in

Discussion/CMV: Nano is a better store of value than Bitcoin and might become a reserve currency (longread)

Warning: longread. A sort of tl;dr at the bottom.

In this post I’ll outline why I think that Nano, rather than Bitcoin, might be the “final” store of value, because it approaches the theoretical limit of perfect store of value/reserve currency characteristics. Much of this is based on Ray Dalio’s “[The Changing World Order](https://www.linkedin.com/pulse/changing-world-order-ray-dalio-1f/)” which is a very long read but is recommended reading for anyone interested in the future of fiat money, reserve currencies and stores of value. While reading his posts I felt like he was putting into words what I couldn’t put into words before regarding my stance on cryptocurrencies and primarily Nano.

To start off with – I realise that most people primarily see Nano as the cutesy cryptocurrency that’s focused on being instant and feeless, and has a ton of supporters because of how easy it is to try out and demonstrate. I think that because of this, the true fundamentals of Nano are overlooked. I believe that in the long run these fundamentals are far, FAR more important than just being instant and feeless, and I believe that these fundamentals are what’s going to get big investors interested in Nano soon. With that said, let me begin.

#**The end of a cycle**

Luckily for us all, I am not talking about the end of a crypto cycle. I believe we are reaching the end of a cycle in which we have fiat currencies as reserve currencies. Not just the dollar – all fiat currencies. This is caused by a confluence of factors, ones that “The Changing World Order” describes better than I ever could. In short – too much collective debt has been built up, and this is being propped up by central banks who are running out of ammunition. This might have gone on for a bit longer, had it not been the case that the Covid crisis accelerated this process.

Because of Covid, (potential) growth slowed further. With record debt outstanding and a slowdown in growth and consumption, there is one primary dial that central banks can turn to support the economy – they can expand the money supply to keep the system propped up. This is what has been happening on a massive scale, faster than we have experienced in our lifetimes. This rapidly expanding money supply further accelerates the decline of fiat currency value.

This is nothing new – these cycles have happened many times before. The Dutch Empire, starting its rise roughly in 1581 by overthrowing the Spanish, peaking in power around 1650, lead to the Dutch Guilder becoming the world reserve currency. The Dutch Guilder remained the world reserve currency until roughly 1700-1750. During its slow decline, the Dutch kept increasing their debt, relying on the strength of their position as the global reserve currency to access cheap debt. Eventually the debt overhang became too much to bear, infighting over wealth increased, and the British were able to take over the role of a weakened Dutch Empire.

The British Empire saw a similar rise and decline, holding the majority of the world’s wealth, military power, and status as a world reserve currency. In the interest of brevity let me just say that the cycle was similar and that the British were eventually overtaken by the US, leading to the situation we currently find ourselves in.

In prior cycles, the bust of the reserve currency led to a flight back into hard money. The cycle starts over, starting with gold-like assets. These assets have the advantage that they were portable, divisible, and most importantly could be settled on the spot. Using gold meant using a creditless and trustless hard currency, a very valuable commodity in a time where people lack trust in credit and promises.

The next stage is moving to claims on hard money, since gold is risky and inconvenient to carry around, and it is far easier to have claims on gold that can be exchanged. This is followed by increasing debt as the banks and governments discover they do not need to always cover 100% of the outstanding claims. Then come debt crises, defaults and devaluations, primarily through (central) bank runs when people discover their claims aren’t 100% backed. This has already happened with gold in the current cycle. This is followed by fiat money (letting go of the gold standard), a system in which hard money no longer plays a role whatsoever. As increasing amounts of money are printed, devaluing the fiat currency, we eventually finish the circle with people looking for stores of value that are not debased as the fiat currencies are. Ray Dalio believes we are currently in this stage, and I am inclined to agree.

However, something has changed relative to prior cycles. We now have the internet, and all the possibilities it brings with it. What the internet offers us is a form of hard money that does not have the problems associated with gold, the problems that lead us to move from the first to the second stage. This leads me to the next subsection.

#**Cryptocurrency or Bitcoin as hard money**

What cryptocurrency offers us is a form of hard money that is easy to carry around because it has no physical existence, that is divisible, can easily be exchanged, and most importantly is secure through decentralization. I believe we are starting to see this movement right now. Investors are fleeing into cryptocurrency as a hedge, because some are coming to the same realisation that I am and that Ray Dalio is. However, I believe that the market is still frothy, and that fundamentals are being overlooked.

The reason I say fundamentals are being overlooked is because the cryptocurrency that is getting the most attention, Bitcoin, is the cryptocurrency where the aforementioned factors (portability, divisibility, security and trustless settlement) are doubtful. Bitcoin‘s lack of scaling causing slow transfers and high fees is already leading to custodial solutions, essentially leapfrogging to the second part of the debt cycle. However, far more importantly, its security through decentralization is questionable at best.

