Author: Jennifer Obem; Source: Byte Yuan CKB
This article is a Chinese translation of the English report "Understanding Nervos Network (CKB): A Comprehensive Overview" written by Messari. This translation is for reference only and has no legal effect. In case of any ambiguity, please refer to the original English text. We have made every effort to ensure the accuracy of the translation, but we are not responsible for any errors or omissions that may be caused by the translation. All rights in this report (including but not limited to copyright, trademark rights and other intellectual property rights) belong to Messari. The publication of this Chinese translation has been authorized by Messari. When reading, using or disseminating this translation, please abide by the same terms of use and restrictions as the original English version.
Nervos Network expands on Bitcoin's core technology to power Bitcoin Layer 2 (L2) with a scalable layer of blockchain.
To improve Bitcoin's programming limitations, Nervos Network adopts a customized model (Cell model) for state storage and a customized virtual machine (CKB-VM) to execute transactions.
Nervos extends Bitcoin's usability through RGB++, an asset issuance protocol based on the original RGB protocol, which aims to position CKB as Bitcoin's execution layer and data availability layer.
Since the launch of the RGB++ protocol on the CKB mainnet, the CKB network has seen a resurgence in transaction activity, with nearly 400,000 new addresses added in April, a 181% increase from March.
Work is ongoing to integrate the payment channel network into the Lightning Network, which will make CKB more scalable and suitable for a variety of blockchain applications.
As the largest cryptocurrency, Bitcoin continues to gain adoption and recognition. However, its success has also exposed some limitations and challenges, especially in terms of scalability. For example, after the Segwit upgrade, the Bitcoin blockchain limited the block size to 4 MB, which limited the number of transactions that can be processed in a given time. As the network grows, this limitation leads to longer confirmation times and higher transaction fees, making Bitcoin less efficient at handling large transaction volumes. Compared to other blockchains, Bitcoin's scripting language currently lacks the flexibility and expressiveness required to develop complex smart contracts beyond value transfer.
To address these limitations, a variety of Layer 2 (L2) solutions have been proposed, such as payment channels, sidechains, and Rollups. Most of them aim to scale Bitcoin by processing transactions off-chain, attempting to increase transaction throughput without compromising the security of the base layer. For example, the Lightning Network creates a second-layer payment channel network that allows near-instant small payments. Another approach is sidechains - independent blockchains connected to the Bitcoin main chain with greater scripting possibilities and faster transactions. However, these solutions often come with trade-offs, such as increased complexity, trust assumptions, and potential security vulnerabilities.
Nervos Network is one of the Bitcoin scalability solutions. It adopts a more native approach and modifies the UTXO model that supports Bitcoin. It improves the RGB protocol and provides Turing-complete contract capabilities for Bitcoin without the need for cross-chain bridges. Nervos Network was established in the first quarter of 2018 by Terry Tai, Kevin Wang, Cipher Wang and Daniel Lv. It is a Layer 1 blockchain designed to improve scalability. To promote the development of the network, the project team raised more than $100 million in funds from seed rounds, private rounds and public offerings. In November 2019, Nervos Network's Layer 1 blockchain, Common Knowledge Base (CKB), went online. In February 2024, CELL Studio, led by Nervos co-founder Cipher Wang, launched RGB++, a Bitcoin layer 1 asset issuance protocol. Inspired by the RGB protocol, the RGB++ protocol uses CKB as a data availability and execution layer to enable smart contract capabilities and asset issuance for Bitcoin. Since the launch of RGB++ on the mainnet in April 2024, the number of projects using RGB++ to issue assets on Bitcoin has continued to increase. As of June 2024, there are 15+ existing ecosystem projects that have revitalized CKB's on-chain activities.
