CoinEx ‘You Ask, We Answer’ Session: Volume 24

We present the latest ‘You Ask, We Answer’ session featuring Dr. Hongzhou Chen (Common Knowledge Base [CKB] Eco Fund Research Lead) from the Nervos Network, a network protocol initiated by the Nervos Foundation, including the company’s field of interests, network functionalities, CKB mining protocols, network developments and more.

1. What are the real problems that Nervos wants to solve?

Bitcoin, recognized globally for its enduring presence, robust security, unmatched decentralization and substantial market value, makes it a great platform for asset issuance. However, despite its numerous strengths, the Bitcoin blockchain operates with limitations; it is not Turing-complete and has significant performance constraints. This creates a pressing need for a flexible and programmable L2 solution that can go beyond Bitcoin’s limitations.

Nervos (CKB) is an exemplary solution to this challenge. CKB is Turing-complete and stays true to Bitcoin’s foundational principles, adopting the same PoW consensus mechanism and extending Bitcoin’s UTXO model. This alignment allows for seamless integration and expansion, making CKB an ideal choice for those seeking to amplify the capabilities and performance of their Bitcoin L1 assets.

2. What are the benefits of running a node on the Nervos CKB network?

Running a node on the Nervos CKB network offers several benefits that contribute to both the health of the network and the node operator. Here are the key advantages:

1. Support the Network: Running a node helps maintain the decentralization and security of the Nervos CKB network by participating in the consensus process and validating transactions. This helps ensure the integrity and robustness of the network.
2. Access to Full Node Capabilities: By running a full node, you can access the complete transaction history and state of the blockchain. This allows for a more trustless interaction with the network, as you don’t need to rely on third-party services to verify transactions or account balances.
3. Earn CKB Rewards: Node operators can participate in mining activities and earn CKB tokens as rewards. The CKB network uses a Proof-of-Work (PoW) consensus mechanism, similar to Bitcoin, where miners are rewarded for securing the network and processing transactions.
4. Enhanced Privacy and Security: Running your own node improves privacy, as you are not exposing your transaction data to third-party nodes. Additionally, it provides better security since you are in control of your node’s configuration and can ensure it adheres to the latest security practices.
5. Facilitate Development and Testing: Developers running nodes can test and deploy decentralized applications (dApps) more effectively. They can ensure their applications interact correctly with the blockchain by using their node for testing and development purposes.
6. Provide Network Services: Operating a node allows you to run additional services like public RPC nodes, which external parties can use to query blockchain data or submit transactions. This is particularly beneficial for applications that rely on real-time blockchain data.
7. Participate in Governance: By running a node, you are directly involved in the network’s governance, contributing to decisions on protocol upgrades and other important matters. This level of participation helps shape the future development of the Nervos network.

3. How much does it cost for mining CKB and how much estimated profit that miner could get?

Mining CKB on the Nervos network involves various costs and potential profits, which can be estimated based on current mining conditions, hardware used and electricity costs. Vist F2Pool for a detailed comparison of mining revenue with different rigs.

4. How to create or costumize a token on CKB?

Different from ERC20 (Ethereum) and BRC20 (Bitcoin), CKB uses a unique way to build custom tokens based on the UTXO-like Cell Model. In CKB, custom tokens are called User-Defined-Token, aka UDT. The core team of CKB has proposed a minimal standard for UDT called xUDT (extensible UDT).

The high-level workflow to issue a custom token with xUDT goes like this: When you issue a token, you create a special Cell that presents some balance of your token, like a piece of printed cash to the dollars. For this special Cell, its data field contains the amount of the token and its type script is xUDT script where the args of that Script will be the issuer’s lock script hash. This issuer’s lock script hash works like the unique ID for the custom token. Different lock script Hash means a different kind of token. It is also used as a checkpoint to tell that a transaction is triggered by the token issuer or a regular token holder to apply different security validation.

Detailed tutorials can be found here.

5. What role does the JoyID wallet play? How can users have access to this wallet?

As a browser-based wallet built on the Nervos CKB and utilizing passkey technology, JoyID plays a crucial role in the Nervos ecosystem by enabling users to create a non-custodial crypto wallet account within seconds for seamless access to the Web3 world.

JoyID offers native support for the RGB++ protocol. With JoyID, users can easily manage and leap assets between different networks without bridges, fully leveraging the security of Bitcoin L1 and the scalability and flexibility of CKB (Bitcoin L2).

To access JoyID, open app.joy.id in the browser and create a new account with your Touch ID or Face ID within seconds. Detailed tutorials are available here.

