Nano is a digital payment protocol designed to be accessible and lightweight, with a focus on removing inefficiencies present in other cryptocurrencies. With ultrafast transactions and zero fees on a secure, green and decentralized network, Nano is ideal for everyday transactions.
Nano is a peer-to-peer currency, much like Bitcoin or Litecoin. It does not have any smart contract functionality, however that is considered by many to be a strength since Nano is incredibly focused on doing one thing and doing it right. It's focused on being a protocol that can then be built upon, kind of like a HTTP for money transfer. Unlike other similar projects, it is entirely feeless and the average transaction time is sub 1 second. It was created to address the inefficiencies of Bitcoin and act as a global payment system.
Unlike Bitcoin, Nano does not achieve consensus using Proof of Work, an intentional move to address the tremendous energy consumption of other similar projects. Read more about the energy use here. Instead it uses a process called Open Representative Voting.
Nano is an asynchronous network, meaning that each user has their own account chain which they can modify whenever they send a transaction. Unlike traditional blockchains, you don't need to wait for the network to add your transaction block to the entire blockchain. The image on the right is a representation of this block lattice network structure, with each horizontal line representing an account chain. Read this article about the the Nano block lattice for an in-depth explanation of this novel block structure.
As a sender, you publish a block to all the Nano Public Representative nodes at the speed of internet latency (20-100ms on average), and those PRs then generate their vote (another very small network packet) and publish that to each other (all PR nodes). Once your node sees enough vote responses to cross the vote weight threshold for a transaction, it makes the decision for itself whether or not a transaction is confirmed.
Basically, you're just waiting for a ping and a response (since the vote responses from the various PRs can be sent to you in parallel). There's a reason the community loves sharing this video of Nano being sent around the world, as it's a perfect example of Nano's speed and feeless nature.
The concern that Nano is only fast and feeless because no one is using it is addressed clearly and succinctly in the reddit thread I mentioned above, under the header "Nano is only fast/feeless because no one is using it." The TL:DR is "Nano is feeless and fast because of its design. It uses the block lattice and Open Representative Voting. There is no competition for block space, no wasted resources. Everything is geared to be efficient/lightweight, and that makes it fast."
Click to enlarge
Proof-of-Work cryptocurrencies like Bitcoin use an astronomical amount of energy to secure the network. These "miners" are running extremely computationally intensive operations which require spending money on hardware and electricity bills. Because of the high cost of securing the network, these miners often get paid with the fees attached to every transaction. Additionally, there is a block reward in many cryptocurrencies which means that the network itself rewards miners. For example, adding a block to the Bitcoin blockchain rewards miners with 12.5 Bitcoin. Additionally, some pretty convincing arguments can be made that fees coupled with inflation lead to centralization since more hash power leads to earning more money, which leads to investing in more hash power and so on.
Nano does things very differently. First of all, since all 133,248,290 Nano was created at inception, there are no block rewards given to node operators for confirming transactions. Additionally, the creator understood that only an entirely feeless cryptocurrency would ever become used as a global payment system. As a result, there are no fees built into the protocol, nor will there ever be. Instead, there are other incentives for running a node, which costs less than $50 a month at the very most (Virtual Private Servers can be rented out for as low as $5 a month).
Spam and DOS (Denial of Service ) attacks are a very real problem in all computer networks. Nano itself was hit by a very serious attack which caused some of the slower nodes to fall behind and desync, causing confirmation times to increase drastically. However, in typical fashion the Nano Foundation was quite proficient in their response and, together with the help of the community, has gone forward with the implementation of some novel prioritisation methods to combat similar attacks in the future. Versions 22 and 23 aim to address spam and mitigate future risks. With the recent changes to prioritisation, spamming the network and affecting real users would require the spammer to own an extremely large sum of Nano. For example, spamming users with roughly 10 Nano in their account (while leaving everyone else unaffected) would cost the spammer several million Nano. There is no incentive to becoming a Nano whale and then spamming the network just to impact a tiny fraction of the users while also devaluing your investment.
A total of 133 million Nano exists, and there will never be any more, making it a deflationary asset. The distribution of Nano (formerly RaiBlocks) was performed through solving manual captchas starting in late 2015 and ending in October 2017. This ensured that it was accessible to people all around the world of varying socio-economic status', not just people who are wealthy enough to buy and run mining hardware, or participate in ICO's. A mere 5% was allocated to the dev fund, which is now mostly gone. The dev wallets and their remaining balance are publicly available.
