nahmii, a Gateway to Scalable Virtual Economies (Part 2)
By: Katat Choi
Tags: Scaling, Blockchain, Tutorial, Ethereum, Economics

Scaling on nahmii

nahmii is a second-layer scaling solution which can act as an interoperability bridge between different blockchains. Referring back to the ‘Blockchain Trilemma’, discussed in part one, nahmii’s architecture aims to maximise Scalability and Security while relying on base-layer blockchains to achieve a degree of Decentralisation. The protocol is currently live on Ethereum, with plans to port nahmii to other blockchains in the near future.

The nahmii scaling protocol is implemented by a set of Ethereum contracts and an operator backend that together manage transaction states in a trustless way. Its SDK encapsulates the knowledge of how to interact with the protocol.

Our previous article outlined a number of issues that blockchain scaling solutions must address before the technology will be ready for commercial adoption. Before we dive into a technical demonstration of how nahmii solves these problems, let’s begin with a quick summary of what makes nahmii special:

Real-time finality

What is done is done. Finality of payment plays a crucial role in any economy. Yet in some traditional centralised payment systems, it is common to take hours or even days to settle a transfer of value. Even when confirmed, some transactions can still be revoked or reversed at a later point. Taken together, slow confirmations and reversible transactions create uncertainty for businesses which rely on real-time transactions. These risks can be mitigated by blockchain technology, but only when applied correctly.

Most blockchain solutions are designed to maximise decentralisation and security, often at the expense of transaction finality. This is a key failing, as many commercial use cases for payments require real-time transactions.

nahmii regards the real-time finality a must-have feature for its payment function. Both parties to a payment on nahmii can be confident that their transaction is final as soon as the operator publishes a signed receipt. This process typically takes a fraction of a second, comparable to the leading centralised services. The instant finality in payments contributes to nahmii’s advantages over both the centralised payment systems and many rival blockchain solutions.

Lower latency

Recent work on UX supports the common-sense idea that poor performance on a website or mobile app will drive customers away. Taking a noticeable amount of time to process a request breaks users’ focus flow, even when the delay is a matter of milliseconds. These negative psychological effects become even more obvious when it comes to making digital payments in a physical setting. In commerce, one key goal is to minimise the number of actions required by a customer to complete a transaction. Every click, confirmation or button press matters and more actions almost always translate into fewer sales. In a physical payment scenario, a simple transaction like purchasing a cup of coffee can become embarrassing for both cashier and customer if the payment takes more than a few seconds. Speed and ease of use are therefore of paramount importance when designing payment systems.

Payments within nahmii are processed directly by the operator of the system. This means that, unlike base-layer blockchains, there is no consensus mechanism underpinning the transaction. The off-chain transaction performance of nahmii is therefore simply a question of how fast our operator node can process a transaction request. Latency is currently at the millisecond level, comparable to the best centralised commercial payment services. If required, we can improve nahmii’s responsiveness even further by upgrading the operator nodes.

Scalable throughput

In general, conventional businesses benefit from wider adoption of their third-party services. As these services grow, suppliers can usually offer more cost-efficient products to their customers creating a win-win scenario. In the current blockchain world, we have seen the opposite. When the network became congested with transactions, consumers either have to pay a much higher gas price for their transactions to be mined in a relatively short time or wait for hours even days until the congestion is relieved.

On nahmii, the throughput capacity can be flexibly tuned based on the demand. Technical speaking, horizontally scaling operator nodes can achieve scalable throughput.

Predictable fees

As we all know, there is no such thing as a free lunch. It is not sustainable for a business to provide free services forever; eventually, users will always need to pay something for the services they value. This value exchange can take many forms, from straight payments to viewing advertisements or giving up user data. For traditional centralised infrastructure, suppliers calculate the value of their services by balancing cost, affordability for the user and profit. While prices can vary over time, users can normally predict how much a service will cost them in advance. Predictable fees of this type lower the risk of doing business.

On the other hand, the cost of using today’s blockchain services is unpredictable. For the majority of base-layer blockchains, transactions are processed if and only if they secure a place in the next block. This competition between customers to have their transactions mined creates conditions of uncertainty. When the network is busy, customers must pay more to ensure their transaction goes through. Given that we cannot predict how busy the network will be at any given time, transaction fees are necessarily unpredictable. As with predictable fees, so the opposite is true here: unpredictable fees introduce new risks for businesses, making adoption of blockchain technology less likely.

nahmii is designed to provide predictable, low fees at all times. This is a key requirement for making blockchain technology comparable with the best of centralised financial systems. The fees on nahmii are at a constant ratio of the currency being transferred and, unlike many rival scaling solutions and blockchains, including Ethereum, transaction fees within nahmii are paid in the currency of the transfer — no additional ‘fee tokens’ are required. Currently, payments on nahmii have a fee of 0.1% of the total transfer value; however, our fee structure is flexible and will soon include substantial discounts for larger transfers.

Usability

In some blockchain scaling solutions both parties must be online when making a transaction, while knowing how to sign the transaction using certain tools. There are a number of drawbacks to this approach, beginning with the high barrier to entry for both parties — particularly the recipient. These prerequisites for making transactions are a clear problem for the typical user experience and a significant barrier to adoption. No one really wants to wake up in the middle of the night to sign a transaction from a counterparty on the other side of the world.

There is a better way: nahmii aims to make trustless payments happen as seamlessly as on the base layer. To make a payment, the sender only needs to own a wallet and have a sufficient balance. As long as the recipient owns an Ethereum wallet, the recipient doesn’t have to be aware of the existence of nahmii in order to receive the funds sent from the sender. The goal here is to match the trustless features of the base layer while bettering the user experience of centralised payment systems.

A smoother, flatter learning curve

The majority of ICO projects have failed to ship a single usable product, why? In many cases, the answer lies in the complexity of developing software using immature developer tools. When combined with the tendency for ICOs to over-promise in order to attract investment, it’s easy to see why so many blockchain projects have failed to deliver on their vision.

The ability to evaluate and comprehend the complexity of the underlying requirements plays a key role in software development. This process encompasses a wide range of elements: teams must be able to understand the potential risks and rewards associated with their development tools and dependencies, while determining the resources and strategies to best fit their business model.

This principle applies to almost every software project. For blockchain technology, the complexity of a typical blockchain project is escalating compared to the conventional B/S or C/S architecture. Complexity leads to uncertainty, which is further multiplied by the shortage of proficient and experienced developers in the blockchain industry. Building high-quality software products is difficult, developing high-quality blockchain-based software is even more challenging. It is therefore unsurprising that so many ICO projects have failed, primarily because they have underestimated the time and expense required to build their promised products.

Complexity in development leads to increased risk and higher costs. Familiar, easier to understand developer tools can mitigate these risks and lower the barriers to entry for new blockchain projects. nahmii has been built with these principles in mind, with simple tools to help developers of all backgrounds build on the protocol. Under nahmii protocol, developers simply need to know how to use the nahmii SDK. The development experience is therefore similar to integrations with SaaS platforms.