Table of Contents
- Why Nano?
- How does Nano work?
- How is Nano so fast?
- What is Open Representative Voting (ORV)?
- How is ORV different from PoS or DPoS?
- Nano vs Lightning Network (LN)
- Nano vs Ripple XRP
- Is Nano a Store of Value (SoV) or a Method of Exchange (MoE)?
- Why should I use Nano instead of a stablecoin?
- What can't Nano do?
- What about volatility?
- How does Nano prevent spam?
- What about the blockchain trilemma?
- Does Nano have a CEO?
- When is a Nano transaction considered confirmed & final (i.e fully settled)?
- What is the incentive to run a Nano node?
- Can Nano scale for global usage?
- Documentation & Resources
- Buy more Nano
- Is Nano fungible?
- Is Nano divisible?
- What is the block-lattice?
- How secure is Nano?
- Biggest Nano criticisms?
- No smart contracts?
- Resolving double spends
- How decentralized is it?
- Deflationary currency
- Initial distribution
- Where can I use Nano?
- Adoption
- How can I earn Nano?
- Marketing
- What wallet should I use?
- Full nodes vs light nodes?
- Node costs?
- Storage costs/Pruning?
Why Nano?
- ZERO transaction fees. Instead of a fee, senders do a small Proof-of-Work to prevent spam. If you send 10.91 Nano, they get 10.91 Nano.
- Near-instant transactions. Transactions are fully-settled in <1 second average. There is no waiting hours for block confirmation.
- Environmentally friendly. Nano transactions use >4 MILLION times less power than Bitcoin transactions (0.112 Wh vs 500+ KWh).
- Highly scalable. There are no protocol-side limits like block sizes or block times. Nano uses whatever resources are available, leading to high transactions per second (TPS).
- No inflation. Nano is fully distributed, & no more Nano can be created. The total (and circulating) supply is ~133 million, and can never increase.
- Low operating costs. The Nano protocol is lightweight & has no mining, so there are no miners with block rewards that must be sold to pay for operating costs.
- Decentralized. Nano has a higher Nakamoto Coefficient (the number of entities required to attempt a 51% attack) than Bitcoin. Furthermore, Nano representatives don't earn transaction fees and don't get special privileges for being a representative, so there is no direct incentive to acquire huge amounts of vote weight. This differs from PoW and PoS cryptocurrencies where profit maximization and economies of scale lead to emergent centralization over time.
How does Nano work?
- Every Nano account has its own blockchain. This is different from Bitcoin, where all transactions are added to a single shared blockchain.
- Nano transactions are peer-to-peer. Senders and receivers interact directly with each other. You don't wait for transactions to get added to a shared block.
- Transactions are asynchronous. Your transactions don't affect other people. Double spend attempts are quickly settled by balance-weighted node voting.
- Instead of a transaction fee, Nano uses Proof-of-Work from the sender to prevent spam. Wallets can pre-compute this work so there is no delay.
- Nano is so lightweight that anyone can run a node. One transaction fits into a single UDP packet & uses 4 MILLION times less power than Bitcoin.
How is Nano so fast?
- Block-Lattice + Open Representative Voting. Nano gives every account its own blockchain, and only the owner of the account can modify it. This means that transactions can be processed individually and asynchronously - there is no waiting for miners to put a bunch of transactions into a shared block. When you make a transaction, you send it to the representatives, who respond with their vote weight if they think it's valid. Once your node sees enough votes from those reps, it confirms the transaction and cements it as irreversible.
What is Open Representative Voting?
- To make a Nano transaction, you broadcast it out (from your node) to all the principal representatives on the network
- If those principal representatives think the transaction is valid (follows all the rules, hasn't been seen before, isn't a double spend, etc), they respond back with their vote weight
- Once your node sees enough votes to cross its quorum threshold (i.e. >50% more weight than any competing double spend, with 60M minimum votes online), your node considers the transaction confirmed and marks it as cemented (irreversible)
- Here's a simple video introduction: https://youtu.be/rsE8izqhF6o
- For a more detailed explanation/comparison to Bitcoin, check out this video: https://youtu.be/IDEQE8lmaqs
How is ORV different from PoS or DPoS?
