Exploring CKB's Evolution

Forward the Original Title：重返初心：CKB 转向比特币 Layer2 赛道，炒作还是机遇？

With the landing of ETFs, the explosion of the BRC-20 ecosystem, and the added narrative of halving, the market’s attention seems to be refocused on the Bitcoin ecosystem. Against this backdrop, CKB, a veteran project in the public chain ecosystem, has also been active recently. After announcing the repositioning of the mainnet as Bitcoin Layer2, it launched a layer asset protocol RGB++. Leveraging the momentum of Bitcoin Layer2’s development, coupled with its own UTXO + PoW “Orthodox Buff”, CKB quickly became a hot topic of community discussion.

However, before we delve into the concept of RGB++, why the CKB team chose the RGB protocol, and how they plan the development path of Bitcoin Layer2, it is necessary for us to go back to the past to gain a deeper understanding of CKB’s history, background, and original intention.

Road to Birth

In early 2018, when market attention was focused on the Ethereum ecosystem, CKB was officially launched. In July of the same year, CKB completed US$28 million in financing, with participation from many well-known investment institutions such as Polychain Capital, Sequoia China, Wanxiang Blockchain, and Blockchain Capital. Then on October 24, 2019, CKB completed an over-funding of $67.2 million on Coinlist. On November 16, 2019, the CKB mainnet “Lina” was launched.

CKB’s team background can be considered a star-studded team, with founders who have been deeply involved in the crypto industry for many years. Olaf, the founder of Polychain Capital, has also stated in interviews that he is very optimistic about the CKB team background.

• Chief Architect Jan Xie: He has long contributed to the development of Ethereum clients Ruby-ethereum and pyethereum, and has also worked with Ethereum founder Vitalik Buterin to develop Casper consensus and sharding technology. In addition, he also founded Cryptape, a company engaged in underlying blockchain platform development and consensus algorithm research.
• Co-founder Kevin Wang: He worked on corporate data solutions at IBM’s Silicon Valley Lab and co-founded Launch School, an online school for software engineers. In addition, Kevin Wang is also the co-founder of the centralized solution infrastructure Khalani, which is driven by intent. (Khalani is a multifunctional ‘collective solver’ that can be seamlessly integrated into various intent-centered applications and ecosystems.)
• Co-founder and COO Daniel Lv: Co-founder of the Ethereum wallet imToken and former CTO of the crypto exchange Yunbi. Moreover, Daniel Lv also organized the Ruby community in China for 10 years and co-founded ruby-china.org.
• CEO Terry Tai: He was a core developer of the crypto exchange Yunbi and co-founder of the tech podcast Teahour.fm.

Interestingly, although the CKB founding team has close ties with the Ethereum community, they chose to inherit the Bitcoin UTXO + PoW model in their Layer1 construction architecture. This is because the team recognized the limitations of Ethereum’s infrastructure. They realized that Ethereum’s architecture limited the overhaul of the entire system, preventing fundamental reconstruction and bold innovation. Therefore, the CKB team decided to take a different path from Ethereum and build a new blockchain.

On the other hand, the reason why the CKB team chose to rebuild a public chain may be inspired by the name Nervos. The word Nervos comes from “Nerve”, which also draws on Charles Darwin’s theory of evolution: “Only species that adapt and flexibly adjust to the constantly changing environment can survive.” This suggests that the network should adjust and evolve at its most fundamental level. However, there is another explanation about the origin of Nervos, because the co-founders of CKB are also fans of esports and anime. The german acronym for the UN special duty organization in the anime “Neon Genesis Evangelion” happens to be “NERV”.

To accelerate ecological progress, CKB began focusing on tool development from the beginning of 2020, successively launching a series of tools, including the Lumos framework based on JavaScript/TypeScript, the Polyjuice Ethereum compatibility layer allowing account models to be used on CKB, the Force Bridge cross-chain bridge connecting Ethereum and CKB, and the Tippy dApp development suite, among others. These tools have greatly lowered the threshold for developing applications. Based on these tools, 127 projects have already been launched in the CKB ecosystem, covering different tracks such as DID, wallets, and inscriptions.

Going Against the Mainstream: What Innovations Does the CKB Architecture Have?

In the context of the community’s widespread concern about TPS and PoS, CKB has chosen a completely different technical route from the mainstream. They insist there can be no compromise on censorship resistance and permissionlessness. Therefore, it was chosen to reduce L1 performance to maintain sufficient decentralization, and adopt improved PoW and simple hash functions to ensure the security and permissionless nature of the network.

