The Incentives to Run a Node
Why users and businesses will function as representatives on the Nano network.
When building the Nano protocol, the goal has always been to create the most efficient network possible without sacrificing security. By making the cost of reaching consensus trivial, requiring only minimal amounts of storage, bandwidth, and computing power, Nano offers the opportunity for anyone to participate in network security.
The prevailing thought among those in the cryptocurrency space is that achieving consensus while adequately decentralizing a network requires validators to be directly rewarded. These rewards or incentives, however, come as a charge to other network participants through transaction fees or inflation. This approach can often lead to a phenomenon called emergent-centralization, where entities benefit from economies of scale, leading to fewer producers and larger scale production which is in opposition to the goal of decentralization.
By offering fast and fee-less transactions, the Nano network offers natural economic incentives to those participating. Incentives in cryptocurrency are typically viewed as a revenue stream or way to generate passive income, but profit can be increased by both increasing revenue or reducing operating costs. While businesses and services are free to utilize the benefits of the network without running a node, those who choose to function as representatives can interact directly with the network without having to rely on a third party. There are several examples of this currently, as businesses such as exchanges, wallets developers and payment processors comprise a significant portion of the voting weight.
Additionally, businesses or services can leverage their representative nodes as a form of marketing. Current lists displaying top representatives typically use aliases when referring to public accounts and there are community run sites where representatives are able to verify themselves and create full profiles. As these profiles continue to be built out and integrated with other network services, businesses will be able to highlight their contribution to network security while advertising ongoing sales and promotions, all at a relatively negligible cost.
It is important to note that the Delegated Proof-of-Stake (DPoS) system implemented in Nano does not limit users to particular delegates or require token lockups, anyone is able to run a representative node and move their voting weight around freely. Nodes on the network with voting weight over 0.1% of the total supply function as “rebroadcasting representatives”, their votes are broadcast across the network and contribute to consensus. Their incentive is to contribute to the decentralization of the network to maximize the security of their funds while taking advantage of the natural economic incentives of the network.
The Nano network is open and accessible to everyone in the world and compared to the market incentives offered by operating on the network, the resources required to operate a node are trivial. Providing fast and fee-less transactions is an unmatched value proposition, allowing businesses to reduce overhead and increase profits while giving access to the unbanked to participate freely in local and global economies.