Bitcoin‘s security derives from its decentralised consensus mechanism. Transactions are verified by a competitive network of miners performing Proof of Work, aiming to lay claim to the block rewards and fees associated with Bitcoin blocks. While this has worked relatively well so far (with some exceptions), the long term dynamics of this must worry anyone that looks into it. Bitcoin mining is a business with economies of scale, through access to cheap capital, scale advantages in production, and myriad other ways.

Economies of scale lead to centralization of consensus power, which directly decreases the security and value proposition of Bitcoin. There is plenty of research that describes this trend which is already becoming apparent. Bitcoin‘s value proposition comes from its security, which comes from its decentralized consensus mechanism. The incentivisation of centralization through economies of scale directly impacts Bitcoin‘s long term value proposition.

It should be clear that while I think cryptocurrencies offer massive potential, I believe that Bitcoin is not the answer. It’s a first version, a prototype, which comes with many issues as prototypes are wont to.

#**Nano as a close to perfect cryptocurrency**

As I mentioned at the very start, I believe the best hard money is Nano, and I believe that its potential is massively underappreciated. I’ll explain why I believe this to be the case.

Nano improves on gold in many ways, and approaches the theoretical limit of a perfect store of value. Its portability and transferability is unparalleled – it’s a digital currency that transfers at the speed of light. I could send you some, and it would be confirmed through global consensus in the time it would take you to blink. Not a single atom is lost as might happen in gold – 1 Nano sent means 1 Nano received, forever, because there are no fees in Nano. It can be divided up to 30 decimal places – the entire world economy could run on 1 Nano and people would still be able to do microtransactions.

This no-fee proposition leads me to the next important aspect, and I’ve written about this before. In Nano, there is no centralisation over time. There is no mining, there are no fees, no inflation nor block rewards. The network itself is the reward. This might sound counterintuitive. Because Nano is feeless , the fastest value transfer in the world, and such an excellent store of value, it’s an ideal solution for many businesses. As any merchant will tell you, being able to cut on fees has high value. As any exchange will tell you, people exchanging into Nano brings them lots of revenue. The value for these entities is in the network being online and staying online in a secure manner. The value is in the businesses they have built on top of it, and in the value of their own Nano holdings. The same holds true, proportionally, for each Nano holder.

Nano has no mining. It uses Open Representative Voting. 1 Nano = 1 vote. Anyone can run a validator, and anyone can vote for any validator at any time, or change their vote at any time. Everyone that holds Nano is incentivised to help distribute votes in such a way that it is incredibly hard for a single party or group to gain a majority of consensus. In other words, every Nano holder is incentivised to contribute to decentralisation.

This is no theoretical exercise. While the emergent centralization in Bitcoin is already apparent, this emergent decentralization can be seen in Nano through the movement of Nano votes over time.

Additionally, there’s the fixed money supply aspect of Nano. Bitcoin enthusiasts sometimes talk about the Stock to Flow (S2F) model as the roadmap to a $1 million Bitcoin. Bitcoin‘s S2F is about 38-54, with a higher number essentially being better as this means there is less new supply coming into the market. Halvings increase the S2F, as this decreases the supply coming into the market. Without going into the validity of this theory, it’s clear how Nano’s proposition offers a better S2F. Nano will never have any new Nano coming into the market. It’s S2F cannot be calculated, because it’s infinite.

Finally, Nano has no limitations built in with regards to scale. It scales using whatever hardware and bandwidth is available to it. The protocol is at the limits of efficiency, and uses extremely little energy. In every sense, it pushes the boundaries of what is possible. This is why I think Nano is not just a fantastic store of value, but that it might be difficult to conceive of something that works better in the first place.

#**Conclusion**

All the above is what I mean when I say that Nano is at the theoretical limit of a perfect store of value. It’s almost limitlessly divisible (up to 30 decimals), limitlessly transferrable (no fees), and perfect as money since transfers are subsecond and trustless. Its security comes from decentralisation, and decentralisation is incentivised on a protocol level. Attacking Nano’s consensus is difficult because it’s extremely hard to acquire a large share of supply, and because once you have done so you have every incentive not to attack it.

Nano’s scalability means that the move to a 2nd stage (claims on hard money – central institutions) in Nano might not ever be needed or at least far less necessary, because Nano gives us a form of hard money that improves on gold by being globally transferrable, trustlessly, instantly, feelessly, with no loss of matter and incredible divisibility, in a scalable manner.

In short, I believe Nano offers an orders of magnitude improvement on every prior store of value. I believe it pushes the theoretical limits of being a store of value and reserve currency, and I believe this is massively underappreciated. I see the current ending of the cycle as the time for hard money to re-emerge, and I think more and more people will find their way to Nano.

If you’ve actually read all this, thanks. Thinking all this through and trying to write it out was rather eye-opening for me, and I would love to hear what you think.



