In the world of blockchain, liquidity is paramount. Recently, the Nervos DAO staking tool NervDAO completed its integration with the iCKB protocol. This milestone progress not only allows Nervos DAO depositors to break free from the minimum 30-day deposit cycle limit, effectively solving liquidity challenges, but also opens the door for users to achieve higher returns through “BTCFi Legos.”
This article will detail the working principle of the iCKB protocol and its significance in the market.
CKB Economic Model, Nervos DAO and NervDAO
Before delving into the iCKB protocol, let's briefly review the economic model of CKB, Nervos DAO, and its staking tool NervDAO.
As of December 8, 2024, the total issuance of CKB has reached 46.202 billion, of which 8.133 billion CKB is locked in Nervos DAO. These CKB mainly come from three channels:
Genesis Block: Total supply is 33.6 billion, of which 8.4 billion entered the black hole address at the time of issuance (equivalent to “burning”), and the remaining 25.2 billion CKB is mainly allocated to institutional investors, ecological funds, development teams, and public investors, etc. These CKB are subject to a time lock, but have now all been unlocked.
Primary issuance (basic issuance): Total supply is 33.6 billion, all rewards go to miners, and its issuance mechanism is similar to Bitcoin, approximately halving every four years until fully issued.
Secondary issuance: A fixed issuance of 1.344 billion per year, this part is distributed proportionally to miners, Nervos DAO depositors, and the treasury (currently this part is directly destroyed).
For a more detailed introduction to the CKB economic model, please read (Understanding CKB's Economic Model and Its Ingenious Design in One Article).
Nervos DAO is a smart contract written at the system's base layer, which can automatically allocate the secondary issuance of CKB to depositors of Nervos DAO. In other words, if holders are willing to sacrifice the liquidity of their tokens by locking CKB in the Nervos DAO contract, they can receive compensation from the system, thereby avoiding asset dilution due to secondary issuance.
NervDAO is the staking tool for Nervos DAO, designed to provide users with convenient staking and withdrawal services. Compared to other tools that support Nervos DAO staking, such as Neuron Wallet and CKBull Wallet, NervDAO's advantages mainly lie in the following two aspects:
Lower operational threshold: Users can operate directly on the webpage without downloading additional apps or wallet software, nor do they need to sync blockchain data.
Support for multi-chain wallet login: Currently supports JoyID, MetaMask, OKX Wallet, UniSat, UTXO Global Wallet, and will support other major ecological wallets including SOL, DOGE, and Nostr in the future.
With the integration of the iCKB protocol into NervDAO, users can choose not only the “traditional” Nervos DAO staking method but also stake through the iCKB protocol.
Detailed Explanation of iCKB Protocol
The iCKB protocol was proposed and developed by Nervos community developer Phroi, aiming to solve the liquidity problem of Nervos DAO deposits: it allows users to deposit and withdraw any amount of CKB at any time.
So, how does the iCKB protocol work?
From the user's perspective, depositing CKB into Nervos DAO through the iCKB protocol requires only one operation: exchanging CKB for iCKB. When withdrawing, you only need to exchange iCKB back into CKB. Therefore, we can view iCKB as the deposit certificate for users depositing CKB in Nervos DAO.
Currently, 1 CKB can be exchanged for approximately 0.86287995 iCKB, and 1 iCKB can be exchanged for approximately 1.15890975 CKB. CKB deposited in Nervos DAO enjoys compensation for secondary issuance (the current annualized yield is about 2.26%), so the iCKB representing the deposit certificate will also appreciate over time, meaning that the amount of CKB exchanged for iCKB will gradually increase over time.
The iCKB protocol will decompose the user's CKB deposit into large deposits and small deposits, with each large deposit equivalent to 100,000 iCKB, and introduce a Market Maker mechanism to solve the liquidity problem of small deposits.
Next, we will illustrate how iCKB works through an example (for simplification, we assume the exchange rate is 1 CKB = 0.8 iCKB, 1 iCKB = 1.25 CKB):
Assuming Alice has 300,000 CKB, she deposits it into Nervos DAO through the iCKB protocol. The iCKB protocol will decompose this 300,000 CKB into: 125,000 CKB + 125,000 CKB + 50,000 CKB. Among them, 125,000 CKB equals 100,000 iCKB, this portion of CKB will be deposited into Nervos DAO (i.e., deposited in 2 portions, each of 125,000 CKB), and the remaining 50,000 CKB will be placed on order and filled by the Market Maker. Finally, Alice will receive 240,000 iCKB.
It should be noted that these 240,000 iCKB will temporarily be in a custody state on-chain. If Alice wants to immediately return them to her wallet, she needs to initiate the “Extract” operation; if she does not initiate the “Extract” operation, during Alice's next deposit of CKB to exchange for iCKB or when using iCKB to exchange for CKB, these 240,000 iCKB will automatically be released from custody and return to Alice's wallet. iCKB in custody cannot be directly exchanged for CKB, nor can it be directly transferred to other wallets or participate in BTCFi.
