An Astronomical Leap: The Architecture Behind the Cryptocurrency Nano

Like the rest of the crypto market, Nano (formerly RaiBlocks) saw a vast increase in price throughout mid to late December. On December 9th Nano was valued at $0.71, and by January 2nd it reached an all-time high of $34.43. So why was this frenzy of increase so prevalent throughout late December through early January?

Regardless of the hype surrounding the cryptocurrency, the technology and architecture behind Nano is unquestionably purposeful. Overall, Nano aims to solve critical cryptocurrency issues–scalability, higher latency, and an inefficient consumption of power. The white paper behind the project describes Nano as a ‘feeless distributed cryptocurrency network’.  This growing cryptocurrency has gained interest because it is centered around a novel block lattice architecture where each account has its own blockchain. Furthermore, this method is profoundly purposeful when attempting to deliver nearly instantaneous transaction speeds and unlimited scalability.

When understanding various forms of blockchains, it is first important to develop an understanding of different systematic terminology. Bitcoin and many other systems achieve transaction consensus through an economic measure called Proof of Work (PoW). A proof of work system allows participants the competition to compute a number called a nonce. Whichever miner holds the greatest hashing power has the greatest possible chance of computing the nonce. Once a miner finds a valid nonce, then it is allowed to be added to the blockchain. Ultimately, those systems (miners) which exhaust more computational resources to compute a nonce have the most prominent influence on the consistency of the blockchain. This is a major drawback for the Proof of Work system because it has the potential to centralize mining and allow more individualistic influence over the blockchain. However, Proof of Work systems do have advantages, such as Sybil attack resistance, and in general, they can be more secure.

A popular alternative to Proof of Work is a system referred to as Proof of Stake (PoS). Peercoin was the first to implement this method in 2012. In a Proof of Stake system, miners have an equal weight equivalent to the amount of wealth they possess. Therefore, those who have a greater financial investment are given more influence and are economically incentivized to maintain the integrity of the blockchain. Proof of Stake eliminates the need for wasteful power consumption in which Proof of Work systems rely upon. Proof of Stake systems only require light-weight software which runs on low-power hardware. Bitcoin electricity consumption is a critical issue surrounding cryptocurrencies, and many systems are moving toward Proof of Stake protocol. One prominent example of a cryptocurrency undergoing this transition is Ethereum. Many other cryptocurrencies are expected to follow.

Nano utilizes a novel block-lattice structure and delegated Proof of Stake voting system in order to establish its transaction consensus. The original white paper for the Nano beta was published in 2014, and in turn, became one of the first cryptocurrencies to be based around a Directed Acyclic Graph (DAG). Some of the most notable DAG based cryptocurrencies are IOTA and Dagcoin which run on the basis technology Tangle. This process broke the blockchain mold and continues to aim at improving system performance and increasing security.  IOTA achieves transaction consensus through Proof of Work stacked transactions, while Nano achieves consensus through a balance-weighted vote on conflicting transactions. This system creates quicker and more deterministic transactions while still maintaining a strong decentralized system.

However innovative the technology behind Nano may seem, the cryptocurrency still has been criticized. Although the need for scalability and efficient power consumption are essential, many other cryptocurrencies possess this capability. Some prominent examples are Ripple, Stellar, IOTA, Bitshares, and Steem, which can achieve exceptionally high traffic with minimal or no fees. Also, in order to have scaling problems, you must first experience scale. Many are skeptical wither or not Nano has yet to prove itself when it comes to scaling. However, there is still reason to be optimistic for the mass adoption of Nano. The Nano network has processed more than 4.2m transactions with a ledger size of only 1.7GB. This fee-less, high-speed transaction capability makes it ideal for consumer transactions of all kinds.

Disclaimer: I am not a financial adviser. This is not financial advice. Please do your research independently and make object decisions. This article is intended to educate readers about the cryptographic architecture behind Nano. Personality, I have no position in Nano.