By now, you must know I love linking articles. If you want to know more about the Nano Faucet, a short article was published explaining what the Nano Faucet is, why this method of distribution was chosen etc.
Nano was first released as RaiBlocks in October 2015. The founder of Nano, Colin LeMahieu, wrote a great article when he first started the project talking about the reasons behind Nano (RaiBlocks). He was enthusiastic about the possibilities that such a self-sovereign form of money offered, but was frustrated with the inefficiency inherent in the current crypto models. In 2014, he began development on a new form of cryptocurrency network. The goal was to create an efficient cryptocurrency, one that could be used for daily payments, by anyone in the world, without the emissions that come with Bitcoin.
He's an excellent engineer and has worked at Dell, AMD and Qualcomm. You can read a reddit thread discussing several of his accomplishments here.
But as we all know a single person doesn't deserve all the credit done by an entire team, and the Nano Foundation is composed of proficient and hardworking people. They aren't hiding from the community, and they aren't anonymous.
Additionally, the Nano Foundation itself is a not-for-profit organisation. As mentioned in the distribution section above, they did not run an ICO, and a mere 5% was kept as a dev fund. Enlarge the image next to this to view a comparison between Nano's dev fund allocation compared to other projects.
Click to enlarge
Nano is extremely energy efficient. Since there is no mining, the nodes are essentially just sending data packets back and forth. It's been calculated that the average energy consumption for a single Nano transaction is about 0.111Wh. As of May 2021, a Nano transaction uses roughly 10 million times less energy than a Bitcoin transaction. Bitcoin is so energy inefficient because it uses a method called Proof-of-Work to secure the network. Nano uses another method called Open Representative Voting, which you can read about in the section below.
The lack of mining is also what makes Nano so incredibly energy efficient. In Bitcoin, miners essentially engage in a bidding war, spending as much energy as possible to increase their odds of being the one to add the next block to the chain. Nano does away with this competition, away with this energy waste, and focuses on efficiency.
Nano was created to address Bitcoin's inefficiencies, and addressing its catastrophic energy usage was a top priority for the Nano protocol.
Click to enlarge
Nano uses a consensus mechanism called Open Representative Voting, or ORV. This is a consensus mechanism unique to Nano which involves accounts delegating their balance as voting weight to Representatives.
The Representatives vote themselves on the validity of transactions published to the network using the voting weight delegated to them. These votes are shared with their directly connected peers and they also rebroadcast votes seen from Principal Representatives.
Votes are tallied and once quorum is reached on a published block, it is considered confirmed by the network. Watch the video below for a visual representation of this representative voting in action.
The community member Senatus wrote a great article about this exact topic, I highly suggest reading it.
The TL:DR is that despite there not being any direct monetary incentives, there are still indirect ones. Additionally, without fees and inflation there is no emergent centralization which is inherent to Proof-of-Work and Proof-of-Stake networks. That said, for a business that uses Nano such as an exchange or wallet there are strong reasons to run a node.
If you are a business that profits from the Nano network being up, you want the network to stay up. On Nanocharts you can see the largest representatives - the top 3 being 465 Digital Investments (a business that wants to use Nano for FX purposes), Kraken (an exchange that trades Nano), and Binance (another exchange). These parties have a vested interest in the Nano network being online, hence they run a node. The same holds true for many other exchanges (Huobi, Kucoin, Wirex) and wallets (Natrium, Nanowallet, Atomic Wallet), and businesses such as PlayNano, Kappture, WeNano etc.
If you are a business using Nano, you want to be able to use the network trustlessly. If you are, for example, Binance, you do not want to rely on an outside party to tell you whether the $10 million Nano deposit was actually deposited. So what you do is you run your own node, so that you can check for yourself whether the transaction has been confirmed. The same holds for businesses - if the nano node they rely on goes offline they would miss out in sales. The $10-$50 a month is well worth avoiding that.
The folks over at KeyWord Crypto have a chat with the founder of Nano.
The following section is an opinion piece on what I think Satoshi Nakamodo's vision was when he envisioned Bitcoin, and why I believe Nano is the answer.
You can avoid reading this entire section by just looking at the title of the Bitcoin whitepaper. "Bitcoin: A Peer-to-Peer Electronic Cash System". Not a store of value, not "digital gold". Not some bloated, espensive, environmentally disastrous mockery of what it was meant to be.
