What is a Nano (NANO)?

Nano (NANO) is a cryptocurrency project that uses DAG technology instead of blockchain, to offer a platform focused on fast payments and without commissions of any kind. 

LThe cryptocurrency Nano brings us another of the most striking projects in the crypto space. Nano is defined as a currency with instant transactions, without commissions and easy to use for people anywhere in the world. Some characteristics that undoubtedly attract attention and that you will know more clearly below.

Origin and History of Nano

The history of this project begins in 2014, when its creator Colin LeMahieu began the development of this project personally. Back then, LeMahieu was looking to fix some issues like low scalability, high cost of fees, and speed of transaction confirmation on blockchains like Bitcoin (BTC).

With this in mind, LeMahieu began the design of RaiBlocks (XRB), his cryptocurrency project that would use the technology of the DAG (Directed Acyclic Graphs), to build a completely different operating system for your ledger than the one using blockchain. Similarly, he opted for the use of DPoS (Distributed Proof of Stake) instead of PoW (Proof of Work) o PoS (Proof of Stake)as this system provides better scalability (versus PoW) and greater decentralization (versus PoS).

The choice of DAG allowed LeMahieu to create a new account and transaction control structure that he called: block-lattice or lattice of blocks. This is truly the heart of this project and the source of its capabilities. As a result of the research and work carried out, Colin LeMahieu presented the white paper of his project in 2015. Later, on October 4, 2015, the operation of this network began.

Nano Features and Operation

Now that we know about the birth of Nano, let's get to know its main characteristics and how they define this network.

DPoS, the consensus protocol of choice for Nano

First of all, we have that Nano works in a network that uses the DPoS consensus protocol or Delegated Proof of Stake. Choosing DPoS looks for three things:

1. Allow better scalability against protocols such as Proof of Work (PoW) used in Bitcoin and other networks.
2. Reduce confirmation times (again compared to PoW).
3. Reduce electricity consumption.

In all these cases, the choice of DPoS turned out to be effective, since the protocol allows Nano to have a very high speed, the capacity to process large numbers of transactions and the electricity consumption is hundreds of times lower than that of networks such as Bitcoin and Ethereum.

However, DPoS has also led to a very high centralization, which has led many figures in the crypto community to criticize the model. In fact, there are currently only 380 representatives in the entire network of and most of them are not usually active all the time. This makes the centralization much greater and with it the risk of attacks increases.

In fact, the attacks of Denial of Services (DoS) in Nano they are quite common, and developers have had to take actions to prevent them from affecting the operation of the network. Beyond this, the developers have done a great job protecting the network and maintaining the same security against this and other threats.

DAG, an alternative to the blockchain with greater possibilities

Another important part in the operation of Nano is its DAG or Directed Acyclic Graph structure. A DAG is a structure very similar to a blockchain, only that it is much more flexible in its formation and operation, which allows certain development freedoms. Among those freedoms is; the one that the nodes using DAG are able to issue and validate their own transactions, which are then analyzed and confirmed by the rest of the network.

This means that if a user executes a node, this when issuing a transaction will be able, at the same time, to offer an initial confirmation of said transaction. This initial confirmation is then verified by the rest of the network, by examining the state of the network at the time that transaction was issued and its current state.

In short, in a DAG, users become confirmators of their own transactions, and the rest of the network only then offers a general consensus of the veracity and validity of said operation. If the network is in consensus, the transaction will be considered valid, but if there is a problem, the transaction will be invalidated and will not be included in the ledger.

In this case, Nano looks a lot like networks like IOTA or Byteball, which also use DAGs for their operations.

Block-lattice, a unique way to organize accounts

Block-lattice on the other hand is a unique Nano solution to provide low latency, high speed, negligible costs in your transactions. This is a structure possible thanks to the use of DAGs, in which nodes are allowed to have their own DAG, their own ledger and an account associated with these elements.

In this way, each node is able to store its own distributed ledger and have full control of its account. This data is then assembled into a network-wide DAG, which provides distributed consensus to the entire network regarding the individual accounts of its users.

This design allows the following:

1. Reduces network overhead. In fact, this allows the network ledger to have a much smaller size than if all operations were posted to it. As a result, the Nano ledger currently occupies about 70GB, compared to over 300GB for Bitcoin.
2. User books are uniquely identified using a system of verifiable digital signatures. Thus it is possible to identify the owners (pseudonymously) of it, who are the only ones authorized to alter said book.
3. Updating of user books is asynchronous. This allows users to issue a transaction, confirm it in their own ledger, and then this information will go to the network ledger, allowing general confirmation. In addition, it allows the confirmation and general validation to be much faster, since it is given on a system of signatures and cryptographic proofs quickly verifiable. In fact, the signature algorithm used is the EdDSA under the curve ED25519, one of the safest today.
4. Being a two-way system (one sender and one receiver with their own histories under control), it is easy to keep accounts between the parties participating in the exchange.. First, the issuer deducts the balance of your account and issues the confirmation within its own ledger, marking the time, the "block" of the network in which this happens, and digitally signing said change. While the receiver, marks the arrival of that money in his own book, using the digital signature system that has been developed between him and the issuer. The use of digital signatures prevents anyone from cheating on this system (such as double spending or making money appear out of nowhere).
5. Another important point is that the balance of the network book (the one that is managed by all the nodes of the network) is a fixed balance. This means three things: first; the emission of Nano is fixed and is 133.247.751,3143379 NANO, second; Nano is not mine and third; the total of NANO within the individual ledgers (those that handle each node) can never exceed the total of NANO within the book or network ledger.