View Reddit by SenatusSPQRView Source

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

25 Comments

  1. If all r/CC posts were like this, I believe the crypto community would be a lot more reasonable and well-informed. Great write up, and I hope to read similar, well-researched write ups for other coins in the future.

  2. I’m not slating, I’m new to the scene and have heard lots about Nano, but how can it sustainably continue on a feeless structure, isn’t the driving force behind maintaining bitcoins Blockchain the rewards miners get through fees?

  3. I wholeheartedly agree with this assessment. If fundamentals matter to you, then nano should be your store of value. It’s mine.

    A quick exploration of what it means for your store of value that there are no miners in nano vs bitcoin. We don’t need to have the cyclicality of bitcoin, because without the halving and with perfect stock to flow ratio, there is no miner accumulation and dumping the top. There are only hodlers and traders; but no true forced sellers except for de minimis fees to run nodes, which even in robust format are orders of magnitude cheaper to run than bitcoin because bitcoin’s security model is overkill vs what is actually needed to achieve the job.

    Bitcoin MUST have sellers by design; electricity isn’t free. And as price of bitcoin goes up, the amount of daily USD inflows required to sustain that price increases proportionally. THIS IS CRAZY…it’s like, the rock gets heavier the further you push it up the hill.

    Nano has no forced sellers, and theoretically needs 0 USD inflows to maintain its price on a given day. In practice obviously there will be net flows, but nano is much more reflexive than bitcoin in this sense.

    Also for btc maxis out there, why not buy a btc-equivalent bag of nano as insurance? Nano total supply is 133m, btc 21m. Multiply your btc stack by 6 and get that many nano and if it does what we think it’ll do then you’ll be covered either way. For a proportional total % of supply as 10btc, buy 60 nano = $300 right now. It’s a tiny sum and excellent insurance for you. Or if you appreciate the implication of Senatus’ post, snag 10-100x that and live happy.

  4. I have been long on NANO since the 2017 RaiBlocks days! It is just such an underrated cryptocurrency, it blows my mind

    So far, everyone of my crypto-illiterate friends I’ve spoken to about nano have ended up setting up a Nano wallet and loving it. It is literally what everyone imagines Crypto to be.

    Fast. Fee-less. Simple.

    Of all of my holdings, NANO is the one I refuse to sell and always accumulate. It’s like I am sitting on Bitcoin in 2010. I am waiting for the day the price just absolutely EXPLODES.

  5. It is quite fascinating how our world has experienced a huge globalisation and exploitation of economies of scale, but the monetary system is still stuck in the early 1900s.

    Firms that operate on a global scale have to deal with so many different currencies, that it just can’t be efficient to maintain this. Everything in MNE supply chains is aimed at efficiency, but the money itself is lacking so far behind.

  6. Very long but very good content, love to see more of those. In a few years when we look back at NANO and BTC, we would be amazed there is a lot of people already see the future.

  7. Thank you for this post. Nano reminds me of Bitcoin in 2009. People recognize the potential of it and how it can potentially change our daily lives, but are skeptical only because they think other people won’t bother.

    But they bothered. And those who bothered made it enough of a deal that pretty much everyone else followed along whether they wanted or not, only to not miss the train.

    The same way everyone was forced to use “the internet” for their businesses or get swallowed.

  8. I just don’t see how it will be widely used while still volatile. The argument I see against it is always that with adoption volatility will decrease but that’s always felt like putting the cart before the horse to me.

    And immediate FIAT on ramps would incur fees, so that’s not a true solution when being feeless is Nano’s primary selling point.

  9. Thanks for the write-up. I’ve been doing some digging on Nano, but can’t help but wonder if there’s inherent confirmation bias that I’m running into amongst Reddit posts/memes, making me think twice about the long-term potential of my investment (and future investments).

  10. Thanks for the rather long but excellent read. While I think the chances of Nano becoming the world reserve currency are rather slim, given its current market cap it’s fair to say the risk/reward ratio that accompanies it is very asymmetric.

    This reminds me of the skewed risk/reward ratio of Ethereum in 2016 ..

  11. I don’t own any nano but I really appreciate how you put your arguments across and your responses in the comments. I wish the nano shills were like you. You have also made me want to investigate nano’s consensus further 🙂

  12. Hey Senatus. Just popping here to say a huge thank you for spreading information about Nano, you’re doing a great job.