Source: Nervos Network
Nervos Network adopts a layered architecture, including an L1 blockchain (Common Knowledge Base, CKB for short) that can be extended through payment channels and RGB++. The Cell model is an improved version of the Bitcoin UTXO accounting model, and CKB-VM is a customized virtual machine that supports the layered design of the network. CKB-VM provides a flexible execution environment for initiating transactions or building applications on the network. This design allows the network to scale vertically by running dedicated components at each layer, similar to a modular blockchain.
CKB is the underlying L1 blockchain of Nervos Network, which operates in a similar way to Bitcoin, using a Proof of Work (PoW) consensus mechanism. It uses an upgraded version of the Bitcoin algorithm, NC-MAX, to improve network efficiency and responsiveness by speeding up transaction confirmation times and reducing orphan block rates. Bitcoin targets a 10-minute block interval and adjusts mining difficulty approximately every two weeks. CKB dynamically adjusts the block interval (approximately every four hours) based on changes in network activity to optimize performance.
CKB uses the Eaglesong function to secure the network, an ASIC-neutral custom hash function that replaces the widely used SHA256 hash function. Eaglesong is a sponge function that optimizes multiple cryptographic elements to provide the same level of security as other proof-of-work (PoW) hash functions, while being tailored specifically for the Nervos Network.
Source: Nervos Network
The Cell model is the core of the CKB data structure, which can store and verify any data on the chain. Bitcoin's original scripting language and UTXO model limit its ability to perform complex calculations required for smart contracts. In contrast, CKB generalizes the UTXO model, allowing more flexible data storage and verification. Unlike Bitcoin, which uses a single script to validate transactions, CKB introduces dual scripts in its Cell model:
Lock Script ensures that only authorized users can access and use the contents of a Cell, similar to Bitcoin.
Type Script is an optional script that sets rules for how a Cell can be used or changed in future transactions.
Compared to Bitcoin's limited options, this system enables CKB to support more features, making it more suitable for a variety of applications. Each Cell in CKB is a programmable Cell that can hold different data types such as tokens, smart contracts, and specific application states. It can also run complex scripts similar to those in Turing-complete languages. Cells run independently, which means they can be updated or referenced without affecting other parts of the blockchain, improving scalability in a parallel manner.
CKB-VM is CKB's execution engine for running smart contracts and decentralized applications. The virtual machine uses the RISC-V instruction set, a flexible and simple open source hardware architecture set (ISA) that supports a variety of programming languages, including popular languages such as C and Rust. This wide compatibility sets CKB-VM apart from other blockchain virtual machines that are usually limited to specific languages, opening it up to a wider developer community. The CKB network also supports SDKs for mainstream languages such as JavaScript, Rust, Go, and Java, making it easier for developers to develop with familiar tools. This makes it easier for developers to create complex decentralized applications using familiar programming languages.
In addition, CKB-VM's architecture provides predictable gas fees, secure execution, and efficient integration with the Cell model, which helps to effectively manage state and verify transactions. The predictable gas fee model avoids unexpected fees, improves user experience, and simplifies contract development.
Source: Nervos Network
CKB extends Bitcoin using the RGB++ protocol, an asset issuance standard that extends Bitcoin's functionality on CKB. The RGB++ protocol enables complex smart contracts and asset management operations that are typically not possible on the Bitcoin network. The original RGB protocol is an L2 solution that aims to enable smart contracts and asset issuance for Bitcoin without changing the Bitcoin mainnet. It does this by binding assets to specific Bitcoin UTXOs, making those assets transferable as the UTXOs themselves are transferred. The RGB protocol relies primarily on client-side validation, with transactions processed and validated off-chain, reducing the load on the Bitcoin network. However, this approach also has limitations, such as potential issues with data availability — since data is not stored on-chain, it may not be readily accessible when needed. In addition, the reliance on client-side validation adds complexity that can affect the user experience.
