diff --git a/VERSION b/VERSION
index 341cf11fa..9325c3ccd 100644
--- a/VERSION
+++ b/VERSION
@@ -1 +1 @@
-0.2.0
\ No newline at end of file
+0.3.0
\ No newline at end of file
diff --git a/pkg/network/peer.go b/pkg/network/peer.go
index c83b7b24c..d301da5a8 100644
--- a/pkg/network/peer.go
+++ b/pkg/network/peer.go
@@ -10,8 +10,10 @@ type Peer interface {
 	id() uint32
 	addr() util.Endpoint
 	disconnect()
-	callVersion(*Message)
-	callGetaddr(*Message)
+	callVersion(*Message) error
+	callGetaddr(*Message) error
+	callVerack(*Message) error
+	callGetdata(*Message) error
 }
 
 // LocalPeer is the simplest kind of peer, mapped to a server in the
@@ -28,12 +30,20 @@ func NewLocalPeer(s *Server) *LocalPeer {
 	return &LocalPeer{endpoint: e, s: s}
 }
 
-func (p *LocalPeer) callVersion(msg *Message) {
-	p.s.handleVersionCmd(msg, p)
+func (p *LocalPeer) callVersion(msg *Message) error {
+	return p.s.handleVersionCmd(msg, p)
 }
 
-func (p *LocalPeer) callGetaddr(msg *Message) {
-	p.s.handleGetaddrCmd(msg, p)
+func (p *LocalPeer) callVerack(msg *Message) error {
+	return nil
+}
+
+func (p *LocalPeer) callGetaddr(msg *Message) error {
+	return p.s.handleGetaddrCmd(msg, p)
+}
+
+func (p *LocalPeer) callGetdata(msg *Message) error {
+	return nil
 }
 
 func (p *LocalPeer) id() uint32          { return p.nonce }
diff --git a/pkg/network/server.go b/pkg/network/server.go
index 5bc145d36..7f5975dc9 100644
--- a/pkg/network/server.go
+++ b/pkg/network/server.go
@@ -1,6 +1,7 @@
 package network
 
 import (
+	"errors"
 	"fmt"
 	"log"
 	"net"
@@ -159,7 +160,7 @@ func (s *Server) shutdown() {
 
 	// disconnect and remove all connected peers.
 	for peer := range s.peers {
-		s.unregister <- peer
+		peer.disconnect()
 	}
 }
 
@@ -173,13 +174,17 @@ func (s *Server) loop() {
 			if len(s.peers) < maxPeers {
 				s.logger.Printf("peer registered from address %s", peer.addr())
 				s.peers[peer] = true
-				s.handlePeerConnected(peer)
+
+				if err := s.handlePeerConnected(peer); err != nil {
+					s.logger.Printf("failed handling peer connection: %s", err)
+					peer.disconnect()
+				}
 			}
 
-		// Unregister should take care of all the cleanup that has to be made.
+		// unregister safely deletes a peer. For disconnecting peers use the
+		// disconnect() method on the peer, it will call unregister and terminates its routines.
 		case peer := <-s.unregister:
 			if _, ok := s.peers[peer]; ok {
-				peer.disconnect()
 				delete(s.peers, peer)
 				s.logger.Printf("peer %s disconnected", peer.addr())
 			}
@@ -196,71 +201,68 @@ func (s *Server) loop() {
 // When a new peer is connected we send our version.
 // No further communication should be made before both sides has received
 // the versions of eachother.
-func (s *Server) handlePeerConnected(p Peer) {
+func (s *Server) handlePeerConnected(p Peer) error {
 	// TODO: get the blockheight of this server once core implemented this.
 	payload := payload.NewVersion(s.id, s.port, s.userAgent, 0, s.relay)
 	msg := newMessage(s.net, cmdVersion, payload)
-	p.callVersion(msg)
+	return p.callVersion(msg)
 }
 
