This post introduces The Basics of a pretty cool cryptocurrency, but also looks at the recent beatdown that is still rippling out from the Spam attack. In other words, this is an intro-level post at the beginning with a bit more of a deep dive at the end.
NANO is a bit of a mystery to me. Or, I should say that the relative lack of excitement over NANO is a mystery to me. An established crypto with interesting and innovative tech, extremely low fees and extremely fast transaction speeds seems like what we're all waiting for in this time of demoralizing gas and mining fees, right? And yet, it's marketcap is a modest #104 according to CoinGecko. In October 2019, the marketcap rank was #51. How has NANO slipped even during a gas crisis that might logically have sent people into its fast little arms?
Given that I am writing this as a days-long blockchain slowdown keeps NANO hobbled, perhaps the answer is sitting right in front of me:
NANO got spammed.
An Introduction to NANO and its Technology?
NANO originally launched as RaiBlocks in 2014, seeking to avoid the high computational demands of the main blockchain tech. Those massive computations require expensive miners to process quickly, and those miners require tons of electricity. Needing expensive processors and a lot of electricity is already recognized as a big problem of BTC and ETH networks, and reducing cost and electricity consumption while increasing transaction speed seems to be where a huge part of innovation efforts are directed.
NANO was founded by Colin LeMahieu with a vision of transactions that are validated by senders and receivers, not by miners. From my own Noob perspective the biggest variations in cryptocurrencies often come down to the method they use to validate transactions. BitCoin is famous for its Proof of Work (PoW) where the gigantic digital transaction ledgers known as blockchains are calculated and verified by powerful computers, the owners of which are incentivized by asking a fee for their service. These are miners and their miner's fees. Calculations are expensive, take time, and if you try to low-ball miners (in their opinion), they might decide not to work on your transaction and it could fail. Whatever you might think about BTC, with these features, it definitely cannot become the digital version of everyday money.
But NANO set out to be an effective and cheap digital money, one you can actually use to pay for stuff without waiting all day or paying high fees. The main innovation as far as I can understand it is to relocate the blockchain. In NANO, each wallet is its own blockchain. Instead of needing to record new transactions on the massive BTC ledgers, using NANO means that only your personal blockchain needs updating. This takes a trivial amount of time and energy, so fees are, well, they are 0.0000. Nada, Nil, Zilch, Rien, Nothing.
You are probably already realizing that there is something missing. After all, every transaction has two sides. In fact, NANO transactions update the Receiver blockchain and also the Sender blockchain every time. So, instead of requests being sent in the form of a really difficult algorithm to powerful computers, two much smaller wallets are update with the new data.
The final transactions verifications are distributed and voted upon by hosts of NANO nodes. These nodes perform what NANO calls a delegated Proof of Stake function. It is like a typical Proof of Stake in that node operators must own NANO, but it is delegated PoS in that they also get to sign the transaction verifications for the entire NANO network. And a node owner votes in proportion to their total NANO ownership share when there are discrepancies in the transaction record. Nodes are critical to NANO because they link the very cheap individual wallet-based blockchains into the larger record of transactions, which is called a blocklattice in NANO parlance (because instead of storing each transaction in ever growing chains of transaction blocks, they store the pairs of Send and Receive transactions across users, which conceptually creates a kind of fence-looking transaction record). This also means that transactions can be processed asynchronously in the moment, with no lag time, and that synchronizing can be done later.
To sum up the key distinguishers of NANO, it is very cheap because transactions can happen on individual processors through the wallet-based blockchains. NANO is very fast because these transactions are short bits of code, and only need to be signed by node operators, which host the network. NANO network then really seems to verify updates to individual wallets, rather than creating monstrous records of every transaction since the mining of the coin. It should be an ideal cryptocurrency - fast, and free to use. But...
The drawbacks of this approach are that there is not as much security attached to NANO coins per se. The security function is distributed across node operators under the assumption that due to their large stakes of NANO, they don't want a crappy counterfeit coin to ruin the value of their holdings. So, the thinking goes, while node operators don't take a cut of verifying transactions through pricey mining and associated fees, they gain economic incentives through the success of the entire NANO project. Cool, but let's not forget, the whole system relies on a limited number of computers verifying each pair of Send-Receive transactions, no matter how tiny and with no expenses to users.
Did you say NANO can conduct a potentially enormous number of free, miniscule transactions? Hmmm.
About This Spam Attack...
