Author: Jennifer Obem
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, the Bitcoin blockchain, after the Segwit upgrade, limited block sizes to 4 MB, which limited the number of transactions that could be processed in a given time. This limitation resulted in longer confirmation times and higher transaction fees as the network grew, making Bitcoin less efficient at handling large transaction volumes. Compared to other blockchains, beyond value transfer, Bitcoin's scripting language currently lacks the flexibility and expressiveness needed to develop complex smart contracts.
To address these limitations, various 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, trying 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 for near-instant micropayments. 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 that takes a more native approach and modifies the UTXO model that underpins Bitcoin. It improves the RGB protocol to provide Bitcoin with Turing-complete contract capabilities without the need for cross-chain bridges. Established in the first quarter of 2018 by Terry Tai, Kevin Wang, Cipher Wang, and Daniel Lv, Nervos Network is a Layer 1 blockchain designed to improve scalability. To fuel the development of the network, the project team has raised over $100 million in funding from seed, private, and public rounds. In November 2019, Nervos Network’s Layer 1 blockchain - Common Knowledge Base (CKB) was launched. In February 2024, CELL Studio, led by Nervos co-founder Cipher Wang, launched RGB++, a Bitcoin layer asset issuance protocol. Inspired by the RGB protocol, the RGB++ protocol uses CKB as the data availability and execution layer to implement smart contract capabilities and asset issuance for Bitcoin. Since RGB++ was launched on the mainnet in April 2024, the number of projects utilizing RGB++ to issue assets on Bitcoin has continued to increase. As of June 2024, 15+ existing ecological projects have revitalized CKB’s on-chain activities.
Source: Nervos Network
Nervos Network adopts a layered architecture, including an L1 blockchain (Common Knowledge Base, CKB) that is scalable through payment channels and RGB++. The Cell model is an improved version of Bitcoin's 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 specialized components at each layer, similar to modular blockchains.
CKB is the underlying L1 blockchain of the Nervos Network and operates similarly to Bitcoin, using a Proof of Work (PoW) consensus mechanism. It uses NC-MAX, an upgraded version of the Bitcoin algorithm, 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 secures the network using the Eaglesong function, an ASIC-neutral custom hash function that replaces the widely used SHA256 hash function. Eaglesong is a sponge function optimized for multiple cryptographic elements to provide the same level of security as other proof-of-work (PoW) hash functions, while being specifically tailored for the Nervos Network.
Source: Nervos Network
Cell model is the core of the CKB data structure and can store and verify any data on the chain. Bitcoin’s original scripting language and UTXO model limited its ability to perform the complex calculations required by smart contracts. In contrast, CKB generalizes the UTXO model, allowing for more flexible data storage and verification. Unlike Bitcoin, which uses a single script to verify transactions, CKB introduces dual scripts in its Cell model:
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 save 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, meaning they can be updated or referenced without affecting other parts of the blockchain, improving scalability through parallelism.
CKB-VM is CKB’s execution engine, used to run 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 broad compatibility sets CKB-VM apart from other blockchain virtual machines that are often limited to specific languages, opening it up to a broader 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 using 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, helping to effectively manage state and verify transactions. A predictable gas fee model avoids unexpected fees, improves user experience, and simplifies contract development.
Source: Nervos Network
CKB extends Bitcoin with the RGB++ protocol, an asset issuance standard that extends the functionality of Bitcoin on CKB. The RGB++ protocol enables complex smart contract and asset management operations that are typically not possible on the Bitcoin network. The original RGB protocol was an L2 solution designed to enable smart contracts and asset issuance for Bitcoin without changing the Bitcoin mainnet. It works by tying assets to specific Bitcoin UTXOs, allowing those assets to be transferred along with the transfer of the UTXO itself. The RGB protocol relies primarily on client-side verification, with transactions processed and verified off-chain, thus reducing the load on the Bitcoin network. However, this approach also has limitations, such as potential issues with data availability – since the data is not stored on-chain, it may not be readily accessible when needed. Additionally, reliance on client-side validation adds complexity that may impact 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++ uses isomorphic binding technology to map Bitcoin UTXO to CKB’s Cell, achieving 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 that were not possible with the original RGB protocol. RGB++ also introduces on-chain verification of key transaction elements, improving security and data availability. In addition, the RGB++ protocol can also implement transaction folding, ownerless contracts with shared states, and non-interactive transfers, and can realize cross-chain transfers of Bitcoin without the need for cross-chain bridges.