-func (s *Server) handleVersionCmd(msg *Message, p Peer) *Message {
+func (s *Server) handleVersionCmd(msg *Message, p Peer) error {
 	version := msg.Payload.(*payload.Version)
 	if s.id == version.Nonce {
-		// s.unregister <- p
-		return nil
+		return errors.New("identical nonce")
 	}
 	if p.addr().Port != version.Port {
-		// s.unregister <- p
-		return nil
+		return fmt.Errorf("port mismatch: %d", version.Port)
 	}
-	return newMessage(ModeDevNet, cmdVerack, nil)
+
+	return p.callVerack(newMessage(s.net, cmdVerack, nil))
 }
 
-func (s *Server) handleGetaddrCmd(msg *Message, p Peer) *Message {
+func (s *Server) handleGetaddrCmd(msg *Message, p Peer) error {
 	return nil
 }
 
 // The node can broadcast the object information it owns by this message.
 // The message can be sent automatically or can be used to answer getbloks messages.
-func (s *Server) handleInvCmd(msg *Message, p Peer) *Message {
+func (s *Server) handleInvCmd(msg *Message, p Peer) error {
 	inv := msg.Payload.(*payload.Inventory)
 	if !inv.Type.Valid() {
-		s.unregister <- p
-		return nil
+		return fmt.Errorf("invalid inventory type %s", inv.Type)
 	}
 	if len(inv.Hashes) == 0 {
-		s.unregister <- p
-		return nil
+		return errors.New("inventory should have at least 1 hash got 0")
 	}
 
 	// todo: only grab the hashes that we dont know.
 
 	payload := payload.NewInventory(inv.Type, inv.Hashes)
 	resp := newMessage(s.net, cmdGetData, payload)
-	return resp
+
+	return p.callGetdata(resp)
 }
 
 // handleBlockCmd processes the received block.
-func (s *Server) handleBlockCmd(msg *Message, p Peer) {
+func (s *Server) handleBlockCmd(msg *Message, p Peer) error {
 	block := msg.Payload.(*core.Block)
 	hash, err := block.Hash()
 	if err != nil {
-		// not quite sure what to do here.
-		// should we disconnect the client or just silently log and move on?
-		s.logger.Printf("failed to generate block hash: %s", err)
-		return
+		return err
 	}
 
 	fmt.Println(hash)
 
 	if s.bc.HasBlock(hash) {
-		return
+		return nil
 	}
+
+	return nil
 }
 
 // After receiving the getaddr message, the node returns an addr message as response
 // and provides information about the known nodes on the network.
-func (s *Server) handleAddrCmd(msg *Message, p Peer) {
+func (s *Server) handleAddrCmd(msg *Message, p Peer) error {
 	addrList := msg.Payload.(*payload.AddressList)
 	for _, addr := range addrList.Addrs {
 		if !s.peerAlreadyConnected(addr.Addr) {
@@ -268,6 +270,7 @@ func (s *Server) handleAddrCmd(msg *Message, p Peer) {
 			go connectToRemoteNode(s, addr.Addr.String())
 		}
 	}
+	return nil
 }
 
 func (s *Server) relayInventory(inv *payload.Inventory) {
diff --git a/pkg/network/server_test.go b/pkg/network/server_test.go
index 115c2b74c..34fbe3063 100644
--- a/pkg/network/server_test.go
+++ b/pkg/network/server_test.go
@@ -6,6 +6,32 @@ import (
 	"github.com/CityOfZion/neo-go/pkg/network/payload"
 )
 
+func TestHandleVersionFailWrongPort(t *testing.T) {
+	s := NewServer(ModeDevNet)
+	go s.loop()
+
+	p := NewLocalPeer(s)
+
+	version := payload.NewVersion(1337, 1, "/NEO:0.0.0/", 0, true)
+	msg := newMessage(ModeDevNet, cmdVersion, version)
+	if err := s.handleVersionCmd(msg, p); err == nil {
+		t.Fatal("expected error got nil")
+	}
+}
+
+func TestHandleVersionFailIdenticalNonce(t *testing.T) {
+	s := NewServer(ModeDevNet)
+	go s.loop()
+
+	p := NewLocalPeer(s)
+
+	version := payload.NewVersion(s.id, 1, "/NEO:0.0.0/", 0, true)
+	msg := newMessage(ModeDevNet, cmdVersion, version)
+	if err := s.handleVersionCmd(msg, p); err == nil {
+		t.Fatal("expected error got nil")
+	}
+}
+
 func TestHandleVersion(t *testing.T) {
 	s := NewServer(ModeDevNet)
 	go s.loop()
@@ -15,12 +41,8 @@ func TestHandleVersion(t *testing.T) {
 	version := payload.NewVersion(1337, p.addr().Port, "/NEO:0.0.0/", 0, true)
 	msg := newMessage(ModeDevNet, cmdVersion, version)
 