Layering concept

The reason for choosing a layered architecture is based on the team’s reflection on the operation mode of the internet. The internet has built a relatively stable trust network through layered and decoupled architecture, but its trust level is limited and lacks inherent support for self-guarding protocols. CKB’s ideal cryptographic economic network infrastructure should also adopt a layered and decoupled architecture. This means defining the network through a set of protocols, not just one, while providing native support for self-guarding protocols. Therefore, the team decided to build a secure, scalable layered network where Layer1 focuses on providing security and decentralization, and Layer2 leverages the security of Layer1 to provide unlimited scalability.

As a Layer1, CKB is fully named “Common Knowledge Base”. “Common Knowledge” is defined as universally and widely recognized knowledge, understood by everyone or almost everyone, and known to be understood by others. In the context of the blockchain, “Common Knowledge” refers to the state that has been globally consensus-verified and accepted by everyone in the network, which is why we can treat cryptocurrencies stored on the public chain as currency. Nervos CKB aims to store all types of common knowledge, not limited to currency. For example, it can store user-defined cryptographic assets, including FT, NFT, etc.

Layer 2 protocols can provide unlimited scalability while ensuring the security of CKB. The layered architecture proposed by CKB was later recognized by Ethereum, which since 2019 has abandoned its previous research on execution sharding, instead focusing on Layer 2 for expansion, a practice that continues to this day.

PoW mechanism ensures decentralization

CKB firmly believes that Layer 1 is the cornerstone of the crypto economy and therefore must be a permissionless network. In contrast, PoS determines the proportion of block production based on stake weight, which leads to a conflict with the goals of decentralization and neutrality. In contrast, PoW is completely permissionless, and users only need to purchase mining machines and electricity to participate in block production. In addition, in terms of security, it is extremely difficult to forge or reconstruct a PoW chain because the computing power of each block needs to be recalculated. Vitalik also coined the concept of “weak subjectivity” to explain that the security of PoS is no less than PoW.

Therefore, the CKB team believes that although PoS is indeed better than PoW in terms of performance, if you want Layer1 to be as decentralized and secure as possible, PoW is more suitable than PoS.

Cell model achieves scalability

As the Bitcoin ecosystem rises, the debate between the account model and the UTXO model has once again attracted attention. Initially, both models were interpreted around assets, but over time, UTXO still treats assets as the core (peer-to-peer), while the account model has evolved to serve contracts, with user assets being entrusted to smart contracts and interacting with them. This has led to the security level of assets issued on the UTXO chain being higher than ERC-20 assets issued on Ethereum. In addition to security, the UTXO model has better privacy, changing addresses with each transaction, and natively supports parallel transaction processing. Most importantly, unlike the account model which computes and verifies on-chain simultaneously, the UTXO model moves the computation process off-chain and only verifies on-chain, simplifying application implementation, meaning optimization issues do not need to be considered on-chain.

CKB not only inherits the concept of Bitcoin architecture, but also abstracts the UTXO model, creating the Cell model, which retains the consistency and simplicity of Bitcoin and supports smart contracts. Specifically, Cell abstracts the nValue field in UTXO that represents token value into the two fields of capacity and data, where data saves the state and can store any data. Also, the Cell data structure contains two more fields, LockScript and TypeScript, the former mainly reflects ownership, while the latter can customize many rich functions.

In summary, the Cell model is a more general UTXO model, allowing CKB to have smart contract functionality similar to Ethereum. However, unlike other smart contracts, CKB uses an economic model for the storage of common knowledge, rather than an economic model designed to pay for decentralized computation.

High level “abstraction”

The concept of “abstraction” is no stranger to encryption users. It refers to removing the specificity of the system and creating universality, so that the system can be applied to a wider range of scenarios. The development from Bitcoin to Ethereum is actually an abstraction process. Bitcoin lacks programmability, making it difficult to build applications. Ethereum introduces virtual machines and operating environments, providing a platform for building various types of applications. Ethereum has also continued to abstract during its development process, whether it is the “account abstraction” that Vitalik mentioned many times, or the addition of precompiled “cryptographic abstraction”, etc.

Just like Ethereum is an abstraction of Bitcoin, CKB is also an abstraction of Ethereum to some extent, providing more room for creativity to smart contract developers.

1) Account abstraction

CKB implements account abstraction through the Cell model. For example, the Nervos ecological wallet UniPass has created an identity authentication system based on email and mobile phones. Users are able to log in via email and password, similar to traditional Internet accounts. The decentralized domain name protocol .bit developed by the decentralized identity service provider d.id team also takes advantage of the characteristics of the Nervos abstract account, allowing Internet users, Ethereum users, and EOS users to directly operate applications, not just limited to CKB users.