As the underlying public chain, CKB can be expanded 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 ranging from micropayments to payment gateways, thereby improving CKB's performance. Perun utilizes CKB's Cell model, where Cell carries capacity, Lock Script, Type Script and data to manage the state of the channel. One implementation of the channel (PerunLockScript) can manage access to the channel's real-time Cell, while the other implementation (PerunTypeScript) can handle the validation logic for state transitions. From the time the channel is funded until it closes, these transitions are managed automatically. 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, allowing users to exchange BTC and CKB without relying on a third party.
Nervos Network’s native token CKByte (CKB) plays an important role in maintaining network security and incentivizing efficient storage. The main functions of CKB in the network include:
In addition, CKB tokens have three sources: (1) Genesis block; (2) Basic issuance; (3) Secondary issuance.
When the mainnet was launched in November 2019, 33.6 billion CKB tokens were minted in the genesis block, 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 floating state ("liquidity"). The state distribution of these burned tokens is intended so that miners initially receive at least 15% of the secondary issuance and the treasury fund receives 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 allocation in the genesis block is as follows:
The goal of CKB basic issuance (level one issuance) is to improve the security of the network in the early development stages of the network. The basic issuance of CKB for each Epoch is fixed, and all of it is awarded to miners to reward them for processing transactions on the network. The base issuance is capped at 33.6 billion CKB tokens and follows a similar inflation schedule to Bitcoin, with halvings every four years until the supply is capped. In November 2023, CKB experienced its first halving event, and the annual issuance volume of the basic issuance dropped from 4.2 billion CKB to 2.1 billion.
CKB manages state explosion through two methods. 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 instead charges fees indirectly through an inflationary mechanism called secondary issuance. Each year, 1.344 billion CKB tokens are minted through secondary issuance and distributed to miners, Nervos DAO savers, and treasury funds. Therefore, secondary issuance introduces inflation for users storing data, as locked CKB tokens automatically face value dilution, which is an indirect way of paying state rent. As of this writing, more than 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 more than 4.27 billion CKB tokens allocated to the treasury fund have been directly destroyed.
With Nervos DAO, CKB token holders can natively avoid dilution from secondary issuance. By locking their CKB token holdings into the Nervos DAO smart contract, users can receive token rewards from secondary issuance, ensuring that their token holdings are protected from the effects of inflation. Nervos DAO depositors receive a rate of return equal to the inflation rate of secondary issuance, with APR continuing to decrease as total supply increases. Users can deposit to the Nervos DAO at any time, with a minimum amount of 102 CKB, but withdrawals can only be made after the 30-day deposit period ends.
As of writing, 9.2 billion CKB tokens have been deposited in Nervos DAO. CKB’s deposit-to-flow ratio is 20.84%, which has been trending downward 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 trading volume is 43,600. That’s an increase of 110% compared to the daily average of 20,800 in the fourth quarter of 2023. In terms of new addresses, April saw a significant increase in on-chain activity. 387,600 new addresses were created in April, a 181% month-on-month increase 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 increased network activity and adoption. A spent Cell, although no longer used as a transaction input, still contains 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, an increase of 13% compared to the end of the first quarter. As for spent Cells, as of press time, there are a total of 57.6 million spent Cells on CKB.
Since the RGB++ protocol went live on April 3, 2024, more than 13,200 transactions and 4,400 unique addresses have used the protocol. Network activity was trending downward throughout May and June, but more ecosystem projects leveraging RGB++ should help reverse that 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. Every time a block is mined, the miner can obtain all the "basic issuance" rewards and part of the "secondary issuance" rewards of the block. Miners 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 mining difficulty approximately every four hours based on the network’s orphan rate. In this way, the network can optimize block time while reducing the possibility of block reorganization, which could destabilize the network.
Computing power is a measure of the basic computing power of PoW blockchain miners. Therefore, computing power represents the security of the CKB network. In 2024, the computing power of CKB’s entire network will continue to reach new historical highs. On April 27, CKB’s entire network computing power reached 397.5 PH/s, which is the highest computing power value in the history of the CKB network. Part of the reason for the increase in hashrate is Binance’s opening of the CKB mining pool on April 18, 2024. Similar to hashrate, average mining difficulty also hit an all-time high in 2024 (it was 3.96E on April 21).