Nervos Network addresses these limitations with the RGB++ protocol, which extends and enhances the principles behind the original RGB protocol by using CKB as Bitcoin's data availability and execution layer. RGB++ maps Bitcoin UTXOs to CKB's Cells through isomorphic binding technology, enabling seamless integration with CKB's Turing-complete smart contracts. This is achieved by leveraging CKB’s layered architecture and Cell model, allowing Bitcoin assets to interact with dApps on CKB. By using RGB++, CKB can execute more complex smart contracts for Bitcoin, which was not possible in the original RGB protocol. RGB++ also introduces on-chain verification of key transaction elements, improving security and data availability. In addition, the RGB++ protocol enables transaction folding, masterless contracts with shared states, and non-interactive transfers, and cross-chain transfers of Bitcoin without the need for cross-chain bridges.
As an underlying public chain, CKB can be extended through payment channels, such as the payment channel framework Perun developed by Polycrypt. By processing transactions off-chain and settling on-chain, these payment channels can support a variety of applications from small payments to payment gateways, thereby improving the performance of CKB. Perun leverages CKB’s Cell model, where Cell carries capacity, Lock Script, Type Script, and data to manage the state of a channel. One of the channel’s implementations (PerunLockScript) manages access to the channel’s live Cell, while the other (PerunTypeScript) handles the validation logic for state transitions. These transitions are managed automatically, from when a channel is funded to when it is closed. As of press time, Perun is still in testing and has not yet been launched on the CKB mainnet. Nervos core developers are also working on connecting CKB to Bitcoin’s Lightning Network, enabling users to exchange BTC and CKB without relying on a third party.
The native token of the Nervos Network, CKByte (CKB), plays an important role in maintaining network security and incentivizing efficient storage. The main roles of CKB in the network include:
Granting token holders the right to store data.
Serving as a fee for on-chain transactions.
Distributed to miners as block rewards to ensure network security.
In addition, CKB tokens have three sources: (1) Genesis block; (2) Basic issuance; (3) Secondary issuance.
When the mainnet was launched in November 2019, the genesis block minted 33.6 billion CKB tokens, of which 8.4 billion CKB tokens (25% of the initial issuance) were immediately destroyed. Of the 8.4 billion CKB destroyed, 5.04 billion tokens were used for on-chain storage ("occupying on-chain space"), and the remaining 3.36 billion tokens were in a liquid state ("liquidity"). The corresponding status distribution of these destroyed tokens is intended to allow miners to initially receive at least 15% of the secondary issuance and the treasury fund to receive at least 10%. It is worth noting that all CKB tokens currently allocated to the treasury fund have been destroyed, and this setting can only be changed through a network hard fork.
The CKB in the Genesis Block is distributed as follows:
Public Offering (~21.50%): The largest portion of the Genesis Block was provided to public offering investors in 2018 and all released when the mainnet was launched in November 2019.
Ecosystem Fund (17.00%): The Ecosystem Fund will support third-party developers within the Nervos ecosystem. In the Genesis Block plan, 3% of this grant was in place when the mainnet was launched, and the rest will be distributed over two years, ending in December 2022.
Team (15%): Reserved for the project team, with a four-year lockup ending in May 2022.
Private Placement (14%): Offered to private placement investors in July 2018. 66.60% of this was released at the launch of the mainnet, and the remainder ended a two-year lockup in 2020.
Partners (5%): This grant is reserved for strategic partners who help build the Nervos Network, with a four-year lockup.
Testnet Rewards (0.5%): These rewards are all distributed to testnet and bug bounty program participants at the launch of the mainnet.
Destruction (25%): In the genesis block, this portion is directly destroyed to ensure that miners and the treasury fund continue to receive secondary issuance.
The goal of CKB's basic issuance (primary issuance) is to improve the security of the network in its early stages of development. The basic issuance of CKB is fixed in each Epoch and is fully rewarded to miners for processing transactions on the network. The basic issuance is capped at 33.6 billion CKB tokens and follows a similar inflation schedule to Bitcoin, which is halved every four years until the supply cap is reached. In November 2023, CKB experienced its first halving event, with the base issuance dropping from 4.2 billion CKB to 2.1 billion CKB per year.
