This page contains questions and answers for some of the most frequent concerns about the Nano protocol. Much of this will change over time as Nano matures. This page serves as a reference for education or fighting FUD.
The official FAQ can be found here.
- 1 What about decentralization? Developers or official representatives hold a significant amount of voting weight.
- 2 What does nano has to offer compared with other low fee cryptocurrencies like Ripple, Stellar, Iota, Bitshares, Steem and others?
- 3 With free and fast transactions comes unconstrained data growth. How is that sustainable when aiming for a decentralized and censorship-resistant currency?
- 4 By the look of it there are no incentives to run a node except for commercial self-interest?
- 5 Is the transaction throughput really infinitely scalable as you claim? What about stress tests?
- 6 How is nano secure if transactions are never confirmed several times?
- 7 If someone owns over 50% of all coins, they can take over the network, right?
- 8 What about security audit by an established software security company?
- 9 There is no support for smart contracts! Also it doesn't have pay-to-hash or a capability which would enable cross-chain atomic transactions. This could limit the role it will have in the crypto ecosystem if it can't integrate with other full-featured coins.
- 10 Nano has currently no built in privacy. How will this be addressed?
What about decentralization? Developers or official representatives hold a significant amount of voting weight.
At the beginning of the year, around 80% of Nano was delegated to official representatives. Currently, this number is around 25%. As more and more services have been built around Nano, users have begun to distribute their voting weight among various representatives. It is now up to us (the development team and the community) to continue to make it easier for users to identify and select representatives to which they can delegate votes. While not satisfied with the current level of decentralization, the trend towards it is very positive. Also, it is important to remember that Nano allows users to remotely redistribute their voting weight at any time, so the users of the network ultimately have full control. The NWC desktop wallet and mobile wallet default to the official reps, for now. Binance holds a large chunk as they are the largest exchange for Nano currently and many users do not remove funds from exchanges. One entity/wallet but many users.
Being fee-less is very different than to having fees. While another coin's fees may seem small to users in some parts of the world, for a lot of countries they matter. And there's nothing to suggest that fees for these coins will not increase over time, Nano will always have zero fees. There are also plenty of other differences between Nano and the other coins mentioned. For one, Nano is focused solely on being the most effective peer to peer transfer of value. This is done by stripping down the protocol to make it as lightweight as possible, allowing the fastest possible transactions and letting anyone function as a validator. Nano is more energy-efficient and more decentralized than Ripple and Stellar where majority of coins is hold by development team.
With free and fast transactions comes unconstrained data growth. How is that sustainable when aiming for a decentralized and censorship-resistant currency?
The ledger can be pruned (and have the history removed). Accounts with a too low balance can be removed (they can be forced to make a last payment to another account), and pending transactions can be limited per account. For opening new accounts, either increase the required PoW (just for opening), or require a minimum deposit to be made to it. Introducing Ledger Pruning is a priority. Development was reliant on the Universal Blocks upgrade which was introduced in May 2018 and is being finalized with the release of Epoch blocks. Also Lazy Boostrapping is being implemented. These will minimize data growth. That's one of the strengths with block-lattice architecture. As of Dec 2018, the Nano network has processed near 15 million transactions with an unpruned ledger size of only 7.7GB.
By the look of it there are no incentives to run a node except for commercial self-interest?
It doesn't have to be a financial incentive. It's actually not an issue and already proven to work with over 500 nodes participating. Why do people run Tor nodes or expensive seedboxes for Torrents? Many node operators simply run a node to strengthen the network and thus help protect their own investment. To help ensure the stability and accessibility they want, they freely participate upkeep. Nano node are just that, to ensure your transactions are being processed by a trusted entity, either yourself or someone else. At the same time, aiding the network without having to rely on a third-party. The goal is to make the cost of running such a node trivial. Financial incentives are not always the goal within a system and such thing can actually ruin a cryptocurrency, as can be seen from all the forks, hash wars and centralization in certain areas with cheap electricity. Nano is an extremely green coin with zero fees and that also attract people with that kind of mindset.
