Project Background and Introduction

As the largest cryptocurrency, Bitcoin has gained widespread adoption and recognition, but its success has also exposed some limitations, especially in terms of scalability. After the Segwit upgrade, Bitcoin's blockchain limited the block size to 4 MB, resulting in longer confirmation times and higher transaction fees as the network grows, making it less efficient to process large-scale transactions. In addition, Bitcoin's scripting language lacks the flexibility to develop complex smart contracts. To address these issues, a variety of Layer 2 (L2) solutions have been proposed, such as payment channels, sidechains, and Rollups, to increase transaction throughput by processing transactions off-chain. For example, the Lightning Network enables near-instant small payments by creating a network of payment channels; sidechains provide greater scripting possibilities and faster transactions by connecting independent blockchains to the Bitcoin main chain. However, these solutions often increase complexity, trust assumptions, and potential security vulnerabilities.

Nervos Network is a Bitcoin scalability solution that takes a more native approach and modifies the UTXO model that underpins 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 to improve the scalability of Layer 1 blockchains and has raised more than $100 million through seed rounds, private rounds, and public offerings. In November 2019, Nervos Network's Layer 1 blockchain Common Knowledge Base (CKB) went live. In February 2024, CELL Studio, led by Nervos co-founder Cipher Wang, launched RGB++, a Bitcoin layer 1 asset issuance protocol, using CKB as the data availability and execution layer to enable smart contract capabilities and asset issuance for Bitcoin. Since the launch of RGB++ mainnet in April 2024, the number of projects has continued to increase, and the existing 15+ ecological projects have revitalized CKB's on-chain activities.

Technical architecture and features

Nervos Network adopts a layered architecture, including an L1 blockchain (Common Knowledge Base, CKB) that can be extended 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.

  • Common Knowledge Base (CKB): As the underlying L1 blockchain of Nervos Network, it adopts the Proof of Work (PoW) consensus mechanism, uses NC-MAX, an upgraded version of the Bitcoin algorithm, to improve network efficiency and response speed, and uses Eaglesong function to ensure network security.

  • Cell Model: The core of CKB data structure, allowing any data to be stored and verified on-chain. Compared with Bitcoin's UTXO model, CKB introduces dual scripts (Lock Script and Type Script), supports more functions, and is suitable for various applications.

  • CKB-VM: CKB's execution engine uses the RISC-V instruction set, supports multiple programming languages, and provides predictable gas fees and efficient integration with the Cell model.

RGB++ Protocol

CKB extends Bitcoin through the RGB++ protocol to enable complex smart contracts and asset management operations. The RGB++ protocol leverages CKB as Bitcoin's data availability and execution layer, enhancing the original RGB protocol. RGB++ uses isomorphic binding technology to map Bitcoin UTXO to CKB's Cell, achieving seamless integration with CKB's Turing-complete smart contracts, improving security and data availability.

Payment Channels

CKB is expanded through payment channels, such as Perun, a payment channel framework developed by Polycrypt, which improves CKB performance by processing transactions off-chain and settling on-chain, supporting applications ranging from micropayments to payment gateways.

Token Economic Model

Nervos Network’s native token, CKByte (CKB), is mainly used to grant token holders data storage rights, pay on-chain transaction fees, and reward miners. CKB tokens have three sources: (1) Genesis block; (2) Basic issuance; (3) Secondary issuance.

  • Genesis Block: When the mainnet was launched in November 2019, the genesis block minted 33.6 billion CKB tokens, of which 8.4 billion were immediately destroyed.

  • Basic issuance: The basic issuance of CKB in each Epoch is fixed and all of it is awarded to miners.

  • Secondary issuance: 1.344 billion CKB tokens are minted each year and distributed to miners, Nervos DAO depositors, and treasury funds.

Through Nervos DAO, CKB token holders can avoid the dilution caused by secondary issuance and obtain the same return as the secondary issuance inflation rate.

Networking activities

The CKB network has continued to be active over the past year, with average daily transaction volume increasing by 110%. 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.

Security and decentralization

As a PoW network, CKB ensures security through miners verifying transactions and adding new blocks. CKB's customized NC-MAX consensus protocol dynamically adjusts the mining difficulty according to the network's orphan block rate and optimizes the block time. In 2024, CKB's total network computing power and average mining difficulty continued to set new historical highs.

ecosystem

Nervos Network promotes the development of the ecosystem through funding, infrastructure, and tool support. The Eco Fund has supported multiple ecosystem development initiatives, including the CKB Eco Fund, which focuses on incubating and investing in projects that use RGB++ to connect CKB and Bitcoin.

Competitive product analysis

As Bitcoin L2, Nervos Network enhances Bitcoin functionality through the RGB++ protocol. Compared with competitors such as Stacks and Rootstock, Nervos enhances the native Bitcoin experience without adding complexity or compromising decentralization. The RGB++ protocol provides a wider range of functions and supports complex decentralized applications, which has advantages over solutions such as the Lightning Network.
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