Nervos Network 繼續透過資金、基礎設施和工具支援來促進生態系統的發展。在 2019 年 11 月主網上線時，約 57 億 CKB（佔創世區塊 CKB 分配額的 17% - 寫文時為 6240 萬美元）被預留用於生態基金。多年來，生態基金已為多個生態發展計畫提供了種子資金，以推動網路的發展計畫。其中之一是 CKB Eco Fund（前身為 InNervation），該生態基金專注於孵化和投資使用 RGB++ 連接 CKB 和比特幣的早期和種子輪專案。 CKB Eco Fund 支援生態項目建設關鍵的基礎設施和跨領域的去中心化應用，包括 DeFi、遊戲、工具、NFT 市場等。 2024 年 1 月，CKB Eco Fund 推出了 BTCKB 計劃，旨在透過 PoW 共識機制和 UTXO 模型加強比特幣和 CKB 區塊鏈之間的整合。 BTCKB 計畫引入新的智慧合約功能，將 BTC、Taproot Assets 和 RGB++ 資產納入 CKB 區塊鏈中，從而增強比特幣區塊鏈的功能。作為該計劃的一部分，CKB Eco Fund 還孵化了 CELL Studio，這是一家由 Nervos 聯合創始人 Cipher Wang 領導的區塊鏈軟體公司，也是 BTCKB 計劃的領導者。 CELL Studio 開發基礎設施和應用程序，以增強和擴展 Nervos 生態系統，它與 ConsenSys 為以太坊開發 Infura 和 MetaMask 等基礎工具的方式類似。截至目前，CELL studio 開發的知名生態系統工具包括：
自 2024 年 4 月 RGB++ 主網上線以來，已經有超過 15 個現有生態項目利用該協議進行資產發行。值得重視的生態項目包括：
CELL Studio 發布的 RGB++ 開發路線圖強調了 2024 年內要完成的重要計劃包括：
作為 BTCKB 計劃的一部分，CKB Eco Fund 還打算推出連接 BTC 和 CKB 的跨鏈橋和基於 UTXO 的 DEX。此外，還會利用 RGB++ 協定為 CKB 開發了一個支付通道網絡，相關的概念驗證已完成。此支付通道網路將連接到閃電網絡，使 CKB 更具可擴展性，適合各種區塊鏈應用。
作為比特幣 L2，Nervos Network 擴展比特幣的方法主要是透過 RGB++ 協定來增強比特幣的功能。像 Stacks 這樣的競爭提供了客製化的執行環境和程式語言，而 Rootstock 則對兩條鏈之間的交易進行掛鉤。相較之下，Nervos 的目標是在不增加複雜性或損害去中心化的情況下增強原生的比特幣體驗。借助 RGB++ 協議，CKB 可以為比特幣提供與比特幣原始 UTXO 模型緊密結合的智慧合約執行環境。這種設計可能會為Nervos Network 帶來優勢，吸引那些對偏離比特幣核心理念—— 去中心化和安全性—— 的解決方案持懷疑態度的用戶
與閃電網絡這樣的擴展解決方案相比，CKB 的智能合約提供了更廣泛的功能，可為開發者在比特幣上建立更複雜的應用程式提供服務。雖然閃電網路能有效促進快速、低成本的交易，但它並不支援複雜的去中心化應用。同時，Liquid Network、Merlin Chain 和 Bouncebit 等平台需要信任半中心化的聯盟來管理側鏈與比特幣主網之間的跨鏈橋。 CKB 使用鏈下計算和鏈上結算的方法，避免了這種程度的中心化。
儘管如此，Nervos 利用 RGB++ 協定擴展比特幣的方法並非沒有限制。在數據可用性和資產發行方面對外部網路（特別是 CKB 區塊鏈）的依賴，為比特幣帶來了額外的複雜性和潛在的延遲。此外，由於缺乏全面的開發工具和多方互動解決方案，限制了該協議有效支援去中心化應用的能力。最後，CKB 區塊鏈上交易的透明度損害了 RGB 協議最初提供的隱私優勢。
隨著人們對比特幣原有功能之外的可擴展性和功能的需求不斷增長，比特幣 L2 市場也在持續發展。各種 L2 解決方案，如閃電網路、側鍊和 Rollup，旨在透過將交易移出主鏈來解決這些問題，從而在不影響安全性的情況下提高比特幣的吞吐量。然而，這些解決方案往往會帶來新的複雜性和安全性挑戰。 Nervos 的與眾不同之處在於透過 RGB++ 擴充了 RGB 協定。 RGB++ 為比特幣提供了原生擴展，整合了與比特幣 UTXO 模型直接相關的更深層的智慧合約功能。這些功能反過來又促進了比特幣實用性更無感、更安全的擴充。此外，將支付通道網路與閃電網路連接在一起的工作正在進行中，這將使 CKB 更具可擴展性，適用於許多區塊鏈應用。
最終，Nervos 的目標是透過簡化用戶和開發者體驗來加強其在比特幣 L2 領域的地位。此外，Nervos 還可以優先為更廣泛的資產類型和複雜應用提供 RGB++ 支持，從而提高其在比特幣生態系統中的實用性。透過這樣做，Nervos 可以在比特幣作為去中心化應用和智慧合約平台的更廣泛採用和功能性方面發揮關鍵作用。
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