Bitcoin has failed as a "digital cash" alternative and recent events show that its only purpose, a store of value, is just an excuse for people who are invested to keep their money. The price dropped by nearly 50% between May 10th 2021 and May 22nd 2021. However, the concept of cryptocurrencies doesn't have to die along with it. Projects like Nano live up to the idealistic view of what Bitcoin could have been if it had been allowed to grow and evolve over the past decade.
So what was the idea Satoshi had? As per the whitepaper, Bitcoin was meant to be a truly decentralised peer-to-peer electronic cash that uses a cryptographic proof based system instead of trust. It functioned as such for a bit, and documentaries from the early 2010s show groups of happy libertarians talking about this great new way of having full control of their own money, governments be damned. This was all fine and dandy until network usage started to increase. Confirmation times went up, fees went up, and the carbon footprint did nothing but grow. So what's it like now to actually try to buy something with Bitcoin? Let's imagine for a moment it's entirely feeless. Confirmation times ranging from 10 minutes to hours if not days mean that it's absolutely unusable in a traditional brick and mortar environent. Standing around for 10 minutes in a coffeeshop waiting for your transaction to go through isn't at all realistic. Even the faster currencies that have 30 second confirmation times simply aren't useable in this context when users are used to instantly paying with contactless credit cards. Users aren't going to inconvenince themselves just so that the store doesn't have to pay the 3% Visa fee. Let's go back to the real world where Bitcoin fees are in the $20 range for faster confirmation times. Yeah, not going to happen. There's just no debate. Even buying something online with Bitcoin would be a huge hassle, with many companies such as Steam and more recently Tesla accepting Bitcoin payments for a bit then realising just how awful the experience is for their customers and the environment.
Nano on the other hand is virtually instant and completely feeless. The experience would be comparable to paying using a contactless credit card, but with all the advantages inherent to cryptocurrencies for both the customer and the vendor.
Another ideal Satoshi had for Bitcoin was decentralization. The entire idea behind cryptocurrencies wasn't just to make another PayPal or Visa, it was to move away from a trust based system to ensure the validity of the transactions. An absolutely vital part of this idea was to ensure that one entity couldn't control the network. At the time, the proof-or-work approach was a brilliant and novel solution. It was also 2008, a time where one of the most high-end consumer CPUs was the oh so powerful i7-920, a 2.7ghz quad core. Satoshi could never have predicted ASICs, GPUs being used to mine instead of CPUs, and mining pools. He assumed computers would consume less energy over time as well, and while modern GPUs and CPUs are more efficient, they are so much more powerful that the energy consumption has done nothing but increase. The issue with this is that these massive mining pools earn a lot of money mining Bitcoin. That money goes straight into buying more hardware thus increasing their hash power and revenue. As the pools get larger and larger, the network centralises. Instead of thousands of tiny nodes accross the world, we now have mining pools that alone contain more than 10% of the total network hash power. When a power outage in Xinjiang reduces the total hashrate by 45%, there's a problem.
Satoshi also underestimated human greed getting in the way of technological progress. Larger blocks? Faster rates? These aren't great solutions, but are still small steps towards addressing Bitcoin's shortcomings. These proposed changes fractured the community and caused multiple hard forks such as Litecoin and Bitcoin Cash. The reasons given were that it increased centralization or reduced security. While true, it's not hard to see the unspoken reasons: people with a lot invested in the network aka the miners and the companies taking profits, would simply earn less money from fees.
Finally, I want to discuss equal access to the cryptocurrency. While early day Bitcoin was accessible to anyone with a half decent PC and the willingness to turn their basement into a sauna, modern Bitcoin is only accessible to large mining pools that have invested millions of dollars into massive mining operations. Nano was distributed fairly to anyone with a device that can access the internet. Even simply using Bitcoin is now reserved for people who don't care about a fairly significant fee being taken every time they transact over the network. Pretending this helps the 2 billion unbanked people on our planet is no longer a valid argument. On the other hand, imagine being able to top-up your relative's account when they're at a store and they have just realised they're out of money. Imagine this $5 top-up occuring without a $20 fee and instantly appearing in their account. It's hard to imagine a world where anything less than that is acceptable.
To conclude, Nano is what Bitcoin was envisioned to be. It's just as trustless, secure and decentralised, but without the slow, expensive transactions. Additionally, it's environmentally friendly and the network decentralises over time instead of the opposite, which is the case with Bitcoin.