-	resp := s.handleVersionCmd(msg, p)
-	if resp.commandType() != cmdVerack {
-		t.Fatalf("expected response message to be verack got %s", resp.commandType())
-	}
-	if resp.Payload != nil {
-		t.Fatal("verack payload should be nil")
+	if err := s.handleVersionCmd(msg, p); err != nil {
+		t.Fatal(err)
 	}
 }
 
diff --git a/pkg/network/tcp.go b/pkg/network/tcp.go
index dffb56b4d..88243a9e1 100644
--- a/pkg/network/tcp.go
+++ b/pkg/network/tcp.go
@@ -2,6 +2,7 @@ package network
 
 import (
 	"bytes"
+	"errors"
 	"fmt"
 	"io"
 	"net"
@@ -52,8 +53,7 @@ func handleConnection(s *Server, conn net.Conn) {
 
 	// remove the peer from connected peers and cleanup the connection.
 	defer func() {
-		// all cleanup will happen in the server's loop when unregister is received.
-		s.unregister <- peer
+		peer.disconnect()
 	}()
 
 	// Start a goroutine that will handle all outgoing messages.
@@ -66,17 +66,17 @@ func handleConnection(s *Server, conn net.Conn) {
 	for {
 		_, err := conn.Read(buf)
 		if err == io.EOF {
-			break
+			return
 		}
 		if err != nil {
 			s.logger.Printf("conn read error: %s", err)
-			break
+			return
 		}
 
 		msg := &Message{}
 		if err := msg.decode(bytes.NewReader(buf)); err != nil {
 			s.logger.Printf("decode error %s", err)
-			break
+			return
 		}
 
 		peer.receive <- msg
@@ -85,9 +85,11 @@ func handleConnection(s *Server, conn net.Conn) {
 
 // handleMessage hands the message received from a TCP connection over to the server.
 func handleMessage(s *Server, p *TCPPeer) {
+	var err error
+
 	// Disconnect the peer when we break out of the loop.
 	defer func() {
-		s.unregister <- p
+		p.disconnect()
 	}()
 
 	for {
@@ -98,30 +100,58 @@ func handleMessage(s *Server, p *TCPPeer) {
 
 		switch command {
 		case cmdVersion:
-			resp := s.handleVersionCmd(msg, p)
+			if err = s.handleVersionCmd(msg, p); err != nil {
+				return
+			}
 			p.nonce = msg.Payload.(*payload.Version).Nonce
-			p.send <- resp
+
+			// When a node receives a connection request, it declares its version immediately.
+			// There will be no other communication until both sides are getting versions of each other.
+			// When a node receives the version message, it replies to a verack as a response immediately.
+			// NOTE: The current official NEO nodes dont mimic this behaviour. There is small chance that the
+			// official nodes will not respond directly with a verack after we sended our version.
+			// is this a bug? - anthdm 02/02/2018
+			msgVerack := <-p.receive
+			if msgVerack.commandType() != cmdVerack {
+				s.logger.Printf("expected verack after sended out version")
+				return
+			}
+
+			// start the protocol
+			go s.sendLoop(p)
 		case cmdAddr:
-			s.handleAddrCmd(msg, p)
+			err = s.handleAddrCmd(msg, p)
 		case cmdGetAddr:
-			s.handleGetaddrCmd(msg, p)
+			err = s.handleGetaddrCmd(msg, p)
 		case cmdInv:
-			resp := s.handleInvCmd(msg, p)
-			p.send <- resp
+			err = s.handleInvCmd(msg, p)
 		case cmdBlock:
-			s.handleBlockCmd(msg, p)
+			err = s.handleBlockCmd(msg, p)
 		case cmdConsensus:
 		case cmdTX:
 		case cmdVerack:
-			go s.sendLoop(p)
+			// If we receive a verack here we disconnect. We already handled the verack
+			// when we sended our version.
+			err = errors.New("received verack twice")
 		case cmdGetHeaders:
 		case cmdGetBlocks:
 		case cmdGetData:
 		case cmdHeaders:
 		}
+
+		// catch all errors here and disconnect.
+		if err != nil {
+			s.logger.Printf("processing message failed: %s", err)
+			return
+		}
 	}
 }
 
