Is CKB a Good Investment? In-depth Analysis
The issue of scalability and sustainability has been an age-long debate in the blockchain ecosystem. For instance with the Bitcoin emission curve, where for every 4 years Bitcoin halves, it has thus become a major concern what will become of the entire Bitcoin network in the next 50 years. Going by the halving architecture, it will be very hard for miners to keep mining to protect the Bitcoin network because the earning which the miners would be parting with will be very little unless the price of Bitcoin doubles every halving season — these has not been the trend lately.
Ethereum network is currently battling a more critical problem of sustainability due to its “asset size” it houses several tokens which contributes almost nothing to the maintenance cost of the network. Ethereum keep incentivizing miners with ETH to guarantee security of the network, but again, the sustainability of this arrangement is almost impossible, especially, at a time when more attention is being shifted to DeFi, these tokens that Ethereum houses will become more attractive and successful, thereby making the Ethereum network a big target for attackers.
What is Nervos CKB?
Nervos CKB is a layer 1, proof of work public blockchain protocol of the Nervos Network. It provides cryptographic assets with the storage space that is permissionless while guaranteeing security and immutability. But this does not end here; Nervos CKB enables smart contracts, layers 2 scaling and also captures the total network value using CKByte — the native token of the network.
Nervos core design principle is the layer 2 solutions; they include sidechains, state channels and plasma chains which makes it easier to scale a blockchain without having to compromise the security of the base layer (layer 1) through some touted unwholesome techniques.
Nervos is using the Cell Model which generalizes UTXO (unspent transaction output) as state storage, this way all the states are stored in cells, all computation is done off-chain and all verification work is handled by nodes. In Ethereum, transaction history and state history are two different dimensions. The block and events represent the events that trigger state transfer, instead of states themselves.
In the Bitcoin protocol, transactions and states are merged into a single dimension. CKB does not only verify only numeric data but any data that is considered as valuable and recognized by all contributors. Bitcoin model lacks this capability. Since the verifiable states can be modified beyond number values, thus, able to store other data values, a more generalized number value has been born — cell.
What is Nervos CKB doing differently and Better?
· To support scalability, work is divided by the cell model, computation of smart contract execution is done off-chain before the transaction is sent to the network while validation is done on-chain by full nodes after being received by the network. This way, the burden of computation on the full nodes is taken away, this enhances the total processing capacity of the Nervos Network.
· Still on scalability, smart contract on Cell Model runs in a parallel order with each transaction running independently in its own virtual machine and also allows multiple virtual machines to run simultaneously. Furthermore, multiple smart contract commands can be embedded in a single transaction instead of designing multiple but similar transactions. This helps to cut down on the processing fees.
· In the Nervos blockchain transaction fees can be paid by anyone between the sender and the receiver, or the person executing a smart contract — this is a unique feature of the cell model
· Nervos offers a more secured network using the NC-MAX to solve block propagation issues. It does this by dividing the confirmation process into two steps: propose and commit. When a transaction is proposed to the network, it can not be confirmed until several blocks later, giving more time for transaction propagation without slowing down block propagation. After the transaction has been proposed and propagated successfully, then it can be committed. These steps clearly eliminates the possibility of 51% attacks and transaction propagation as a delay factor to block propagation.
Nervos Developers Grant and Partnerships
To attract the best hands and brains in the and to further achieve the goal of decentralization, Nervos Foundation flagged the Nervos Ecosystem Grant. This grant is worth $30 million — almost 40% of what the foundation raised in public sales. The grant will sponsor external developers building its blockchain infrastructure.
All submitted projects for the grant are made public for feedback from the broader community members.
Towards the building of its layer 2 blockchain, the grant is focusing on developing infrastructures such as smart contract language, tooling, client protocols, cross-chain interoperability and others. Obsidian Labs is one the grant winners so far who has put their hands at work and have been able to show a demo product on Ledger Hardware Integration with CKB-CLI after winning the grant in February, 2020.
Nervos has left no stone unturned in its strategic partnership. It is one of the earliest blockchain adapters in China that has entered into partnership with China Merchants Bank International towards decentralized finance applications. Its series A funding round that raised $28 million was led by private equity giant Sequoia and Polychain.
Now we have a pretty good understanding of Nervos fundamentals. Let’s look at the distribution of Nervos native token — CKB. To fully understand the token economics here, one to get grasp of CKBytes issuance schedule. This schedule is divided to 3 categories; the genesis block, base issuance and secondary issuance.
The genesis block on the Nervos network contains 33.6 billion CKBytes of which 25% was immediately burned.
Refer to the image below for the distribution of the genesis block tokens
The base issuance of CKB refers to the total number of tokens that can be mined on the Nervos network. On this category of base issuance that equals 33.6 billion CKBytes, miners would mine a total of 16.8 billion CKB in the first 4 years while the total mining rewards will reduce automatically to 8.4 billion tokens until the last byte is mined.
The secondary issuance can be likened to an inflation tax on CKBytes holders storing state on blockchain. This will be distributed to Miners, NervosDAO and Treasury. Users who aren’t using their CKBytes are encouraged to lock them in a smart contract (NervosDAO) to be able to receive part of the secondary issuance. Miners gets part of the secondary issuance that equals the total number of occupied CKBytes divided by all existing CKBytes. This will continue at the rate of 1.3 billion CKBytes per year.
CKB; a Gold Mine?
A logical, fair and balanced way of analyzing the price of any cryptocurrency or other traditional asset like stocks is by measuring the potential of the issuing firm against market forces and trends. Going by these measures, CKB is no doubt a potential gold especially for long-term investors.
Although we are currently in a bear market and most cryptocurrencies are in the average of their all time highs and some in their lows, a check on CoinMarketCap shows that CKB has been holding off well despite the negative sentiments towards cryptocurrencies lately.
The current price of $0.004 also makes it a gem for short-term traders as well, seeing as the price has been holding off well in the recent months despite any inflation that was meant to be due to the constant token emissions due to the activities on the network. With the several developmental strides and the constant official strategic partnerships the foundation is always entering, really points where the price of CKB will reside in the not distant future. Nervos unique layer 2 approach to the blockchain and adoption is certainly worth keeping an eye on as the entire crypto markets and what Nervos stands for matures overtime.
In conclusion, with the support by major partners of, the developers community and entire cryptocurrency community, their is nothing that CKB cannot overcome as it has shown continuous effort in building on its vision, which is a very positive signal for every investor.
