SUMMARY

Nanocurrency, or Nano, is a digital currency that offers free, nearly instant, and highly scalable transactions. Nano’s protocol layer is based on a form of a directed acyclic graph called a block lattice. Nano markets itself as the ideal digital currency for peer-to-peer transactions and currency trading. It also boasts of being cheap to maintain due to the lack of mining, lightweight costs of running a node, and small transaction sizes. Originally created in 2015 as Raiblocks by solo developer Colin LeMahieu, Nano rebranded in February 2018 with a new website, logo, wallet, and addresses. 

The Nano team did not conduct an initial coin offering or crowd sale. Instead, the supply of Nano was available to anyone through solving a CAPTCHA to receive coins from a faucet system that ended in October 2017. Nano has reached its maximum supply of 133,248,290. The total supply equals the circulating supply, so there are no more outstanding coins to be distributed in the future.

The Nano team is small and dedicated, with a total of 10 team members performing roles from development and community management to marketing and compliance.

 

­­ UTILITY

The purpose of Nano is to enable instant, free, and scalable peer-to-peer transactions on a decentralized network. The Nano team plans to add extra functionality in the future. Nano has the potential to become an internet standard that is fully decentralized. Such an advancement would allow Nano to compete with fiat currencies as a peer-to-peer payment mechanism and establish Nano as the premier cross-currency trading pair on cryptocurrency exchanges. Furthermore, since Nano is a permissionless and internet-based currency, it has the potential to bank the world’s unbanked population by allowing anyone with access to the internet to control and secure their finances.

 

INCENTIVE SCHEMES

Nano does not have a miner incentive to run a full node due to its feeless protocol. Instead, incentives for running a full node include warm glow, personal investment, utility, voting power, and more. The approximate cost of running a node is only $3 per month, so there is no barrier to entry when it comes to costs. Also, anyone using a wallet is already running a node, only with the voting power delegated to a wallet account. Warm glow means someone wants to help further the Nano ecosystem out of a sense of altruism. Personal investment as an incentive occurs when someone holds a large amount of NANO coins and wants to support the Nano block lattice so that their investment will increase in value. Utility as an incentive occurs when someone has great demand for cheap currency-like transactions. For example, someone wanting to bypass Western Union’s high fees and slow speed can send remittances with Nano instantly and for free. Also, auxiliary benefits can act as an incentive for someone to run nodes. Someone who runs a node can operate wallets and sign blocks, receive notification of new blocks, and retrieve historical block data from the block lattice. Finally, voting power as an incentive occurs when someone runs a node in order to have greater control and delegation of their staking and voting power.

Unlike traditional blockchains, where a miner’s monetary incentive anchors the ledger, Nano’s utility helps create its own incentives because people and firms have a massive monetary incentive to use a fast, feeless distributed ledger. Essentially, the main incentive for someone to validate other transactions is the ability to create and use transactions themselves, as well as the right to represent oneself in voting power to help the network reach consensus.  

This type of incentive scheme is not common in the cryptocurrency space. Generally, incentive schemes provide what we call an ‘active incentive’ meaning that a node receives bonus payments for performing duties that support the network. Nano has what we will call a ‘passive incentive’ meaning that the incentive for supporting the network is to either maintain the value of Nano that you already have or to support the vision of a decentralized, highly scalable currency that is accessible by the wealthy and the poor, the banked and the unbanked.  

 

CONSENSUS ALGORITHM & SCALABILITY 

Nano uses a delegated proof-of-stake consensus mechanism, so consensus is reached through votes weighted by account balances. In a proof-of-stake system, the largest account holders have the greatest incentive to avoid becoming bad actors, and also to punish bad actors. A tiny amount of proof-of-work is required to send transactions, which helps protect from spam while keeping the cost of maintaining the network cheap.

Nano purports to be infinitely scalable, as it does not use a blockchain and thus does not face the notorious blockchain scalability problem. In theory, Nano’s block lattice grows stronger with each new transaction, so as new transactions are created and spent, the distributed ledger’s ability to process transactions increases. Because Nano’s transactions must directly and indirectly approve other transactions, the number of transactions that can be processed in a time period increases with the number of confirmed transactions. Nano’s scalability is limited by current bandwidth technology and hardware, just like any other peer-to-peer software, centralized or not.  

A block lattice is a record system in which every account holder maintains a private blockchain, where every block holds a single transaction. Because each account holder provides the computational power to verify only their own transactions, the entire network is not required to update the account ledger together at the same time. Transfers require both a send transaction from the sender and a receive transaction from the receiving account. Therefore, Nano is able to process more transactions per second than Bitcoin and Ethereum. In a recent stress test evaluation, Nano’s network successfully processed 75 transactions per second over 30 minutes and 5,730 transactions per second over 10 seconds. Colin LeMahieu touts a current target of 7,000 transactions per second.