As you can see, block-lattice helps solve various problems in Nano accounting. This, in addition to making the issuance and reception of coins more flexible, making it asynchronous, much more flexible and faster. A feature that allows better use of network resources while protecting the network from attacks.

No commissions, Nano's greatest strength (and weakest)

Finally, another feature of Nano is that its transactions do not require commissions. If to this we add the fact that there is no mining, you will wonder How do the main nodes of the network make money? Well, this was achieved at the beginning of Nano, during the distribution of tokens.

With the launch of the network, the genesis ledger had a certain number of coins at its disposal. This ledger was used to obtain NANO tokens that could then be sent to another account, to later be used in payments or simply to make HODL. In fact, most of the NANO tokens were distributed through faucets that allowed people to obtain tokens completely free of charge. When the distribution faucet system closed in 2017, most of the tokens had already been distributed and, since then, the system has maintained its operation without commissions or incentives on the network.

This fact includes the main nodes of the network, which do all their work for free, and whose only reward is that the system persists, the use of NANO increases, and therefore its price shoots up, allowing them to earn money for that reason. .

The fact that Nano does not have commissions is usually seen as the strongest point of this cryptocurrency, however, it also has negative points. First of all, running a node entails electricity and internet expenses, which are not covered by the fact that there are no commissions. And, also due to the fact that the increase in the price of this cryptocurrency is not impressive.

In fact, the highest price reached per swim was € 26,9 (January 2018) and currently (April 2021) it is located at € 8,9. So the high fluctuation of the price and its low relevance has alienated many from this currency, due to the expenses incurred to maintain a node, and the null profits that are obtained by executing one. The result of this is the high centralization of the nodes, which do not exceed 400, and of which only a third are usually active at all times.

Nano Foundation, cultivating the future of the project

Nano was created in order to be completely free software and network. First of all, we should note that the Nano code is licensed under a 3-Clause BSD license. This license is considered by many in the development community as the most free software license that exists, allowing the publication of its code for use in any free or private software project, without limitations. This means that Nano is a project that bets on the freedom of the code at all times.

Second, participating in the Nano network only requires you to install your node and that's it, you don't need anything else. If you want to become a representative (nodes that approve transactions for the network's distributed ledger) you will only have to do a staking under your possibilities and with this you will gain weight in voting within the network.

Finally, this entire system is managed by the Nano Foundation, a non-profit foundation that seeks to encourage the development of Nano and its community. At the head of this foundation are Colin LeMahieu (CEO), George Coxon (COO) and Maulin Shah (General Counsel).

Nano Curiosities

From RaiBlocks to Nano

As we discussed at the beginning, Nano was named RaiBlocks. However, in early 2018, it was renamed Nano. The reason is that RaiBlocks was a difficult name for most of the public to remember, pronounce and write, so the name change was well received. In fact, just changing the name caused the price of cryptocurrencies to increase 240% in just 24 hours.

Instant transactions or maybe not?

Another curiosity of Nano is its instant transactions. In reality, Nano transactions are instantaneous on their first confirmation, since it is counted in the books of the sender and receiver. But, the computation, verification and validation at the network level takes a little longer. Thus, on average, a transaction in Nano takes about 0,25 seconds to be confirmed by most of the Nano network.

Products

Because Nano does not use Proof of Work, this network is very energy efficient. In fact, compared to Bitcoin, Nano advocates indicate that Nano has a more than 8000% reduction in power consumption for the same number of transactions.

Security issues

The high centralization of nodes in Nano has led to the network suffering from some security problems. In March 2021, the Nano network was the victim of a series of distributed denial of service (DDoS) attacks that affected the operation of the network. The problem was solved, but the network must integrate new changes to avoid this being a problem in the future.

Other security problems detected in the network were related to the use of the UDP data protocol, which under certain conditions could allow an attacker to bring down the operation of the Nano network, by means of eclipse attacks (eclipse attack).

In addition, the risks of Sybil attack they are also maintained. Especially due to the low decentralization and low cost of the token, which would allow an attacker to form a set of malicious nodes and use them against the network.

Spam control

One of the problems of not having commissions in the network is spam. Spam is the action of a malicious individual who manages to send millions of transactions to the network to put it out of service. Well, to avoid this, Nano implements a small Proof of Work system that uses the Blake2 hash function. This PoW system has no weight in the consensus (which is controlled by DPoS), and is only used to create a simple proof of work with a low computational cost. All of this work is done before a transaction is successfully formed and sent to the network for processing.

The idea is that the test is sufficiently dissuasive for an attacker to perform this type of action on Nano. This is because if an attacker applies this test by the millions, the cost of electricity and computational resources will be very high. HashCash, when it was used to prevent spam in emails.

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