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There are times when it is advised to delete this file, since it will be recreated the next time monerod (or the GUI, running monerod within it) is started. But what's in this file? What does it do? Does deleting it do any harm?

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This file contains the list of peers the node knows about, along with the time they were last seen. Deleting it clears that memory, and the node will have to rely on seed nodes to get a new list of peers.

Keeping this file means that you don't have to rely on the seed nodes to be able to connect to the Monero network, as you already know of a large number of other potential nodes to connect to. This decreases the centralization whic comes with asking the seed nodes first (while there are a dozen or so, I believe they're run by the Monero core team).

When talking to other nodes, lists of known peers are exchanged, so you can then keep up to date without having a need for seed nodes (though those may also be contacted, as they are normal Monero nodes too).

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