An Introduction to Nano
Edit: Nano($NANO) is the re-branded name of RaiBlocks($XRB). The re-branding took place in January of 2018, and this article was updated to accommodate this change. Nothing else has changed regarding the coin’s fundamentals.
Nano hopes to become what Bitcoin, at times, struggles to be: an efficient, viable alternative to fiat currencies.
In Nano’s white paper, the cryptocurrency’s development team raises concerns over the practicality of Bitcoin as a common currency. The concerns are as follows:
- Scalability issues have users facing high transaction fees, with a median fee of $10.38
- Bitcoin’s high computational latency makes for an average transaction time of 164 minutes.
- Bitcoin’s proof of work consensus uses an estimated 27.28TWh annually, an average of 260KWh per transaction.
Using its own block-lattice structure, Nano wants to succeed where Bitcoin has fallen short. The cryptocurrency promises to deliver zero-fee transactions in real time without the same work-intensive overhead and energy consumption as Bitcoin.
If you think this all sounds too good to be true, pinch yourself and keep reading.
How it Works
The block-lattice infrastructure operates like blockchain but with a few key difference. To start, each account on Nano’s protocol has its own blockchain called an account-chain. Only an account-chain’s user can modify his/her individual chain, and this allows each account-chain to be updated asynchronously of the rest of the block-lattice network.
In effect, this means that users can send and update blocks on their account-chain without relying on the whole network. To achieve this, any funds sent on Nano’s block-lattice require two transactions: a sender transaction and a receiver transaction. In order for a transaction to be settled, the receiving party must sign a block confirming that the funds were received. If only the sending party’s block is signed, a transaction is pended as unsettled. All transactions are sent in User Datagram Protocol (UDP) packets, which keep computing costs low and allow senders to transfer funds even if a receiver is offline.
One of the block-lattice’s more attractive features is how its ledger handles and stores transactions. Each Nano’s transaction is its own block, and each new block replaces the one before it on its user’s account chain. In order to maintain a proper account history, new blocks take a record of the account holder’s current balance and factor it into the processing transaction.
To illustrate this, if you were sending NANO to someone, the transaction is verified by taking the difference between the send block and your current balance on the preceding block. On the other end of the transaction, the receive block would then add the amount to its account chain’s preceding block. The end result is a new block that records the updated balance of each user.
Under this system, Nano keeps a record of an account’s balance on its ledger, not a full history of all transactions like traditional distributed ledgers. This means that the Nano network only has to keep a record of each account on its full ledger. Instead of maintaining a record of all prior transactions, the network only stores account balances.
If you haven’t grasped why this may present a solution to Bitcoin’s latency and scalability issues, we’re about to go over some of its benefits below.
The Perks of a Block-Lattice Infrastructure
Thanks to account-chains, each account and its chain can be updated asynchronously of the entire network. By implementing a dual-transaction mechanism, it is up to both the receiver and sender of funds to verify a transaction. This eliminates the need for miners entirely and paves the way for instant and feeless transactions.
All transactions on Nano are handled independently from the network’s main chain. They also fit into a single UDP packet and are recorded in their own blocks. Effectively, this does away with blocksize issues, because nodes are not responsible for maintaining a comprehensive record of all network transactions. Instead, they need only store the individual account balances of each account-chain rather than their entire ledger.
With Bitcoin’s traditional distributed ledger, a transaction cannot be cleared until an entire block is built into the blockchain. These blocks act as comprehensive ledgers for the network’s financial information and include Bitcoin’s entire transaction history. As more information is stored, we’ve seen sluggish transaction times and high fees. Nano’s account-chains make for a lightweight infrastructure, and as a result, the block-lattice offers improved scalability compared to legacy blockchains.
Energy Efficiency and Decentralization
Nano keeps its network secure using a delegated proof of stake model (DPoS) similar to Ark. If any discrepancies arise with conflicting transactions, Nano delegates vote on which transaction to verify as valid. The DPoS offers a number of benefits compared to Bitcoin’s proof of work mechanism.
For one, without miners, Nano safeguards itself from mining attacks and the defacto centralization large mining pools have brought to Bitcoin’s network. NANO delegates hold a stake of its currency, so they are deterred from abusing their power lest they compromise the entire network’s legitimacy and thus their own investment.
Further, because of the block-lattice structure, delegates only need to verify transactions if a problem arises. As a result, running a node on the Nano network consumes much less energy than if the nodes were operating under a proof of work model.
Nano’s Trading History
In December 2017, Nano (then Raiblocks) experienced an incredible run up and briefly touched its all-time high of $37 on January 2nd, 2018. In keeping with the cryptocurrency space as a whole, the price fell through January and February, finding a solid bottom around $8.
After another run up in late February to around $15, volume began to drop off and the price steadily declined to though March. Early April saw a stark reduction in volume and a bottoming out of the price at around $6. Since the first week in April, Nano has shown steady and sustained increase in both volume and price, as investors and enthusiasts respond to the consistent progress and further development of the Nano network.
Where to Buy Nano
Nano is available on Binance, Kucoin and Nanex(a Nano based exchange which pairs Nano with all of its other coins). There are many other smaller exchanges that have added Nano trading pairs and additional exchanges and fiat gateways are listing Nano weekly.
Where to Store Nano
Besides keeping it on an exchange (which we don’t recommend), there are a multitude of storage options for your Nano. Nanowallet.io(formerly raiwallet) is a web-based wallet with an excellent track record of stability and has been used by the majority of Nano owners. There is a desktop wallet attached to the official node software that users have described as rather basic, however, the official Nano wallets for Android, iOS, Windows and OSX are all in the final stages of beta development.
Additionally, the Nano community have produced some extremely functional and polished desktop and web-based wallets. Both NanoVault and CanoeWallet offer cutting edge Nano wallet experiences.
The Future of Nano
Since Nano functions solely as a currency, most of its development at this point is dedicated towards adoption. The Nano roadmap shows that a Point-of-Sale platform is under alpha testing, allowing for easier merchant adoption. The aforementioned wallet rework is designed to make it so that it will effectively work as a personal banking system, not only a simple wallet. The Nano team is also developing smart cards that could sign Nano transactions, effectively putting Nano inside an industry standard already used world wide. Along with Point-of-Sale integration, this could be a strong force driving adoption due to it’s familiarity and ease of use for all parties involved.
Besides the official Nano team developments, the community has also provided valuable projects, with Brainblocks being the most famous one. It allows for easy Nano integration in web-stores, with open source code for web developers and dedicated plugins for Woocommerce and Shopify, it is already widely used by the community.
At the protocol level, the current milestone is the release of universal blocks. Without going into much technical detail, it allows for aggressive pruning of the ledger without loss of information, therefore preventing ever escalating hard drive requirements for nodes on the network. This update, which is due at any time (it is released in two steps and the first one has already been through), will also make it easier for other kinds of integrations, including hardware wallets.
Nano was designed to thrive where BTC lacks, mostly scalability, latency and energy consumption. Since it’s focus is to compete with FIAT, easy of use is of paramount importance and the Nano roadmap seems to be moving in the right direction. If they can achieve their goals, you may be buying your pumpkin spiced latte with Nano in the coming years
This article by Colin Harper was originally published at CoinCentral.com on December 26th 2017. Edited and updated by the NanoThings team.