One of the ideas behind Proof of Work is to make transactions so costly that spammers can't flood networks with a killing number of mini transactions, which could bring the whole network down. The slow transaction speed and the cost are features of many cryptocurrencies not bugs, in this sense.
NANO does not have that feature. They have cheap and fast. According to CoinDesk reporting, last week NANO was hit with more than 70 transactions per second for a sustained period of time, which overloaded some number of the computers operating nodes, which in turn caused them to de-sync from each other. That is, the nodes could not keep up with verifying all the Send-Receive pairs, which opens the possibility of accidentally verifying fraudulent transactions. The better choice, under those circumstances, was to reduce the number of transactions processed to a bare trickle.
Just like a bot army flooding a website with more requests than it can handle crashes the website, the bot army of spam transactions caused node operators to shut NANO down to minimal levels. As I can personally attest, transaction speed went from fractions of seconds to days.
NANO is working on an update that is supposed to preserve speed while increasing security against these kind of attacks. And, there are no reports of fraudulent transactions becoming part of the record. But, losing the ability to have the hyperfast transactions NANO is known for significantly reduces NANO's competitive advantage.
In doing research for this article, I ran across this post from 6 months ago: "Nano is an interesting cryptocurrency, but it’s very benefits are attack vectors. Currently Nano has no way of dealing with a precomputed PoW attack which means a single attacker has the ability to effectively ‘DDOS’ the network." This is on the site Y Combinator, which is apparently where geniuses go to chat when they're bored with the rest of us, so I couldn't follow much of the post, but apparently the asynchronous nature of NANO's verifications also introduces some problems related to security by limiting the difficulty of transaction verification. I *think* I know what all those words mean. Probably.
What I think they mean is that it would be a somewhat heroic act of programming and investment to create world-leading security within the speedy and inexpensive technology NANO spearheaded.
So In The End...
I hope we're not revisiting the Spam-crazy days of 2018 when Chainlink and Ethereum both were knocked out for a few days by spammers. Now, in 2018, I didn't know that either Chainlink or Ethereum existed, so I am basing this on this post on Medium. But, spam attacks on blockchains seem not to be that common anymore, as there have been huge investments in the security of nearly all cryptocurrency year over year.
This is an area where NANO clearly needs some work to regain momentum and user confidence. According to CoinGecko, NANO reached a recent peak at $7.75 back on February 8, and now sits at $4.83 as I write, with remarkably mellow price and volume movement. People are not fleeing this coin despite the fact that the network has slowed substantially. I tend to think that they are sticking by because NANO solves many of the aggravating problems of the BTC and ETH blockchains, but it also could be that those problems are so aggravating that people are sticking with anything that is fast or cheap by comparison. An argument in favor of this interpretation is the mass shift over to Binance Smart Chain despite it being highly centralized, which is a weird choice for those members of Cryptoworld who want Unbanks and decentralized everything. The draw of low fees and fast transactions will always be a big deal in this space, I think.
I still like NANO, and hope it can sort things out. This cautious affection is driven quite a lot by the fact that I hate all the fees and know that they have prevented me from progressing as an investor in Cryptoworld.
And, although this might not be the most important reason to invest in a project, I get a smile looking at their Executive Leadership Team. I mean, they have names like Colin, George, and Russel, but one of those names belongs to a woman, unlike the executive teams of so many crypto projects. And she's a ginger! That's different! I've always been a bit of a sucker for redheads, I will admit. And on top of that, while the two dudes are looking like they are mentally preparing themselves to shit out a feral pig, the woman almost looks as if she remembers the last time she smiled. Festive!
In the end, I think NANO's fate rests quite a lot on how it comes through this fairly substantial crisis, so for now it is wait and see... Will NANO shit out a feral pig or will it remember how to smile?
That wraps up my first article on a single cryptocurrency. It was a lot of work, so I hope you found it useful! :)
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If you'd like to buy NANO but can't because of those effing Spammers, take a moment to be angry. Then try out a few faucets. The only cure for cryptofever is free crypto, hahaha!
Seriously, though, when you use referral links from me or other writers, you help support our passion for writing good shit, so please consider it.
The Hot list of referral links I am most excited about: Cointiply, BetFury, and RollerCoin, and if NANO is your thing, then TipNano app, too...though I don't see that it is accepting new referrals right now.
The Maybe! list of referral links that you might enjoy even if the payout is not so great: FreeBitco.in (if you build your own referral base), DutchyCorp, and Pipeflare.