CKB manages state explosion in two ways. First, to store data on-chain, users must lock CKB tokens. CKB does not directly charge users who lock CKB tokens to pay state rent, but indirectly charges fees through an inflation mechanism called secondary issuance. Every year, 1.344 billion CKB tokens are minted through secondary issuance and distributed to miners, Nervos DAO depositors, and the treasury fund. Therefore, secondary issuance introduces inflation for users who store data, as locked CKB tokens automatically face value dilution, which is an indirect way to pay state rent. As of writing, over 600 million CKB tokens have been distributed to miners as state rent, approximately 1.15 billion CKB tokens have been awarded to Nervos DAO depositors, and over 4.27 billion CKB tokens allocated to the treasury fund have been directly destroyed.
Through the Nervos DAO, CKB token holders can natively avoid dilution from secondary issuance. By locking their CKB tokens into the Nervos DAO smart contract, users can receive token rewards from secondary issuance, ensuring that their tokens are protected from inflation. Nervos DAO depositors receive a yield that is the same as the inflation rate of the secondary issuance, and the APR will continue to decline as the total supply increases. Users can deposit to Nervos DAO at any time, with a minimum amount of 102 CKB, but withdrawals can only be made after the 30-day deposit period is over.
As of writing, 9.2 billion CKB tokens have been deposited in Nervos DAO. CKB's deposit-to-circulation ratio is 20.84%, which has been on a downward trend over the past two years. This downward trend may be due to the increasing number of unspent cells on CKB.
Over the past year, the CKB network has continued to be active. As of now, CKB's average daily transaction volume is 43,600. This is an increase of 110% compared to the daily average of 20,800 in the fourth quarter of 2023. In terms of new addresses, on-chain activity increased significantly in April. 387,600 new addresses were created in April, a month-on-month increase of 181% compared to March.
Cell activity on CKB has been steadily increasing since April, partly due to the launch of the RGB++ protocol. Cell activity is divided into unspent cells and spent cells. Unspent cells can be used for future transactions, smart contract execution, and data storage, reflecting the increase in network activity and adoption. Spent cells, while no longer used as transaction inputs, still contain valuable data that can be accessed and referenced, contributing to the history and data traceability of the blockchain. As of May 15, 2024, there were 1.7 million unspent cells, a 13% increase from the end of the first quarter. As for spent cells, there were 57.6 million spent cells on CKB at press time.
Since the RGB++ protocol went live on April 3, 2024, there have been more than 13,200 transactions and 4,400 unique addresses using the protocol. Network activity has been on a downward trend throughout May and June, but more ecosystem projects leveraging RGB++ should help reverse this trend.
As a PoW network, miners ensure the security of CKB by solving cryptographic puzzles to verify transactions and add new blocks to the blockchain. For every block mined, miners receive all of the "base issuance" rewards and part of the "secondary issuance" rewards for that block. Miners can also receive proposal rewards or submission rewards from transaction fees for processing network transactions. To manage changes in network activity without degrading performance, CKB's customized NC-MAX consensus protocol adjusts the mining difficulty approximately every four hours based on the network's orphan rate. In this way, the network can optimize block times while reducing the likelihood of block reorganizations, which can undermine network stability.
Hashrate is a measure of the basic computing power of PoW blockchain miners. Therefore, hashrate represents the security of the CKB network. In 2024, CKB's total network hashrate continued to set new historical highs. On April 27, CKB’s total hashrate reached 397.5 PH/s, the highest hashrate ever achieved by the CKB network. The rise in hashrate is partly due to Binance’s launch of the CKB mining pool on April 18, 2024. Similar to hashrate, average mining difficulty also hit a new all-time high in 2024 (3.96E on April 21).
