Standard and Local Policies

There are standard rules both at a network level and local node level which are applied when validating blocks and transactions.

When a new transaction arrives at a node, it goes through a set of checks and validation rules. These are the consensus rules a node is mandated to enforce for the network's operations. Most of them are standard across all nodes and are part of the Bitcoin protocol (shown as Standard Policies in the diagram below). Node’s also apply local policies which are specific to their own infrastructure and preferences.

Standard and Local Policies - Transaction Storage

Generally, the rules for Local Policies are only checked for transactions before they are accepted into the mempool or included in the block candidate. In contrast, Standard Policies or consensus rules are always checked.

The transaction to the blockchain can be something that is coming from a user, or it could be a transaction which it finds missing while validating a block created by another node. In that scenario, the node will then request the missing transaction from the node it received the block from. When it receives that transaction, it will be sent through the same set of validation processes shown above as if it is a new transaction.

Nodes don’t first solve a cryptographic puzzle. First of all, a node needs to validate all of the transactions and create the block. Then they can create a puzzle if ,and only if, they have fully validated everything in the block, that is every single transaction. If they don’t do this, it’s no good running proof of work algorithms as no other node will accept it.