mistakes.  Even if the mistakes are innocent without ill intent, it could still result in some of the 32 ETH being taken away as punishment. If a validator loses over 50% of its ETH, the node is automatically ejected. At current market prices, that would equate to a loss of around $34,108. That is a significant amount of money by any count.

The problems are not limited to setting up the node. Fully understanding the technical workings of Ethereum 2.0 can be a challenge. Even when one does get a good grasp of how it works, the network is still in development, which means major changes could be made in the future. Within the crypto world, time is money, and every second you spend trying to grasp how everything works is a lost opportunity for profitability.

Node Uptime Interruptions Could Lead to Financial Losses

Another danger that comes with running a node is the risk of uptime interruptions. When that happens, you could suffer huge penalties, leading to the loss of any financial rewards that come with running a node.

It is worth noting that the network does not make excuses for factors outside your control. If your ISP has problems with their services, for example, you could still be penalized. If there is bad weather, and the grid goes down, you could be penalized.

Maintain the Security of the Validator Keys

Another noteworthy risk of operating your own node is that there is the risk of losing validator keys. If they are lost or damaged, it could lead to huge financial losses. Ethereum 2.0 validators running their own node are provided with keys. They could lose the key, forget the password, or damage the hardware on which the keys are stored. In some cases, the hardware could suffer physical damage. However, technical faults could also cause the data to be lost.

All of these issues will lead to financial penalties for inactivity. Instead of having block rewards slashed, all the ETH that is staked could be taken as a penalty. When running your Ethereum validator node, you need to think about security. For instance, if someone manages to get into the computer remotely since it is always connected to the internet, they could steal the validator keys. If the security of a node is compromised, it could take a year or more to recover it. In other cases, you may never recover it.

Mitigating the Risk of Operating a Node Using a Hosting Service

Consequently, many people who decide to run a node often opt to pay for an external hosting service instead. An Ethereum hosting provider has a better chance of offering the kind of uptime needed to qualify one as a trustworthy validator.

Picking the Right Ethereum Node Hosting Provider

Even when using Ethereum node hosting providers, there are some risks. You must pick a reliable provider. The provider you pick needs to guarantee continual service, which eliminates the risk of financial losses. In most cases, you will not receive compensation for penalties resulting from downtime, as that is usually factored into the terms of service.

When picking an external Ethereum node-hosting provider, one of the first places to check is the review section. Reading the reviews will help you to make an informed decision on whether or not the provider is reputable. Another area to check is security. A good node-hosting provider will have clear guidelines on how they deal with the security of validator keys, users’ information, and funds. Additionally, they will have clear guidelines on how they ensure continual uptime.

One of the best Ethereum node-hosting providers out there are, which is a blockchain node provider based in Germany. The company offered nodes for popular EVM blockchains such as Tron, Ethereum, and the Binance Smart Chain. Its solution is unique in that users get access to dedicated nodes, which means there is only one powerful node per server, with one user per node. The result is great security, unlimited security, and reliable performance. It features a user-friendly dashboard, which makes it easy to import and export key stores.