Nervos Network continues to foster ecosystem growth through funding, infrastructure, and tooling support. At the launch of the mainnet in November 2019, approximately 5.7 billion CKB (17% of the genesis block CKB allocation — $62.4 million at the time of writing) was reserved for the ecosystem fund. Over the years, the Eco Fund has provided seed funding for multiple ecological development initiatives to drive the network's development plans. One of them is CKB Eco Fund (formerly InNervation), which focuses on incubating and investing in early-stage and seed-round projects that use RGB++ to connect CKB and Bitcoin. CKB Eco Fund supports ecological projects to build critical infrastructure and cross-domain decentralized applications, including DeFi, games, tools, NFT markets, etc. In January 2024, CKB Eco Fund launched the BTCKB program, which aims to strengthen the integration between Bitcoin and CKB blockchains through the PoW consensus mechanism and UTXO model. The BTCKB program introduces new smart contract functions to incorporate BTC, Taproot Assets, and RGB++ assets into the CKB blockchain, thereby enhancing the functionality of the Bitcoin blockchain. As part of the program, CKB Eco Fund also incubated CELL Studio, a blockchain software company led by Nervos co-founder Cipher Wang, who is also the lead of the BTCKB program. CELL Studio develops infrastructure and applications to enhance and expand the Nervos ecosystem, similar to how ConsenSys developed foundational tools such as Infura and MetaMask for Ethereum. To date, well-known ecosystem tools developed by CELL studio include:
CoTA: Aggregation protocol for fungible and non-fungible tokens on CKB.
ForceBridge: A cross-chain interoperability protocol that connects CKB and other blockchain networks, currently supporting Ethereum and BNB Smart Chain.
Spore: A protocol for on-chain digital objects (DOBs) powered by CKB.
Since the launch of the RGB++ mainnet in April 2024, more than 15 existing ecosystem projects have used the protocol for asset issuance. Ecosystem projects worth noting include:
UTXO Stack: Bitcoin L2 "OP Stack" based on the RGB++ protocol.
JoyID: A non-custodial wallet that uses biometrics for user authentication and supports multiple networks, including Ethereum, Bitcoin, and RGB++ assets.
HueHub: A decentralized trading platform and launchpad that supports RGB++ assets on Bitcoin.
Stable++: A decentralized stablecoin protocol that supports CKB and BTC.
World3: An autonomous world game based on the RGB++ protocol and DOB.
Nervape: A multi-chain composable digital object based on Bitcoin, whose "base assets" are issued on Bitcoin and "subordinate assets" are issued on CKB.
Haste: RGB++ asset management solution.
d.id: A decentralized identity protocol for the Bitcoin ecosystem.
The RGB++ development roadmap released by CELL Studio highlights the important plans to be completed in 2024, including:
Release a cross-chain protocol for issuing RGB++ assets across UTXO chains.
Bridge Atomicals, Orderals, and other UTXO-based assets to CKB via the RGB++ protocol.
Propose and implement RGB++ scaling solutions that support multiple networks.
Connect RGB++ with the CKB Lightning Network.
As part of the BTCKB initiative, CKB Eco Fund also intends to launch a cross-chain bridge connecting BTC and CKB and a UTXO-based DEX. In addition, a payment channel network will be developed for CKB using the RGB++ protocol, and the relevant proof of concept has been completed. This payment channel network will be connected to the Lightning Network, making CKB more scalable and suitable for various blockchain applications.
As Bitcoin L2, Nervos Network's approach to expanding Bitcoin is mainly to enhance Bitcoin's functionality through the RGB++ protocol. Competitors like Stacks provide customized execution environments and programming languages, while Rootstock hooks transactions between the two chains. In contrast, Nervos aims to enhance the native Bitcoin experience without adding complexity or compromising decentralization. With the RGB++ protocol, CKB can provide Bitcoin with a smart contract execution environment that is closely integrated with Bitcoin's original UTXO model. This design could give Nervos Network an advantage, attracting users who are skeptical of solutions that stray from Bitcoin’s core ideals of decentralization and security.