    I’ve been on and off from crypto, mostly dipping my toes in BTC & ETH territory, and only recently started expanding to other technologies. I’ve never heard of Nano before few weeks ago. I’ve noticed a decent amount of “shilling” going on in different subreddits, so I decided to take a leap, went on Nano sub asking to convince me why I should check it out, and was told you’re the person who knows most about it. I was linked your medium articles, and after reading them, doing some of my own research I got convinced to try it out. Trying it out is actually what convinced me the most. Won’t go over how fast and feeless it is, but I absolutely understand now why everyone who talks about Nano looks like a shill. I feel the same joy a kid feels opening presents under a Christmas tree. I don’t know what future brings, because what is being used does not always correlates with how good technology is, but I do love the fundamentals of Nano. I am feeling an urge to spread the knowledge about it to my friends and people, and it’s impossible to do without sounding like a shill. Thanks for introducing me to it.

    Overall, the sentiment around Nano reminds me of early days of BTC. You have to go out of your way to obtain some, it is treated like funny internet money, people use tipping bots, there are faucets, etc. Hope it will get used more and gets easier for people to get. Cheers.

  13. I own some nano already. But only since a few months ago. The shilling initially turned me off, last market cycle, but there’s no denying it made a lot of people a lot of money in the first cycle. That hype seems to have never really disappeared at least in terms of community engagement. So I bought in, since it’s probably going to make money this cycle. Btw r/cc tends to delete nano posts as they constantly get brigaded. Not surprised as they are usually annoying af to read even as a recent ish nano holder. This is one of the more interesting ones though. Hopefully it stays up.

  14. Nano is such a pleasure to use. I think people get really passionate about how well it works and get labelled as shills, bots etc as people in the crypto space are (rightly) suspicious of anything that sounds too good to be true.

    It genuinely does work that well though. Does that mean it’s a sure thing by 2025, 2030? Of course not, but it won’t be the tech or the community that fails it. It is more decentralised than BTC and has never had a security faliure. You can’t say that for many projects.

    If NANO hits BTC’s current market cap then it will see a 129000% increase in price. If it passes LTC market cap then 1600%. The coin is significantly below ATH levels and once the normie crypto gold rush repeats itself I can see a lot of people yoloing into a “BTC killer”. The actual likelihood of it overtaking BTC at this point is very low, but the upside is so insane that it becomes a no brainer as a value investment.

  15. One thing people forget about Nano is that it is genuinely fun to use. Sending back and forth with the touch of a button instantly and it’s hard to communicate to people how good it feels haha.

  16. Store of value isn’t just use factor. To store value, it must have several things, which Nano has always lacked:

    – Heavy liquidity on multiple exchanges. This is required for price stability, arbitrage, and awareness across multiple platforms. Nano is regularly near the bottom of trading volume in the top 100 and has very few pairs across exchanges. A 100k buy of Nano will generally raise its price a gigantic amount, whereas a 100k buy of anything in the top 10 will barely register a blip on the radar. It can’t store value if small price fluctuations destroy it.

    – Trust factor – All Cryptos earn this as time passes, but Nano still has yet to earn this designation. Whereas with Bitcoin you can trace all mining back to the original days, Nano was not mined and was distributed with capchas – And quite a few people wonder about the distribution method. I’m not one of them, but it’s something brought up all the time.

    – Adoption – Nano has very little. It’s used on extremely niche sites and is spreading slowly but surely online. People make fun of the adoption of BTC, LTC, BCH, ETH, but I’ve definitely never seen a store accepting Nano.

    – True decentralization – Currently, Nano has a “face” – Colin. It’s not like ETH’s face (Vitalik) because Vitalik isn’t the one doing all the programming for Ethereum, he’s just one of many. People worry that if Colin leaves the project, or the dev funds run out (both very possible things that can happen), Nano will collapse or falter. The project would need to be in the hands of a group of decentralized coders instead of a nano foundation.

    – Transactions are “free” for users – Not free for nodes. This requires people to run nodes out of the goodness of their hearts, and eventually, said people will tire of running nodes and give up on them.

    – Lack of Fiat on/off ramps. Not only is Nano’s price moved too easily by small buys, but it is very hard for casual users to buy Nano via on ramps. If it’s not easily bought, it’s not easily adopted.

    A lot of these things are solved with time. However, its main issues are that it is currently only a so-so store of value because of lack of liquidity and pairings.

  17. I’ve been collecting these things from faucets because I don’t have any fiat left, but I’ll repeat myself a million times with regards to Nano: hands down the most impressive experience using crypto. Super easy to adopt, fast as fuck, and feeless at the point of transaction. WeNano is awesome, too.

  18. I think Nano perfectly encapsulates the very essence of cryptocurrency. Get rid of the banks. Get rid of the middleman. In a market of 1.4 trillion dollars fueled by hype and promises (and those promises are nothing short of groundbreaking, but none the less, promises) Nano is one of the very selected few who has no promises. These promises are reality. It’s what can overthrow traditional banking and it’s here, right now.

Loading…

0

What do you think?

Bitcoin Could Become the Global Trade Currency Says Citi – Trustnodes

Bitcoin Could Become the Global Trade Currency Says Citi – Trustnodes

Monday Art – Marc Ferrer Vives