A few days later, Alice decides to exchange back to CKB. For convenience in calculation, we assume the exchange rate remains unchanged. After the iCKB protocol receives Alice's 240,000 iCKB, it will decompose it into: 100,000 iCKB + 100,000 iCKB + 40,000 iCKB. Among these, the two portions of 100,000 iCKB will be burned, while iCKB will select 2 deposits from Nervos DAO that can be withdrawn in the shortest time. The remaining 40,000 iCKB will be placed on order and filled by the Market Maker. Finally, Alice will receive 300,000 CKB (similarly, these CKB are also in a smart contract custody state on-chain and can be returned to the wallet immediately through the “Extract” operation, or they can be automatically released and returned to the wallet during the next exchange).
Through this example, we can clearly see how iCKB effectively solves the liquidity problem of Nervos DAO deposits: the liquidity of large deposits is achieved by aggregating the deposits of other users, while the liquidity of small deposits is ensured by Market Makers. It should be noted that anyone can become a Market Maker under the iCKB protocol, with their main income coming from service fees paid by users.
The far-reaching impact of the iCKB protocol
The “traditional” staking method of Nervos DAO has two major limitations:
Amount limit: Minimum deposit of 102 CKB (excluding miner fees).
Time limit (liquidity issue): There is a minimum deposit period of about 30 days, and withdrawals are also affected by the compensation cycle (i.e., initiating a withdrawal transaction does not necessarily mean immediate withdrawal).
The iCKB protocol, through clever design, allows users to deposit and quickly withdraw any amount of CKB at any time, successfully resolving the amount and time limitations of the “traditional” Nervos DAO staking method, greatly increasing the liquidity of Nervos DAO deposits.
Additionally, iCKB tokens also belong to RGB++ assets, which means that iCKB holders can not only earn interest from Nervos DAO but also participate in various BTCFi applications to gain more returns. For example, iCKB holders can create pools on UTXOSwap and become liquidity providers (LPs) to earn transaction fees. The next step for the RGB++ protocol is to expand to DOGE, and in the future, it will also expand to other UTXO chains. iCKB can be safely transferred to UTXO chains like DOGE through RGB++'s Leap cross-chain technology without bridges, participating in the ecology of these chains.
Moreover, once the CKB Lightning Network Fiber Network mainnet goes live, iCKB can also enter the Lightning Network, enjoying the advantages of low-cost, high privacy, and instant confirmation transactions.
Operation Guide
The NervDAO website offers two staking methods: one is the “traditional” staking method, operated on the Deposit page of the NervDAO website; the other is staking through iCKB, operated on the iCKB page of the website. These two staking methods are independent of each other.
As mentioned earlier, through the iCKB protocol, depositing CKB into Nervos DAO requires only a simple operation: exchanging CKB for iCKB. To withdraw the corresponding CKB, simply exchange iCKB for CKB. The specific operation steps are as follows:
Deposit
1. Open the NervDAO website (https://www.nervdao.com/) and connect your wallet (currently supports JoyID, MetaMask, OKX Wallet, UniSat, UTXO Global Wallet).
2. Click on the iCKB in the left navigation bar, select “Deposit,” enter the amount of CKB you want to deposit, then click the “Swap” button and sign in your wallet to confirm.
3. Wait for approximately 90 seconds for confirmation. When the order in “Active Orders” shows as “Completed,” it indicates that the on-chain operation has been completed.
4. At this time, your iCKB will be in a custody state on-chain. To withdraw, click “Extract” and sign in your wallet to confirm; if you do not withdraw, the next time you deposit CKB to exchange for iCKB or use iCKB to exchange for CKB, this portion of iCKB will also automatically be released from custody and returned to your wallet. Whether to perform the “Extract” operation does not affect the earnings of Nervos DAO. The only difference is that these iCKB in custody cannot be directly exchanged back to CKB, nor can they be directly transferred to other wallets or participate in BTCFi.
Withdraw
1. Open the NervDAO website and connect your wallet.
2. On the iCKB page, select “Withdraw,” enter the amount of iCKB you want to exchange, then click the “Withdraw” button and sign in your wallet to confirm (if you want to exchange all iCKB, and there are iCKB in custody in “Active Orders,” you need to first retrieve all iCKB through the “Extract” operation).
3. Wait for the transaction confirmation on-chain. When the order in “Active Orders” shows as “Completed,” it indicates that the on-chain operation has been completed. Similarly, these CKB are also in a custody state on-chain and can be returned to the wallet immediately through the “Extract” operation, or they can be automatically released and returned to the wallet during the next exchange.
Conclusion
The launch of the iCKB protocol marks a significant advancement in Nervos DAO's staking tools, not only solving liquidity problems for users but also providing them with more flexible investment options and profit methods. Through iCKB, users can fully enjoy the opportunities and value brought by Nervos DAO and the entire BTCFi ecosystem.