Compared to scaling solutions like the Lightning Network, CKB’s smart contracts offer a wider range of functionality, serving developers building more complex applications on Bitcoin. While the Lightning Network is effective at facilitating fast, low-cost transactions, it does not support complex decentralized applications. Meanwhile, platforms like Liquid Network, Merlin Chain, and Bouncebit require trust in a semi-centralized consortium to manage the cross-chain bridge between the sidechain and the Bitcoin mainnet. CKB avoids this level of centralization by using an off-chain computation and on-chain settlement approach.
Nervos’ approach to scaling Bitcoin with the RGB++ protocol is not without limitations, though. The reliance on external networks (particularly the CKB blockchain) for data availability and asset issuance introduces additional complexity and potential delays to Bitcoin. In addition, the lack of comprehensive development tools and multi-party interaction solutions limits the protocol's ability to effectively support decentralized applications. Finally, the transparency of transactions on the CKB blockchain undermines the privacy advantages originally provided by the RGB protocol.
The Bitcoin L2 market continues to develop as demand for scalability and functionality beyond Bitcoin's original functionality continues to grow. Various L2 solutions, such as the Lightning Network, sidechains, and Rollups, aim to address these issues by moving transactions off the main chain, thereby increasing Bitcoin's throughput without compromising security. However, these solutions often introduce new complexities and security challenges. Nervos is different in that it extends the RGB protocol through RGB++. RGB++ provides native extensions to Bitcoin, integrating deeper smart contract functionality that is directly related to Bitcoin's UTXO model. These features, in turn, promote a more seamless and secure expansion of Bitcoin's utility. Additionally, work is underway to connect the payment channel network with the Lightning Network, which will make CKB more scalable for many blockchain applications.
Ultimately, Nervos aims to strengthen its position in the Bitcoin L2 space by simplifying the user and developer experience. In addition, Nervos can also prioritize RGB++ support for a wider range of asset types and complex applications, thereby increasing its utility in the Bitcoin ecosystem. By doing so, Nervos can play a key role in the broader adoption and functionality of Bitcoin as a decentralized application and smart contract platform.
After CKB launched the Bitcoin layer 1 asset issuance protocol RGB++ in the first half of the year, it has now launched CKB RGB++ Layer, which will not only ignite Bitcoin Finance (BTCFi), but may also drive all UTXO chains to take off.
JinseFinanceWhen the RGB++ protocol was first launched, the market was very enthusiastic. The first use case of the “isomorphic binding” technology proposed by RGB++ combined the BTC network and the CKB network, which also triggered people’s new understanding of the CKB network.
JinseFinanceBitlayer, CKB, and Bool Network discussed their views on the capital market, the Lightning Network, RGB and other well-known projects, the trustlessness of cross-chain bridges, and the path to breaking through the Bitcoin ecosystem.
JinseFinanceAt present, enhancing the programmability of Bitcoin and thereby increasing the utilization rate of the Bitcoin mainnet block space has become a new design space for the Bitcoin community consensus.
JinseFinancePerhaps what is different from all previous halving cycles is the change in the income structure of miners, which is caused by factors such as the future price space of BTC and the current development status of the Bitcoin ecosystem.
JinseFinanceCKB, a long-established project in the public chain ecosystem, has been active recently. After announcing that it would adjust the mainnet positioning to Bitcoin Layer2, it launched a layer asset protocol RGB++.
JinseFinanceAre RGB++ assets BTC assets or CKB assets?
JinseFinanceBefore we delve into the concept of RGB++, why the CKB team chose the RGB protocol, and how they plan the development of Bitcoin Layer 2, it is necessary for us to go back in time and learn more about the history, background, and original intentions of CKB.
JinseFinanceThe competition among third-party settlement layers under the Bitcoin chain may begin soon.
JinseFinanceThe last Bitcoin halving took place on May 11, 2020, and the next bitcoin halving will likely occur in 2024.
Coindesk