While we typically focus on DeFi, this time we’re going to look at a Layer 1 solution, the Nervos Network. They’re a blockchain solution that is based in China. Huobi uses Nervos as part of their settlement, and it’s also been included in the Chinese Government’s Blockchain-based Services Network (BSN), along with Tezos, NEO, EOS, IRISnet, and Ethereum.
What makes Nervos stand out from the crowd? It takes the best aspects of Bitcoin and Ethereum and builds it into something completely new.
Bitcoin Improvements
One challenge that Bitcoin cases is that of token issuance, the payout for miners who work together to secure the network. In 20 years or so, that token issuance will essentially dry up. The concern is how to incentivize Bitcoin miners, if not through mining rewards? Nervos attempts to deal with this with an inflationary model, with a built-in countermeasure to that inflation which they call their Nervos DAO. The Nervos DAO is a shelter against that inflation from secondary issuance to manage state storage and incentivize miners. So if you lock your Nervos (CKB tokens), you’ll get an annual rate of just over 3%, to secure your investment from the continual inflationary pressure, while also allowing miners to be incentivized to secure the network into the long-term future.
Ethereum Improvements
Ethereum also has a potentially large problem: the total tokens on the network exceed the value of the Ethereum tokens themselves. This could lead to a situation where people want to manipulate the network to gain control of the ERC-20 tokens on the network. Nervos’ solution to this potential issue relates back to the CKB token, which represents one byte of data that can be deployed to the Nervos network. Thus as network traffic increases, the cost of ‘space’ on the network, data utilized, will rise accordingly. To deploy a smart contract to the Nervos network, you ‘pay’ for the data utilization, and that value is returned to the CKB token holders.
A Layer 1 Solution Built on a Layer 2 Solution
Nervos is built on Proof of Work (PoW), similar to Bitcoin. PoW is very secure, even if Proof of Stake (PoS) is far more common these days with other projects. Their plan is to have a highly-secure Layer 1 blockchain, but transactions can be done quickly and efficiently on the Layer 2 solution, but they’re always eventually settled on the more-secure Layer 1 blockchain. This integrated solution is very scalable, which avoids the problems of block congestion (as with BTC) and high gas costs (as with ETH).
Nervos Use Cases Today?
While not many projects are up and running on the blockchain presently, although many projects are in the works. One feature which is working is a swap feature available right now on Metamask, from ETH or USDT to CKB. Of course you can also deposit your CKB tokens into the DAO and receive the bonus yield. As network usage increases, token price will surely follow.
I recommend reading their Positioning Paper to gain a clearer understanding of the underpinnings behind this innovative Blockchain.
If youw ant to test out ckb with your metamask, use this link.
Full disclosure, Gabriel does some marketing work for Nervos.
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