Nano is decentralized
Nano is decentralized, because it is a decentralized system, with subsystems more or less decentralized than others. Let’s understand some of these metrics.
Series article: NANO ISwhere I will explain some fundamentals about cryptocurrency nano (XNO).
Contrary to what many people think, decentralization is not an absolute concept. There are different degrees of decentralization and different categories, or subsystems, to be evaluated. Decentralization is also a dynamic state, increasing or decreasing over time.
Decentralization in development
Nano was created centrally by Colin LeMahieu, like every system in its early stages. Colin is director of the Nano Foundation, the main institution contributing to the code and leading the nano-node on Github. One open source software (OSS).
At the software level, nano-node is the software most used by nodes to connect to the network. It is the equivalent of Bitcoin Core (full node) which is also used by more than 98% of the Bitcoin network. Not so decentralized, right? We need improvements in this area to further increase decentralization in nano.
But at the same time, both are Open Source Software (OSS), so it’s easy to improve decentralization in this subsystem as people can fork the code, change it, or keep it safe elsewhere. I think the vast majority of decentralized projects need to improve in this area.
A decentralized network needs different options to configure a node and improve the code, with no single points of failure. Despite this, the nano-node has more than 82 employees, most independent. Its development, in this sense, is quite decentralized — and growing.
Nano ecosystem is decentralized
The nano ecosystem is highly decentralized and counts with the collaboration of more than 435 developers. As it is an asset with a low market capitalization, it is an impressive number, due to the low financing capacity, relying mostly on donations and voluntary development.
Comparing the number of “favorites” on GitHub with other projects, weighted by market capitalization, we can see that nano really stands out. This does not directly affect decentralization in nano at the moment, but it could indicate a positive incentive, with more capital coming in.
Decentralization in the network and consensus
At the moment we have 260 nodes online, scattered around the world. Each of these nodes are “peers” of a live, fully decentralized and non-permissioned peer-to-peer network. what does it mean that anyone can run a node and further collaborate with this subsystem, without needing authorization from a central entity.
If we split the 260 nodes for 0.143 billionweighting again by market capitalization, the result is 1,818.
If we calculate the same index for the Bitcoin (BTC), for example, with 9,680 nodes for $464.986 billion of market cap, the result is equal to 20. Which shows the decentralization of nano in relation to the decentralized currency with higher market capitalization.
The same logic could be applied to the number of nano-node collaborators, for similar comparative results.
Nano consensus is decentralized
Perhaps the most important subsystem when evaluating the decentralization of a system. There are currently 108 Main Representatives (PRs) online on the network. A PR is a special type of node that is configured to vote and has more than 0.1% of the online weight.
Remembering that a PR has no “extra benefits”, other than the network’s ability to identify the “validators” with more weight. And users can change this distribution at any time through instant delegation to another delegate.
Decentralization at Nano uses the consensus mechanism Open Representative Voting (ORV).
In the ORV, every online address can openly vote on the network, but many decide to choose a PR to vote in their place, borrowing their voting power as measured by the balance in the address, no staking. This is useful for keeping the network decentralized, with online voting 24/7.
Nano’s Nakamoto Coefficient
O Nakamoto’s Coefficient (NC) measures the minimum number of entities that need to conspire to attack the network through the consensus domain. At nano, the Nakamoto Coefficient is measured in two different ways:
Safety | NC = 10
In Safety, the number of entities that would need to conspire to make a “51%” attack is measured, which in the nano could occur with ~67% (⅔) which represents the majority in the consensus. In this attack, one can, theoretically, make a double spend or explore other centralization vectors.
Know more: Decentralization at Monero Did Not Evolve as Expected
nano’s Nakamoto Safety Coefficient is 10, with just 0.93% remaining to be redistributed outside the top 10 to increase to 11.
Liveness | NC = 3
In Liveness, the number of entities that would need to conspire to temporarily disrupt the network is measured, refusing to broadcast their vote, preventing consensus (67%) from being reached.
It involves ~33% of votes (or ⅓). And the current status is not Good.
As a comparative measure, the Liveness coefficient in the Ethereum (ETH), which has similar rules to nano, is currently between 1 and 2, with Lido taking 31% of the vote weight.
Know more: Centralization in Ethereum 2.0 worries its creator, Vitalik Buterin
So both need improvement, but nano is slightly better than the biggest proof-of-stake network by market cap.
As I said at the beginning, decentralization in nano is a dynamic state that gets better or worse over time. The network is a living organism and we must remain vigilant to avoid a centralization movement. There will always be “bad actors” trying to do this.
We can safely say that Nano is decentralized. There are points where it is more decentralized than most projects (Safety NC for example) and points where it is more centralized.
But one point where nano really excels is in the incentives for more decentralization over time.
By not paying direct financial rewards to network participants and validators, as in Proof-of-Work coin mining or PoS coin staking, all Key Representatives have decentralization as an intrinsic incentive. And not the increase in profit, regardless of centralizing more, with the activity.
Furthermore, by turning validation (mining or staking) into a business, an economy of scale effect is created, where the biggest validators earn more money, the greater their dominance over the network consensus.
Your incentive is to be able to increase your participation, more and more, to increase your profit. And because of the economy of scale, this is possible.
The biggest miners, or biggest stakeholders, earn more over time, are able to reinvest more money to increase their stake (in equipment or staking), get better energy contracts, cheaper capital, better lease or various other benefits that only increase the effect. economies of scale in the centralization of these networks.
Nano is decentralized and has the right incentives for it to become increasingly centralized, as it is one of the only protocols that has seen and solved this problem. Keeping the network alive and more secure, with greater decentralization in nano, is the only incentive needed.
“The decentralization argument at Nano is strong because it is the most simple and with lower risk in which people can participate in the consensus. From an economic point of view: the need to have capital expenditure and offer monetary rewards will result in economies of scale trying to minimize the cost of capital and maximize return, which inevitably leads to centralization”.
– Colin LeMahieuFounder of Nano.
This content was originally published in English, on twitter:
1/ NANO IS: DECENTRALIZED— vinibarbosa.xno (@vinibarbosabr) August 13, 2022
Series thread: *NANO IS*, where I will explain some fundamentals about #nano cryptocurrency (ticker: $XNO).
Nano is a decentralized system, with sub-systems more or less decentralized than other projects. Let's understand some of these metrics. ⬇️ pic.twitter.com/4BEL2CwaaP