The Bitcoin is a hot topic right now. Everywhere you look, someone is advocating Bitcoin’s technology as “the future of money”, and would-be investors are flocking to the market with their hard-earned “fiat” waving wildly in the air. But, the thing is – the Bitcoin has fundamental problems. Before we will show you the “ideal” alternative, let us show you it’s problems:
Bitcoin doesn’t scale well:
- Because of the linear structure of Bitcoin’s blockchain, blocks are mined one at a time, and then “attached” to a chain of all previously verified blocks. Within these singular blocks, only a certain amount of data (1MB) can be stored, which means the space within a new block becomes more valuable as demand increases on the network, and the blockchain is growing in size every day. This leads to high transaction fees and a slow network during high-demand.
- The BTC Network was set to only “add” one confirmation every 10 minutes. On top of this, the average transaction needs to be confirmed ~6 times before it can be trusted, totalling ~60 minutes for the entire process to complete. This is impossibly slow for a global-scale currency.
- Although there are proposed solutions to the scalability and speed issue (like Segwit and the Lightning Network), the Bitcoin network is comprised of many miners who don’t always agree with each other. This causes high volatility in the price, and the constant uncertainty of Bitcoin’s direction takes away from the legitimacy of Bitcoin as a true alternative to fiat monetary systems.
Bitcoin mining is extremely energy-inefficient:
Bitcoin uses a Proof-of-Work consensus to validate data on its network. Essentially, every transaction on the network needs to be referenced against all previous transactions to prove it is true. This ensures Bitcoins can’t be spent twice (double-spending). This is very computationally-intensive and requires the network to consume huge amounts of electricity to mine blocks. As time goes on, the amount of data on the blockchain grows, and more electricity is required to mine subsequent blocks.
Nano — The Real Future of Money?
Nano, formerly “RaiBlocks”, aims to solve Bitcoin’s problems by implementing a “block-lattice” instead of a blockchain. The block-lattice is a network of many blockchains, each of which is associated with only one account. Each user’s blockchain only records the transactions coming in and out of their account, not those of the entire network. This allows account balances to be updated independently, or “asynchronously”, from the rest of the block-lattice network, removing the negative effects of high-demand, and making Nano extremely efficient and cheap when confirming transactions.
How does the block-lattice work?
Nano’s block-lattice requires all completed transactions to consist of two separate parts:
- The sender transaction
- The receiver transaction
The concept is very straightforward at its core. Let’s imagine that you want to send one unit of Nano (XRB) to me because I am extremely fuzzy and likeable. To send 1 XRB, you would sign a block indicating that you are subtracting 1 XRB from your total balance to send to me, and your blockchain would record this new value in its new block. My blockchain, the receiving address, would confirm the transaction by signing a block stating I have received the funds, and add 1 XRB to my balance, which is then recorded on my blockchain’s newest block. Our blockchains will only confirm the transaction if both of our balances reflect the true result of our exchange. IE -1 XRB for you, +1 XRB for me (purrrrr).
The above transaction can occur independently of the rest of the block-lattice. The only informations that need to be stored by Nano’s public ledger are the final blocks that state our updated balances, rather than the full history of our transactions. This eliminates the need for a third party miner to verify our transaction, keeps the size of the public ledger small, and allows our transaction to be instant and free.
Nano is resilient to malicious attacks
On the Bitcoin network, a large mining pool can “trick” the network via a 51% attack. This attack occurs when a collection of miners gain control over more than 50% of the computing power (hashrate) on the network. If this happens, the group could control which transactions are confirmed, and more importantly, could reverse transactions, and “double-spend” the Bitcoins that are being sent during the time they have control.
The Nano network has a protection against such an attack. When a Nano account is created, it is tied to a “node”. A node is essentially a trusted representative that is always online and serves the sole purpose of voting on the legitimacy of transactions. When a conflict occurs during one of the account’s “send transactions”, the node will look at the recent history of transactions on the account’s blockchain, and vote on the legitimacy of the transaction request. This is called “Delegated Proof of Stake” (DPoS). The node’s “voting power” is intrinsically tied to the amount of Nano the node has staked in the network. The more Nano, the higher the voting power. In order to achieve a 51% voting consensus, an entity would have to control 51% of all XRB tokens in existence, and if this were even possible, the attacker would not be able to double-spend coins, keeping the integrity of the ledger from being altered or falsified.
Bitcoin has introduced the concept of a decentralized digital currency to us, but it has yet to implement an effective network. The Bitcoin network just can’t handle the millions of transactions required to sustain a global-scale currency system. Although the Bitcoin network is trying to implement different solutions, like Segwit and the Lightning Network, Bitcoin will always have a fundamental linear blockchain at the core of its network. This is why I think Nano presents a seriously considerable alternative to Bitcoin, and could potentially pave the way for the true future of money. If not, it won’t bother me, because, well, I am a cat.