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No, it does stop working for all intents and purposes. At the timeout will start rejecting blocks, effectively forking the node off the chain. If timed correctly, the node could be fed a chain with less work. This is arguably worse than just shutting down, since other services relying on the node will not notice immediately.
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You're right, I missed that this code runs inside CheckBlockHeader. Thank you!
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This answer of yours is in line with what I was reading elsewhere. This is worrying. It is true that in two years, everything could change, maybe other programmers will start working on Knots and things could change. I was installing a well-known Knots, when they cut my fibre optic cables and now I am without a network for the whole week.
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