Technically, Nano transaction fees cost ~$0.00035 per proof-of-work. Effectively, the transaction fee is free.

A bad actor can spam the Nano network with countless transactions, as transaction fees are effectively free. However, because transactions require proof-of-work, spamming billions of transactions would cost the attacker a significant amount of money.

A 51% mining attack on Nano is impossible because the Nano block lattice does not have miners. In theory, a 51% staking attack is possible, as with all proof-of-stake systems. A bad actor would need to acquire more than 50 percent of the totally supply. Two incentives discourage such a bad actor from performing a 51% attack. First, purchasing enough Nano to reach the majority threshold is extremely expensive. As an attacker purchases more Nano, market liquidity decreases and the price of Nano increases. Second, even if the attacker manages to acquire a majority stake, it may not be in the attacker’s best interest to double spend for fear of crashing the price of NANO.

 

SENTIMENT ANALYSIS

Nano is an open source project, which means that anyone can audit its code. It has several public repositories on GitHub for everyone to see. The Nano Foundation is a small private company, but they offer transparency through regular blog posts and news updates. Nano also has a strong social media presence with 1,653 Facebook followers, 44,500 Reddit subscribers, and 98,000 Twitter followers.

 

MARKET OPPORTUNTIY

Nano currently seems to position itself as a competitor to first-generation blockchains like Bitcoin, Litecoin, and Bitcoin Cash, as well as second-generation blockchains like Ethereum, EOS, and NEO. IOTA is a possible next-generation competitor, but IOTA is more focused on Internet of Things and machine-to-machine instead of peer-to-peer. Nano’s competitors include legacy financial firms like PayPal and Western, and new fintech firms like Circle and Zelle. As legacy firms offer slow speeds, high fees, and poor service to consumers, Nano could be well-positioned to dominate their market share in the personal finance and remittances markets. Nano has a healthy market capitalization of about $135 million, 39th largest overall and similar to those of its crypto competitors. 

Nano’s sector is Medium of Exchange, specifically peer-to-peer payments and remittances, though it aims to break into other markets like financial trading eventually. The size of the peer-to-peer payments market is well over $700 billion and is projected to continue growing. The size of the global remittances market is well over $600 billion and is projected to rise as low- and middle-income countries continue to grow. The value add of Nano in peer-to-peer payments and remittances is low cost and fast speed.

 

ADOPTION FRICTION & EASE OF USE

Nano has a first-mover advantage as one of the most publicized and well-known directed acyclic graph networks. Nano does not currently have partnerships with big companies, preferring to eschew ambiguous marketing hype and focus on development with its own team. 

Although Nano experienced a security crisis with the BitGrail exchange in early 2018, it is worth noting that it had nothing to do with inherent flaws in Nano itself, but rather a bad actor controlling a centralized exchange. Nano is mostly respected in the cryptocurrency community for its simple utility, ease of use, and homegrown team.

It is relatively easy for an enterprise to run a node and use Nano in transactions. Anyone can download and install wallet software, buy Nano on an exchange, and spend the NANO cheaply and quickly. However, keeping track of a Nano wallet is likely too much to ask of the general population, despite it being easy for the small population of day-to-day crypto users.

 

Current Status and Roadmap

The Nano Foundation offers a roadmap for those interested in its research, but the roadmap does not include a timeline. The Nano team is currently developing a scalable cloud infrastructure to allow vendors and exchanges to deploy the use of Nano as a service. Also, Nano is alpha testing a “plug and play” point-of-sale platform for vendors and mobile terminals. Because using Nano can save vendors payment processing fees, Nano aims to create software that lets any merchant accept the digital currency. Finally, Nano is promoting its network and utility in regions across the globe, specifically in Asia and South America. The roadmap is available on the website at https://developers.nano.org/roadmap.

[1] https://nano.org/en

[2] https://nano.org/en/whitepaper

[3] https://medium.com/nanocurrency/the-nano-faucet-c99e18ae1202

[4] https://coinanalysis.io/nano/

[5] https://coingape.com/nano-network-stress-testing-bitcoin-superstore-support/

[6] https://github.com/nanocurrency

[7] https://www.facebook.com/nanofoundation/

[8] https://twitter.com/nano

[9] https://www.reddit.com/r/nanocurrency

[10] https://www.emarketer.com/Article/P2P-Payment-Transactions-Exceed-120-Billion-This-Year/1016187

[11] https://www.forbes.com/sites/tobyshapshak/2018/05/21/global-remittances-reach-613bn-says-world-bank/