What is Nano (XNO): The digital currency bringing crypto back to its roots

Nano, touting zippy transaction times, zero fees and energy efficiency, has a lot going for it

Image of an online shopper using a digital cart with a global connection – Photo: Shutterstock                                 
Global scalability issues persist in the crypto space. Nano might just be the solution. Photo: Shutterstock
                                

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Nano (XNO), operating since the early crypto days of 2014, is a digital currency aiming to succeed where bitcoin has not, designed around the philosophies of true decentralisation, sustainability and efficiency.

Despite being a valid store of value, bitcoin has moved far from its initial purpose as a tradable currency. Slow transaction speeds, high transaction fees, network inefficiencies and the eye-wateringly high power consumption needed to create new coins have all contributed to this.

That is where Nano saw a gap in the market. By deploying its unique ‘directed acyclic graph’ (DAG) protocol and “open representative voting’ validation method (ORV), Nano’s ecosystem provides some head-turning features for those looking for a genuine transfer of value, which is what cryptocurrencies are meant to be about.

Having recently announced its new ticker symbol, “Ӿ”, is Nano living up to its ambitions? What is Nano (XNO)? Exactly how does Nano (XNO) work around the issues plaguing other digital currencies? How does Nano work? And what is the Nano coin used for? 

What is the directed acyclic graph (DAG) protocol?

DAG is a form of “blockchain lattice” ledger design, which is used by numerous blockchain offerings, although Nano is perhaps one of the more successful.

With DAG, Nano manages to circumvent the need for intensive mining or staking activities, which are the main drivers behind blockchain’s energy-sapping reputation.

To achieve this, DAG essentially delegates the blockchain functions to each individual user rather than a massive mining rig or mining pool. In other words: Instead of a shared global ledger, DAG is a set of non-shared asynchronous ledgers. 

Whereas Bitcoin miners become stuck in an arms race as they try to outperform each other, each Nano user is responsible for its own blockchain operations and energy consumption.

All this is designed to keep Nano lightweight, therefore keeping transaction times down and maximising energy efficiency.

What is open representative voting (ORV)?

Nano’s open representative voting (ORV) validation method is quite different from the commonplace Proof-of-Work (PoW) method employed by Bitcoin and the Proof-of-Stake (PoS) method used by many others.

The architecture of ORV is designed primarily around achieving Nano’s lightning-fast transaction speeds.

To do this, transactions are validated by ‘principal representatives’ (PRs), to whom token holders delegate voting power. While this might sound similar to existing PoS methods, there are some clear differences.

Most importantly, since validators are not rewarded monetarily, Nano is less prone to “emergent centralisation”, where voting power becomes increasingly centralised as fewer and fewer validators benefit from economies of scale. This is a big problem in the cryptocurrency space.

In basic terms, this makes for a more equally distributed blockchain validation network, thus adhering to blockchain’s philosophy of decentralisation.

Pie chart of Ethereum's validation spread, showing centralisation – Photo: etherscan.io
The Ethereum network suffers from centralisation concerns – Photo: etherscan.io

If PRs do not receive incentives for validating the blockchain, why do they bother wasting time and energy? Despite not receiving internal rewards, there are some genuine external benefits.

According to Nano, “while businesses and services are free to utilise the benefits of the network without running a node, those who choose to function as representatives can interact directly with the network without having to rely on a third party”.

Essentially, it makes sense for any entity with an interest in seeing Nano succeed as a product to donate some resources to its daily operations. Therefore, most PRs tend to be exchanges, payment processors, wallet developers and other businesses with a stake in Nano. PRs also get advertising exposure and greater access to the Nano network for software development purposes.

Currently, the most powerful PR has 16,059,644 XNO coin delegated to it, constituting 12.05% of total voting power. In comparison, the largest validator on the Ethereum network holds 28.8% of all voting power. 

The second-largest Nano PR holds 4.6% of voting power, against Ethereum’s second-largest validator, who holds 18.5% votes. These figures bode well for Nano’s decentralisation claims.

Becoming a Nano Principle Representative

Are you considering becoming a PR to help validate and secure the Nano ecosystem? Here are some key things to take into account.

A node requires a minimum of 0.1% voting weight (ie 0.1% of all circulating tokens) delegated to them to become a PR. With a circulating supply of 133,248,297.20, that would mean a delegation of 133,248 XNO coin ($522,300 at today's price).