+type sendTuple struct {
+	msg *Message
+	err chan error
+}
+
 // TCPPeer represents a remote node, backed by TCP transport.
 type TCPPeer struct {
 	s *Server
@@ -132,7 +162,7 @@ type TCPPeer struct {
 	// host and port information about this peer.
 	endpoint util.Endpoint
 	// channel to coordinate messages writen back to the connection.
-	send chan *Message
+	send chan sendTuple
 	// channel to receive from underlying connection.
 	receive chan *Message
 }
@@ -143,15 +173,22 @@ func NewTCPPeer(conn net.Conn, s *Server) *TCPPeer {
 
 	return &TCPPeer{
 		conn:     conn,
-		send:     make(chan *Message),
+		send:     make(chan sendTuple),
 		receive:  make(chan *Message),
 		endpoint: e,
 		s:        s,
 	}
 }
 
-func (p *TCPPeer) callVersion(msg *Message) {
-	p.send <- msg
+func (p *TCPPeer) callVersion(msg *Message) error {
+	t := sendTuple{
+		msg: msg,
+		err: make(chan error),
+	}
+
+	p.send <- t
+
+	return <-t.err
 }
 
 // id implements the peer interface
@@ -165,16 +202,51 @@ func (p *TCPPeer) addr() util.Endpoint {
 }
 
 // callGetaddr will send the "getaddr" command to the remote.
-func (p *TCPPeer) callGetaddr(msg *Message) {
-	p.send <- msg
+func (p *TCPPeer) callGetaddr(msg *Message) error {
+	t := sendTuple{
+		msg: msg,
+		err: make(chan error),
+	}
+
+	p.send <- t
+
+	return <-t.err
 }
 
-// disconnect closes the send channel and the underlying connection.
-// TODO: this needs some love. We will get send on closed channel.
+func (p *TCPPeer) callVerack(msg *Message) error {
+	t := sendTuple{
+		msg: msg,
+		err: make(chan error),
+	}
+
+	p.send <- t
+
+	return <-t.err
+}
+
+func (p *TCPPeer) callGetdata(msg *Message) error {
+	t := sendTuple{
+		msg: msg,
+		err: make(chan error),
+	}
+
+	p.send <- t
+
+	return <-t.err
+}
+
+// disconnect disconnects the peer, cleaning up all its resources.
+// 3 goroutines needs to be cleanup (writeLoop, handleConnection and handleMessage)
 func (p *TCPPeer) disconnect() {
-	p.conn.Close()
-	close(p.send)
-	close(p.receive)
+	select {
+	case <-p.send:
+	case <-p.receive:
+	default:
+		close(p.send)
+		close(p.receive)
+		p.s.unregister <- p
+		p.conn.Close()
+	}
 }
 
 // writeLoop writes messages to the underlying TCP connection.
@@ -184,17 +256,17 @@ func (p *TCPPeer) disconnect() {
 func (p *TCPPeer) writeLoop() {
 	// clean up the connection.
 	defer func() {
-		p.conn.Close()
+		p.disconnect()
 	}()
 
 	for {
-		msg := <-p.send
-
-		p.s.logger.Printf("OUT :: %s :: %+v", msg.commandType(), msg.Payload)
-
-		// should we disconnect here?
-		if err := msg.encode(p.conn); err != nil {
-			p.s.logger.Printf("encode error: %s", err)
+		t := <-p.send
+		if t.msg == nil {
+			return
 		}
+
+		p.s.logger.Printf("OUT :: %s :: %+v", t.msg.commandType(), t.msg.Payload)
+
+		t.err <- t.msg.encode(p.conn)
 	}
 }