Nano may or may not be too good to be true. But lets at least understand what we are arguing about

By far the most common point made against Nano is that there is no incentive to run a node. What people mean by this is that the protocol does not provide payouts to active nodes. This is in fact true. And while there are many valid counter arguments being made about whether payouts to nodes are necessary, these counter arguments seem to forget one crucial thing: Bitcoin does not provide an incentive to run a node. Yes I wrote that correctly. The Bitcoin protocol provides absolutely no payout for running a node.

Now I know what you are thinking. “Yea it does, miners get paid”. But that idea is missing an important detail: Miners are not nodes and nodes are not miners. Sure most mining pools also run nodes, but you can also mine without running a node.

What is a node? A node an entity that listens to network information (blocks, transactions, etc) from the other nodes that it is connected to, and relays that information to the nodes that are connected to it. A node listens to blocks and transactions, and relays those blocks and transactions.

In order to be a miner the only network interactions you must make are to: listen for blocks and transactions, and to send out the small percentage of blocks that you mine to one or more nodes. In order to qualify as a node, you would also need to relay blocks that you didn’t mine.

The next logical counter argument is “why bother differentiating if all the mining pools run nodes anyway”? And this is a very good point. So good in fact, that it’s the philosophy upon which Nano is built.

Why do all the mining pools run nodes? Because it is convenient to do so. They are already listening to blocks and sending out occasional block solutions, so why not just relay all the blocks to listeners and run a full node.

Miners are just players in the Bitcoin ecosystem. Just like people who pay using bitcoin are players in the ecosystem. Just like Bitcoin exchanges and businesses that accept Bitcoin are players in the ecosystem. For some of these players it is convenient to run nodes, and for others it isn’t. Most people who buy stuff with bitcoin do so infrequently enough that it is not worthwhile to run a node full time. But most exchanges handle so many transactions that they may as well run nodes of their own. That is why most exchanges do, in fact, run their own nodes. Just like a lot of bitcoin businesses do. These nodes are what keep the bitcoin network alive. Without nodes there is no mining. Mining is nothing more than bitcoin’s solution to the byzantine emperor problem. The existence of nodes is a product of the convenience of doing so.

And this is the idea behind Nano. If a business wants accept Nano for goods and services, they would most likely want to listen to transactions on the Nano network to be aware of money received. So just like the Bitcoin miners, they may as well relay those transactions along in the network, and run a full node. Likewise exchanges would want to run their own nodes for the same reason. And guess what, they do. Just about every exchange that accepts Nano runs its own node. People run Nano nodes for the same indirect incentives that make people run bitcoin nodes: Its convenient.

I can go on about how Nano’s voting system works synergistically with the indirect incentive to run nodes, but this post is getting long and that’s a topic for another post. But can we finally put this argument to rest? Network players do not need a direct payout to be incentivized to run nodes.

TLDR: Nano provides no incentive to run a node, but neither does Bitcoin.