In terms of processing power, the requirements are trivial. Since Nano’s blockchain is incredibly lightweight, a standard modern home PC is up to the task. There is one bottleneck to be considered, however. A minimum of 500Mbps is required, which is far above the US average broadband speed of 12 to 25Mbps. 

In fact, anyone can become a validator, even with less than that 0.1% voting weight. But it is only when you reach that critical mass that you achieve PR status and reap the rewards accordingly.

Another key feature of ORV is that delegated funds are not tied to a lock-up period as used in the staking method. Users may withdraw their delegated funds from any PR at will, or move funds from one PR to another. This is probably designed to be a disincentive for bad actors.

Assessing block speeds

According to Nanocrawler, at the time of writing, there are 87 PRs on the Nano network achieving an average block confirmation time of 0.61 seconds, which is pretty impressive against some competitors.

Graph displaying Doge,Litecoin and Ethereum block times – Photo: bitinfocharts.com
Per minutes, cryptocurrency competitors have drastically differing block times – Photo: bitinfocharts.com

In comparison, Bitcoin is known to take more than 10 minutes. Litecoin hovers around the 2.6-minute mark, as does Dash. While Ethereum manages block times as low as 0.22 seconds, Nano’s speed is still nothing to be sniffed at and compares favourably to many other competitors. (Data sourced from bitinfocharts.com)

A few Nano tokenomics

As at 9 December 2021, XNO is valued at $3.86. XNO is fully diluted, meaning the entire, maximum supply of 133,248,297 is already in circulation, generating a market capitalisation of $536.9m – ranked 141 in the crypto charts, according to CoinMarketCap.

The most recent trading volume was $32.03m, or 0.06% of market cap.

Nano circumvented the initial coin offering (ICO) route, instead opting to distribute XNO through a unique crypto faucet system. Before the taps were closed in 2017, individuals could solve complex CAPTCHA riddles and earn coins, thus rewarding time and effort instead of mining capabilities.

Nano said that ‘Nano communities’ started to spring up in poorer countries, enticed by the gains made possible by these faucets.

While not all planned coins were distributed throughout the faucet’s lifespan, the remaining supply was burned, thereby encouraging deflation. On that note, there is one potential issue going forward for Nano. As it finds higher mainstream adoption by merchants, who presumably will then convert their holdings to fiat, this will reduce circulating supply. 

While good from an inflation perspective, potential investors may want to keep an eye on Nano’s token-drop schedule.

Remember, Nano is a feeless system. Coins are not mined, nor are they paid out to nodes. Because of this, Nano represents a true exchange of value. One XNO sent equals one XNO received.

Seven million XNO are held in the Nano Foundation as a resource pool for the founders.

We have more up-to-date nano cryptocurrency information over at our nano price predictor.

Where next for Nano?

Nano’s developers are seeking to optimise the DAG system through the ‘ledger-pruning’ exercise, which aims to lighten the ecosystem even further.

With the new currency symbol released and a revamped website, it looks like Nano is aiming to level up its digital currency in 2022.

FAQs

Initially called RaiBlocks before changing names in 2018, Nano was founded by the software developer Colin LeMahieu in 2014. LeMahieu, previously based in Texas,  now operates out of London. He previously worked as a software developer for AMD, Dell and Qualcomm, before starting his decentralised currency passion project.

Colin LeMahieu is the director of the Nano Foundation.

Nano suffered a denial of service (DoS) attack in March 2021, necessitating a bug fix.

Sybil attacks, where an attacker attempts to gain voting influence through a large number of fake identities, are a primary concern for DAG systems. However, Nano’s white paper states that “since the voting system is weighted based on account balance, adding extra nodes into the network will not gain an attacker extra votes. Therefore there is no advantage to be gained via a Sybil attack.”

Concerns have been raised that Nano’s zero-fee feature sacrifices security to some extent. But wider merchant adoption will be needed to scrutinise this.

Nano is a legitimate digital currency overseen by the Nano Foundation. Furthermore, founder LeMahieu intentionally circumvented the ICO (Initial Coin Offering) route because of concerns over securities law.

Nano is a digital currency with a true exchange of value with no transaction fees and fast block times. Furthermore, the validation network does not employ mining or staking methods, making it energy efficient.

Further reading

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