6. Currently, many people are looking for NFTs, metaverse and games. Can you tell me what makes you different in this field?

Nervos CKB features Digital Objects (DOBs) issued by the Spore protocol. Unlike Ethereum NFTs, Spore DOBs are fully stored on-chain and have intrinsic connections between content and value. Creating a DOB requires using CKBytes, the native token of Nerovs CKB, as raw materials. The amount of CKBytes used determines the DOB’s on-chain storage space. Destroying a DOB retrieves the CKBytes used.

This mechanism makes holding Spore DOBs equivalent to occupying CKB, reducing the amount of CKBytes available. With more CKBytes being occupied, its value is likely to increase, fostering a symbiotic relationship between Spore DOB creators, holders and the overall CKB ecosystem.

Read this post to learn more.

7. Can you list some salient features of the project that set it apart from the competition? What competitive advantage are you most confident of？

Compared to other Bitcoin L2s, CKB is more decentralized, secure (because of PoW consensus) and Bitcoin-compatible. It has a similar data structure (Cell and UTXO models) and a similar UX because users can use Bitcoin addresses and wallets to access CKB assets.

• Cell model: Cells are the fundamental data structures of the CKB blockchain. They can store a wide range of data, from smart contracts to DOBs (Digital Objects). The Cell model facilitates Turing-complete smart contract functionality, underpinning a highly sustainable, flexible and scalable programming environment.
• CKB-VM: Powered by RISC-V instruction sets, CKB’s virtual machine supports all current and prospective cryptographic primitives. This flexibility ensures that the CKB-VM can evolve alongside advancements in cryptographic technology, maintaining its relevance and security.
• Layered architecture: CKB’s architecture is characterized by its multi-layered approach, which can support a range of scalability solutions. This includes state channels, payment channels, sidechains and even the capability to deploy EVM-compatible rollups. This layered architecture is pivotal in enhancing the network’s throughput and efficiency while providing a robust framework for future innovations.
• Account Abstraction: CKB features native or protocol-level account abstraction for flexible cryptographic operations without the need for protocol level changes, making the blockchain more user-friendly and accessible and encouraging broader adoption and use cases, such as the JoyID wallet.
• Tokenomics: To ensure long-term sustainability, CKB has a dual issuance model. The primary issuance is the same as in Bitcoin, with a hard-capped supply and an issuance rate that halves every four years. The secondary issuance is uncapped and constant but directed at users storing data on CKB. The secondary issuance aims to solve the state explosion problem* plaguing smart contract platforms and to ensure miners have a predictable long-term block reward.

In sum, the integration of these features gives CKB a unique competitive advantage in the Bitcoin ecosystem due to its ability to seamlessly integrate the security and decentralization of PoW with the flexibility and scalability of advanced UTXO-based programmability. This integration positions CKB as a highly secure, adaptable and sustainable platform, ideal for pioneering new applications and services within the Bitcoin ecosystem.

8. Can you explain how your token is distributed?

The CKB token launched with an initial supply of 33.6 billion coins, 8.4 billion of which were burned soon thereafter. The base issuance is 33.6 billion coins per year and halves every four years until it hits zero, whereas the fixed secondary issuance is 1.344 billion. Check out the detailed CKB supply structure and issuance schedule here.

Miners receive CKB rewards from two sources: the base and secondary issuance. The secondary issuance depends on state occupation, where miners receive half of the secondary issuance reward if half of the circulating CKB coins are used to store state. When the base issuance eventually ends, miners will keep earning “state rent” income from the secondary issuance, regardless of transaction demand, which ensures they’re incentivized to secure the blockchain long-term.

Long-term CKB holders can seek inflation shelter from the secondary issuance by locking their coins in the Nervos DAO smart contract.

9. Security is the most important thing to consider when starting up a platform, how secure is this project for users and investors?

Launched in November 2019, CKB adopts the same time-tested PoW consensus mechanism as Bitcoin to maximize security and decentralization. CKB completed its first halving in November 2023 when the actual inflation rate dropped from 7.9% to 3.7%.

CKB uses a novel hash function called the Eaglesong and the mining rigs are produced by Bitmain, the world’s largest designer of ASIC chips for crypto mining. The current hashrate of CKB network is approximately 400 PH/s, setting a new historical high.

CKB-VM can evolve alongside advancements in cryptographic technology, maintaining its relevance and security in the post-quantum era.