- Nano uses Open Representative Voting (ORV), which can be compared to DPoS but is very different in many ways:
- Each Nano account has its own blockchain that only the owner can modify (representatives can only modify their own blockchain)
- There is not one monolithic blockchain that requires leader selection (i.e. a staker or a miner) to extend
- Representatives do not create or produce shared blocks (groups of transactions)
- In Nano, a block is a single transaction (not a group of transactions). Transactions are evaluated individually and asynchronously
- Anyone can be a representative
- Users can remotely re-delegate their voting weight to anyone at any time
- No funds are staked or locked up
- Representatives do not earn transaction fees, which means there's not really a direct incentive to hoard weight
- Deterministic finality (not probabilistic finality)
- Representatives cannot reverse transactions that nodes have locally confirmed (due to block cementing)
Nano vs Lightning Network (LN)
- With the Lightning Network you still have to worry about onboarding, offboarding, fees, channel capacity, channel liquidity, routing, watchtowers, being online, etc. It's also systemically vulnerable to "Flood & Loot" attacks, due to limited 1st layer scalability. Nano is faster and cheaper than LN, and it doesn't have any of those issues.
- Here are two comparison videos: [1] [2]
Nano vs Ripple XRP
- Nano is faster and cheaper. ZERO transaction fees, no account/balance minimums, 0.2 second average full-settlement times, given away for free (no ICO), not created by a for-profit company, fully distributed, & doesn't have billions in escrow.
Is Nano a Store of Value (SoV) or a Method of Exchange (MoE)?
- Nano is both a store of value (SoV) and a method of exchange (MoE). SoV is an emergent property of utility, and is a function of supply vs demand. Bitcoin was not worth anything in the beginning, but it became valuable over time because it was useful and in-demand, with a limited supply.
- Here is a good visualization: https://i.imgur.com/NgiwJXW.png
- In fact, Nano has better SoV properties than Bitcoin:
- No inflation
- Fully distributed
- Minimal operating costs
- No block rewards
- No miner dumping
- No fees to leech value from transactions
- Still usable above >7 TPS
- Deterministic finality (vs Bitcoin's probabilistic finality)
- Environmentally friendly: no externalities that someone else is paying for
- Asymmetric risk-reward ratio
- Low current market cap
- Also usable as an MoE
Why should I use Nano instead of a stablecoin?
- Cryptocurrencies were invented to get away from trust, inflation, and middlemen. Stablecoins reintroduce all of that.
- Stable against what? Who controls the supply? What happens if the pegged assets (e.g. fiat currency) fail? What happens if more of those assets are printed? How do you maintain the peg? How do you get people to voluntarily adopt a stablecoin that has the same problems as fiat?
- Also, stability is relative. Even USD is volatile, but because most people in the US get paid in USD and buy goods in USD, they don't care about its stability. The same applies to Nano. Even as is, Nano is already more stable than some countries' currencies, and stability typically increases with adoption and market cap. If everyone is using Nano in a circular economy and buying goods with Nano, then you don't really care about volatility relative to fiat
- In the short-term, a buy-and-replace strategy can be used. Spend Nano, immediately rebuy the fiat equivalent. Or buy the fiat equivalent of Nano and spend that
- See also: Volatility.
What can't Nano do?
- Nano has no smart contract functionality.
- Nano is not private like Monero, but it is pseudonymous like Bitcoin (and more fungible since it doesn't use UTXOs).
What about volatility?
- All currencies are volatile, because their volatility comes from their behavior relative to other currencies. Even USD is volatile, but because it has such a large market cap and most people use USD as their primary currency, they don't really care about its volatility.
- Volatility is different for different people, and in some parts of the world Nano is already more stable than local fiat currencies. It's a low possibility, but even USD could fail or undergo hyperinflation, so having currencies like Nano as a potential alternative can be a good hedge.
- Short-to-mid term, enthusiasts can use a buy and replace strategy to mitigate the impact of volatility.
- The concept of an SoV AND usable MoE is relatively new, but those long-term "true believers" often don't care about volatility that much, otherwise they would have sold off a long-time ago.
- Most people care about purchasing power over volatility, so volatility in a generally upward direction (deflation) is more likely to be accepted.
- Even if volatility didn't decrease over time with adoption and market cap increases, that wouldn't diminish Nano's utility as a store of value or hedge against fiat currencies. Nano is a store of value that can also be used as a method of exchange, and both of those properties (SoV & MoE) are valuable.
- See also: Stablecoins.