Is the transaction throughput really infinitely scalable as you claim? What about stress tests?
The claims are based on the fact that there is no limiting block time, so scalability depends on hardware, more specifically on network performance. Obviously, the only thing that matters for any currency is the performance obtained in a real time environment. The development team identified bottlenecks early 2018 and have been working hard to put improvements in place. Recent or upcoming advancements such as Vote by Hash, Vote Stapling and Lazy Bootstrapping are all designed to reduce voting traffic on the network, which as a result will increase the amount of transactions per second the network can handle. Once these features are added, dev team look forward to conducting another stress test.
How is nano secure if transactions are never confirmed several times?
Each transaction on the network is voted on and confirmed/discarded by representatives. The whitepaper is incorrect in this regard, which we believe led to some confusion. A new, updated version including recent improvements will be released shortly. Additionally, in the upcoming Boulton release (v17), Confirmation Height will be stored locally by nodes, preventing nodes from rolling back transactions in the case of a 51% attack. For more information on Confirmation Height, you can visit that section of the roadmap.
If someone owns over 50% of all coins, they can take over the network, right?
Decentralization of the network is important to protect from 51% attacks, though this is certainly not exclusive to Nano. It’s important to note that users can change their representative at any time, so if they believe collusion is happening in order to attack the network, they can redistribute their voting power. If you are solely speaking on someone buying up over 50% of Nano, that attack becomes increasingly expensive as the market cap raises and the attack itself would result in their coins becoming worthless. It would not be profitable.
What about security audit by an established software security company?
December 24, 2018 — The Nano Foundation engaged with Red4Sec, a leading cybersecurity firm, to perform a comprehensive audit of the Nano protocol. The audit, which began in September, encompasses the unique Nano network consensus algorithm and node software.
“We understand security is an ongoing process, the Nano Foundation will continue to maintain the high-quality of the Nano software and seek ongoing third-party reviews,” said Nano founder Colin LeMahieu. “We’re excited to have a reputable audit firm validate our efforts so far.”
Upon completion of the audit, Red4Sec reported no critical vulnerabilities were found in the Nano protocol. During the audit process, Red4Sec recommended two minor modifications to the Nano code base, the first of which was included in the recent Nano Boulton release, with the second planned for inclusion in the next software release.
“We are pleased to confirm that after conducting the security audit of the consensus code, no critical vulnerabilities were detected, proving Nano to be the most secure cryptocurrency we’ve tested,” said Diego Jurado, co-founder of Red4Sec.
There is no support for smart contracts! Also it doesn't have pay-to-hash or a capability which would enable cross-chain atomic transactions. This could limit the role it will have in the crypto ecosystem if it can't integrate with other full-featured coins.
It also can't make you a sandwich but that's not what to expect from it. Joke aside, nano is designed as a p2p coin to be simple and pure, doing one thing and do it well. Every feature addition would make it exponentially more complicated and difficult to develop. This simplicity is a feature by design, not a flaw. As the project increases in visibility and scope, the addition of features will be investigated. Currently, there is a fairly small development team who are focused on improving the core protocol.
Nano has currently no built in privacy. How will this be addressed?
Quote from founder Colin Lemahieu Dec 2017:
I love the concept of privacy in the network and it's a hard thing to do right. Any solution used would need to be compatible with our balance-weighted-voting method which means at least we'd have to know how much weight a representative has even if we're hiding actual account balances. To be fully anonymous it would have to be hide accounts, amounts, endpoints, and also timing information; with advanced network analysis the timing is the hardest thing to hide. Hopefully some day we can figure out an efficient privacy solution though the immediate problem we can solve is making a transactional cryptocurrency so we're focusing on that.
From a Dec 2018 follow up on the question the Nano Foundation's standpoint is still clear:
If we have a good privacy solution we will use it. As the project grows and more eyes are on it, we think second layer privacy solutions will be developed at a minimum.