Additionally, CKB supports the RGB++ protocol, which enhances the Bitcoin ecosystem without the need for cross-chain bridges, thus maintaining high security. RGB++ maps Bitcoin’s UTXO set to Nervos CKB Cells via isomorphic bindings, leveraging scripting constraints on both CKB and Bitcoin chains. This ensures that state changes and transaction verifications are secure and efficient. RGB++ provides features such as client-side validation and non-interactive transfers, eliminating the need for users to rely on centralized third parties while ensuring the integrity of transactions. This allows seamless and secure applications within the Bitcoin ecosystem.

10. What improvements does the NC-MAX consensus algorithm bring to Nervos compared to traditional Proof of Work systems?

Nervos’ NC-MAX builds on Nakamoto Consensus by improving block propagation, block throughput and resistance to selfish mining.

• Improved Block Propagation

When a transaction is broadcast to all the nodes on the network, it remains in queue until it is included in a future block. A bottleneck can occur if the transaction broadcast is not fully successful. For instance, some nodes might be aware of the transaction and others may not. The nodes will need to sync their missing transactions before a block can be properly verified. There will be network delays as the missing transactions are found and distributed to all nodes that need them.

This bottleneck limits the performance of a blockchain because its impact becomes greater as the time between blocks is lowered. It can also lead to selfish mining attacks where miners intentionally create network delays so that they will have an advantage over others to gain more mining rewards.

NC-MAX solves this problem by splitting the confirmation process into two steps: propose and commit. A transaction is first proposed to the network. After several blocks have been verified, the transaction can then be confirmed. This gives more time for transaction propagation without slowing down block propagation. Once a transaction has been proposed and fully propagated, then it can be committed. This eliminates transaction propagation as a delay factor to block propagation, eliminating the bottleneck and selfish mining attack.

• Improved Block Throughput

With a shorter block interval, blocks are created more frequently, enabling faster transaction confirmations and a higher throughput for the network. The downside of a shorter block interval is that internet congestion has a greater effect on the ability of the network to properly synchronize. There are times when blocks are created while the network is not fully in sync, creating so-called orphan blocks. This means that the efforts towards network security are temporarily divided. Orphan blocks are inevitable; however, if too many occur within a short period of time, shorter block intervals become counterproductive.

NC-MAX improves this by automatically adjusting block intervals based on network performance. In the consensus protocol, the number of orphan blocks created within a time frame is tracked and taken into account. The network is then able to adjust the block interval to maximize throughput while maintaining an expected Orphan Rate. This results in dramatically shorter block times without compromising security.

• Improved Resistance to Selfish Mining

Selfish mining is a practice where certain miners are able to secretly gain a larger share of mining rewards while contributing less hash power to the network. This practice is discouraged, since it weakens overall network security and leads to irregular block times that can cause congestion problems.

NC-MAX offers the most accurate measurement of the network’s computing power by taking into account both external and internal factors. The new model takes into account the actions miners would take to exploit the computing power calculation. Therefore, all known selfish mining attacks become unprofitable.

11. Staking program is very important for every project. Can I stake your token? Do you have any plan of starting staking program?

The Nervos DAO allows users to lock CKBytes (that are not being used) and receive rewards from secondary issuance. To check out the Nervos DAO on-chain info, you can reference the CKB explorer. Detailed explaination of Nervos DAO can be found here.

Besides that, the staking mechanism within UTXO Stack does more than just safeguard the security of assets issued on chains launched by it; it also offers tangible benefits to every participant in the ecosystem. Nodes can stake a variety of assets, including BTC, CKB, BTC L1 assets, to ensure security of the application specific chain and earn block rewards.

12. Where I can get the latest updates or more information about the project?Where can I currently buy the token?

To stay informed about the latest updates and developments on Nervos CKB, you can follow several resources:

• CKB Eco Fund website is the primary source for news, project updates and detailed information about the ecosystem.
• Follow Twitter accounts: CKB Eco Fund, Nervos.bit, Nervos Foundation, CKB CN
• Join Telegram: Nervos Community, Nervos Network, Nervos Nation
• Join Reddit: Join the NervosNetwork subreddit to engage with the community and get monthly updates and discussions.
• Check the Dev Log.

CKB tokens are available on many major cryptocurrency exchanges, such as Binance, KuCoin, Gate.io and HTX. For a full list of exchanges, you can check CoinGecko or CoinMarketCap.

13. How are you engaging with the developer community and what opportunities are there for others to get involved in Nervos network’s development?