How does Nano prevent spam?
- Instead of a transaction fee, all Nano transactions require a relatively small amount of client-side Proof-of-Work for anti-spam functionality and transaction prioritization. If the network gets saturated, PoW requirements increase, making it harder for an attacker to keep spamming. Legitimate users can easily do "PoW+1" to get moved to the front of the line.
- As of V22, Nano prioritizes transactions by using a combination of account balances and LRU (least recently used) rules. To outspam the majority of legitimate users, you would have to own a large amount of Nano. Even then, less recently used accounts (i.e. humans) get prioritized over frequently used accounts (i.e. spam).
What about the blockchain trilemma?
- Nano still runs into the scalability trilemma to some extent, but it pushes the boundaries further than many other cryptocurrencies by making unique design decisions (i.e. focusing exclusively on p2p digital cash, using a block-lattice, using ORV, minimal data in transactions, no smart contracts, etc)
- In other words, Nano's design allows the trilemma triangle to be bigger, but the triangle still exists
Does Nano have a CEO?
- No. While Colin LeMahieu created Nano, Nano is a decentralized network that has no CEO. Separate from the network itself, Colin LeMahieu and George Coxon lead the Nano Foundation as directors. This is similar to Bitcoin, which also has no CEO, at the same time as Adam Back is the CEO of Blockstream.
When is a Nano transaction considered confirmed & final (i.e fully settled)?
- Bitcoin confirmation is probabilistic and can always be rolled back with enough hashrate. There is no "100% confirmed" state, there's just "more and more confirmed". Bitcoin rollbacks even happen semi-regulary (1-2x/year) via stale block double spends. That's one of the reasons why exchanges make you wait for 2-6 confs (~20-60 minutes) before giving you access to your Bitcoin
- Nano works differently. When you make a transaction, it gets broadcast to the network immediately, and the representatives start responding with their votes if they think it's a valid transaction. Once your node sees enough votes, it marks the transaction as cemented (permanently final), and will never rollback the transaction (even if somehow an attacker acquired >50% vote weight). Under normal network conditions, this typically happens in <1 second.
What is the incentive to run a Nano node?
- While there is no direct incentive (e.g. mining) to run a node, there are multiple indirect incentives:
- Businesses wanting to cut costs from credit & debit card fees (0.5%-3%)
- Supporting the network so you can take advantage of its benefits (0 transaction fees, near instant transactions, etc)
- Ideological, political, and personal incentives like providing people with access to global finance
- Anyone wanting to use the network in a decentralized, trustless, and self-sovereign way
- The entire internet works on the same incentive model as Nano. Think of HTTP, TCP/IP, SMTP, Facebook, Twitter, Google, Wikipedia, and even Bitcoin full nodes (not miners) - none of them have direct fee incentives.
- In addition, Nano's lack of direct fee incentives help it avoid some of the factors that lead to emergent centralization over time from things like profit maximization and economies of scale. This is part of the reason why Nano continues to get more decentralized over time.
Can Nano scale for global usage?
- While Nano has no inherent protocol-side scalability limitations like block sizes or block times, it is naturally limited by network resources (bandwidth, disk size, disk io, CPU, etc). Here is a list of Nano stress tests over time.
- It depends on your timescale and adoption rate. It's highly unlikely than any single payment system (cryptocurrency or otherwise) will displace ALL existing payment processors, and it doesn't need to - it takes a LONG time to obtain that many customers. In 2019, 185.5 billion purchases were made via Visa, 131 Billion via UnionPay, 108 billion MasterCard, ~16 billion for Amex/JCB/Discover, totaling ~14000 TPS average (source). It's highly unlikely that any existing cryptocurrency can (or should) handle that load. Achieving even just Discover-level adoption (~44 million users) would be a huge achievement for any cryptocurrency, and at Discover usage rates that's ~95 TPS average.
- It's better to start with more realistic targets: for example, achieving 100 million users for any one cryptocurrency. Even Bitcoin is only at ~8 million users per 2018 Chainalysis estimates. 2011 PayPal was doing ~57 TPS average with 100 million customers, 2018 PayPal did ~314 TPS with 267 million active accounts, and 2019 Discover is at ~95 TPS with ~44 million customers. Nano can handle similar loads now, and even without protocol improvements Nano automatically improves roughly in line with Moore's law.
