Nano's scalability and game theory

Or: what would happen if Nano started growing exponentially.

Let's imagine that Nano goes exponential overnight.

It gobbles up the usage and market cap of BCH, Doge, Litecoin, DGB and Dash. What happens?

Market cap increases from $153 mln to $23.8 bln (+15,416%).

Transactions per day increases from 24,329 to 1,823,479 (+7,395%).

But does Nano cope?

First, the increased market cap. A higher market cap in Nano means that Nano becomes i) harder to attack based on buying up large portions of the supply and ii) more decentralized as more holders means more distribution of voting power. The market cap increases, and so does the value.

Second, the increased transaction rate from 0.28 transactions per second (TPS) to 21.11 TPS (74x). There is no reason to think this leads to any issues, as Nano is stress-tested to far above this level in the daily stresstest.

Exchanges can't implement coins overnight, but at this point some bells go off at Coinbase, Gemini and other exchanges that so far haven't listed Nano. Teams are told to look into implementing this, pronto.

Many services that have other crypto implemented for payments (BitPay?) do the same, and find out that implementing Nano is not just easy but an instant and feeless coin is actually pretty nice to have.

All this means more people trying out Nano, more people looking into it. More faucets being used to try it out, more users on our website!

In the next few weeks, new services and exchanges implementing Nano means more and stronger nodes coming online

New Nano owners choosing which node to vote for decide not to vote for one of the biggest nodes, but instead to pick relatively smaller (perhaps newer) nodes that run on strong hardware with higher bandwidth.

This is great for Nano. Decentralization increases, but the capacity of the network also increases. As we move from $20 a month representative nodes to $100 a month representative nodes, max network transactions per second goes 5x as well.

Not a moment too soon, because in this completely hypothetical and made up scenario Nano’s market cap and usage is about to shoot up further. Bitcoin’s full usage is eaten up, and investors catch on to Nano’s fundamentally superior store of value properties. X trials Nano payments to make itself less dependent on traditional payment rails, and runs the strongest node seen so far.

As a result, Nano’s market cap shoots up exponentially making it completely impractical to attack Nano by buying up supply, while these new Nano users largely withdraw their Nano from exchanges to be able to use it to pay and transact instantly and feelessly.

Nano’s usage increases by another order of magnitude to ~200 transactions per second. The network has no issues with this, the stronger hardware is able to manage just fine, without any software changes at all so far.

Some of the new developers and node runners entering Nano find optimizations that make their node run more efficiently. There is no inflation and there are no fees to be extracted, just a cooperative network. Because of this they excitedly share this information with the rest of the node runners; it's in everyone’s benefit to have the network run more efficiently.

This causes further increased TPS

Coinbase, wanting to catch up in the race, starts deposits and withdrawals, and spreads out the Nano voting weight even further. To show how supportive they have been of Nano all along they boast a $500 a month node, which is paid back 100x over in the first day of Nano being traded on their exchange.

Spammers try to attack the network with small transactions but regular users don't even notice it, and the spammers realise that to inflict damage they would need to buy up immense, impractically large amounts of Nano.

Obviously all of this is made up. Living in the exponential age, especially in crypto where it feels like the landscape can completely change overnight, and especially in Nano where many of its supporters feel like it could blow up overnight, it's valuable (and fun) to think through it regardless.

The game theory behind Nano is one of the best parts of it to me. It remains feeless, remains instant, and gets even more secure. It's a very positive feedback loop. It's a feedback loop where my primary question is: who will be the first big name to kick this off and benefit in the process?