Nervos CKB actively engages with the developer community and offers numerous opportunities for involvement. Here are some key ways the Nervos network supports and involves developers:

Developer Resources and Tools

• Developer Documentation
• CKB Developer Resource

Community Engagement

• Nervos Talk Forum: A dedicated forum where developers and community members can discuss technical developments, share ideas and collaborate on projects.
• CKB Community Fund DAO: Nervos has established a Community Fund DAO to provide grants and financial support for developers building on the network.
• Hackathons and Workshops: Regular hackathons and workshops are organized to engage the developer community, providing opportunities to learn, collaborate and innovate. These events are often supported by CKB Eco Fund and offer rewards for outstanding contributions.

Opportunities for Involvement

• Building dApps: Developers are encouraged to build decentralized applications on top of Nervos CKB. The platform’s flexible and interoperable infrastructure supports various programming languages and cryptographic primitives, enabling the creation of powerful and innovative dApps.
• Proposing Improvements: Through the open, community-driven Request for Comment (RFC) process, developers can propose and discuss improvements to the Nervos network. This process ensures that the community has a voice in the ongoing development of the platform.
• Joining Community Projects: There are many ecosystem projects that often look for additional contributors and provide a practical way to get involved.

Grants and Funding

• CKB Eco Fund Grants: The CKB Eco Fund provides grants and support to projects that contribute to the growth and adoption of CKB and related technologies. It focuses on infrastructure, research and ecosystem applications. The fund will begin accepting applications in Q3 2024. For more details, visit the CKB Eco Fund website.
• CKB Community Fund DAO Grants: The CKB Community Fund DAO, jointly contributed by the community and the Nervos Foundation, funds community members to develop code, organize events and produce content around the CKB ecosystem. For builders seeking grants and support, please follow this guide.

14. According to the current roadmap, what are the key products over the next 6–12 months? What are your most important priorities?

During the HongKong Web3 Festival 2024, a lineup of projects scheduled for rollout in the coming months was shared:

• UTXO Stack: The UTXO Stack is a platform for launching high-performance Bitcoin Layer 2 chains secured by CKB. It offers near-unlimited scalability without compromising network security, thus fostering the growth of the Bitcoin ecosystem.
• Bitcoin Finance Expansion: decentralized exchange, decentralized money markets, over-collateralized stablecoins (CDP), etc, like Stable++ and UTXO Swap.
• Lightning Network Integration: Connecting CKB with Bitcoin’s Lightning Network to achieve a bi-directional, censorship-resistant, permissionless and trustless flow of assets across the two networks.
• Nostr client with support of CKB Lightning Network and integrated with the RGB++ protocol to provide a broad ecosystem foundation for projects like SocialFi.

15. Could you provide detailed insights into the specific criteria that the CKB Eco Fund uses to assess potential projects for funding?

The CKB Eco Fund is committed to fostering a thriving and sustainable ecosystem around CKB. We provides grants and support to projects that contribute to the growth and adoption of CKB and related technologies.

Favored Areas:

• Infrastructure and Research

We support projects that focus on building critical infrastructure or conducting research that benefits the CKB ecosystem, even though they may not have immediate commercial viability.

• Ecosystem Applications

We support decentralized applications and tools that expand the utility and accessibility of CKB. These projects should have the potential for commercial viability and independent operation. Projects must deploy their contracts on CKB.

We are particularly interested in projects that contribute to Bitcoin Finance (BiFi), UTXO Stack-based, Digital Objects (DOBs), Nostr-related, Lightning Network on CKB, Games, Autonomous Worlds and other innovative projects.

At CKB Eco Fund, we welcome projects at various stages of development, including early-stage projects. However, please note that our evaluation criteria consider your project proposal’s feasibility, potential impact and clarity, even if it is still in the early stages. We are also open to supporting projects already active on other blockchains and exploring integration with CKB. The fund will begin accepting applications in Q3 2024.

16. Can you tell investors how many people currently work on the team, their experience and qualifications and their achievements? What companies does Nervos Network collaborate with or plan to collaborate with in the future?

The Nervos Network is supported by a highly experienced and globally distributed core team with members across North America, Europe and Asia. Our team includes several Ph.D. holders in computer science, cryptography and blockchain technology from top universities, as well as Bitcoin core developers and industry experts. This diverse and knowledgeable team brings a wealth of expertise to the development and growth of our project. Regarding collaborations, Nervos Network has partnered with dozens of leading institutions and enterprises in the industry. We are committed to contributing to the Bitcoin ecosystem and will continue to expand our partnerships to further this goal. For more details, please visit the websites nervos.org and ckbeco.fund.

About CoinEx

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