What is Nano? (NANO)
The Beginner’s Guide
Nano is a software designed to facilitate fee-free cryptocurrency transactions.
Key to Nano’s design is that each account has its own blockchain. When transactions are made, Nano users exchange NANO cryptocurrency and update their own ledgers. Updated balances are then distributed and recorded on the main Nano blockchain.
In this way, Nano’s design is a departure from other cryptocurrencies, as its blockchain does not keep a full record of its transactions. Instead, the Nano blockchain tracks account balances and their associated transaction amounts.
This differs sharply from other cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), in which all transactions are recorded and batched into blocks with a finite capacity. In such systems, transactions bid for inclusion in a block, and fees are distributed nodes who create new blocks.
The goal is that fees will incentivize the continued operation of these blockchains, as nodes must spend resources to compete for the right to create blocks.
Nano does away with these traditional aspects of blockchain design. Instead, nodes vote on who gets to create blocks, and since this can occur at low to no cost, users don’t need to pay to have transactions included in the Nano blockchain.
The idea is that these design trade-offs will encourage more transactions to be made on Nano, leading to greater adoption of the NANO cryptocurrency in use cases requiring large volumes.
Who created Nano?
Nano was created and designed by Colin LeMahieu, a software engineer and the CEO and founder of The Nano Foundation, headquartered in the U.K.
Launched in 2014 under the name RaiBlocks, the project rebranded as Nano in January 2018.
How does Nano work?
Like all cryptocurrencies, Nano uses a consensus algorithm to ensure its network of nodes stays in sync to prevent users from breaking its software rules. More specifically, Nano uses a variation of delegated proof-of-stake (DPoS) called Open Representative Voting.
Under this system, nodes are assigned a “voting weight” based on their account balances. They can then choose to use or allocate their votes to another node on the network.
When a node has enough voting weight, it is designated as a Principal Representative and can vote on transactions proportionally to the funds in its account and those allocated to it.
Representatives are not paid to vote on which transactions and blocks the network should accept.
What is the Block Lattice?
Nano’s key innovation is a new data architecture it calls Block Lattice.
Under this design, each account has its own blockchain, which allows users to update their account immediately, without waiting for the rest of the network. These individual blockchains are named “account-chains.”
Similar to your bank account, each block in the lattice records and updates the state of an account. Therefore, transaction amounts are interpreted as the difference in the account balance between consecutive blocks.
Each transaction is its own block, and each block replaces the previous one on the account.
Users can send and update blocks without using the entire network. In addition, only account holders can modify their blockchain.
Transactions on Nano occur when:
- The sender publishes a block debiting their account for the amount to be sent
- The receiver publishes a matching block charging their own account.
Each block in Nano also contains a small proof-of-work component used to discourage spam transactions. This is done to prevent users from continuously sending transactions.
Why does NANO have value?
Nano shares many of the characteristics that give all cryptocurrencies value, including durability, portability and scarcity. The maximum supply of Nano is 133,348,297 NANO.
From 2015 to 2017, the NANO cryptocurrency was distributed through a system of online faucets that allowed anyone to complete a captcha and claim it free of charge.
A total of 126,248,297 NANO were distributed through faucets during this time.
In October 2017, 207 million NANO were removed from circulation, sent to an address with a private key that is said to have been destroyed. This means no NANO coins can be minted by the protocol, a possible feature for investors, who can be assured they are buying a finite good.
However, because nodes aren’t allocated new cryptocurrency, there may be less opportunities for tech-savvy users to earn money in its ecosystem by providing services.
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Why use NANO?
Users may find Nano a compelling cryptocurrency for transactions due to it requiring minimal resources to operate while processing a high transaction throughput.
Investors may also seek to buy NANO should they believe the market will one day favor protocols built to facilitate cheap transactions.
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