2) Cryptographic abstraction

At the heart of the cryptographic abstraction is an efficient virtual machine. CKB uses CKB-VM. With the characteristics of the RISC-V instruction set, CKB-VM allows developers to implement cryptographic algorithms using languages ​​such as C and Rust. For example, the JoyID wallet built on CKB makes full use of the advantages of Nervos CKB’s custom cryptography, eliminating the need for passwords and mnemonic words, and directly using biometric technologies such as fingerprints to create wallets and confirm transactions.

3) Runtime abstraction

The goal of CKB is to build higher-level abstractions to improve performance and throughput. As the level of abstraction increases, the Nervos network is able to move more work off-chain or onto Layer 2. For example, although XBOX is an abstract general platform, there are still some limitations, such as the inability to change the hardware. PC allows users to replace hardware such as graphics cards, CPUs, memory and hard drives. The PC is therefore a more abstract system. The goal of CKB is to transition from XBOX to PC, to meet a wider range of needs and provide greater convenience for developers.

CKB Economic Model Analysis: Mining Rewards and Inflation Mechanism

CKB’s native token is CKB (Common Knowledge Byte), which represents the global state of the blockchain that holders can occupy. For example, if you have 1,000 CKBs, you can create a Cell with a space of 1,000 Bytes, and use these 1,000 Bytes to store assets, application status, or other types of data.

The economic model of CKB is very unique. In addition to halving the mining reward every 4 years (similar to Bitcoin), it also introduces an inflationary design similar to mainstream PoS coins, with an annual increase of 13.44 billion. As of now, according to the statistical data of CKBDAPPS, the issuance of CKB is 443.79 billion, of which the circulation is 436.9 billion. The specific designs are as follows:

1) Genesis issuance:

A total of 33.6 billion were issued in the genesis block. In homage to Satoshi Nakamoto, 8.4 billion CKB were initially stored in Nakamoto’s address. The remaining 25.2 billion CKB were distributed to institutional investors, the ecology fund, the development team, and public offering investors, all of which have been unlocked.

2) Primary Issuance:

The total amount of primary issuance is 33.6 billion. Similar to Bitcoin, halving occurs every four years until all primary issuance has been mined. Currently, CKB has undergone its first halving in November 2023, and the issuance has dropped to 2.1 billion CKB per year. The second halving is expected to take place in November 2027 and will reduce issuance to 1.05 billion CKB per year. All CKBs from the primary issuance will be rewarded to miners.

Specific distribution:

• 21.5% is used for the public token sale, all will be unlocked when the mainnet launches
• 17% is allocated to the ecosystem fund, 3% is unlocked when the mainnet is launched, and the remainder will be unlocked within 3 years
• 15% is allocated to the Nervos team, with a four-year vesting period and 1/3 will be unlocked when the mainnet is launched.
• 14% is used for private placement in 2018, locked for two years
• 5% is allocated to the founding partners, locked for three years, and will not be circulated on the mainnet.
• 2% is used for the foundation reserve, which was unlocked in July 2020 and will not be circulated on the main network.
• 0.5% is used for testnet incentives, providing rewards to testnet participants through mining competitions and bug bounty programs
• The remaining 25% has been destroyed

3) Secondary issuance

In order to ensure that the income source of miners is not affected by halving and on-chain transaction volume, CKB has introduced the concept of “secondary issuance”, with a fixed issuance of 1.344 billion CKB every year. How CKB is distributed depends on how CKB is used on the network:

• Miners: Proportional to on-chain state occupancy
• NervosDAO: Proportional to the proportion of locked CKB in NervosDAO to the total issuance
• Treasury: Proportional to the proportion of CKB in circulation to the total issuance. The current governance mechanism has not been perfected, and this part is directly destroyed.

Secondary issuance can be viewed as an “inflation tax” mechanism. That is, if a user needs to store data or status on CKB, he or she needs to pay a certain amount of CKB as “state rent” to the miners. If storage is no longer needed, CKB can be unlocked and deposited into NervosDAO. Those holding users who have no storage needs can directly deposit their CKB into NervosDAO and receive subsidies to avoid the token value being diluted by secondary issuance.

According to data from the CKB Explorer, 11.4% of the secondary issue tokens are used for mining rewards, 19.1% are used for lock-up subsidies, and 69.5% are allocated to the treasury fund and destroyed.

Network computing power

CKB mining began on May 18, 2019, using the Eaglesong hash algorithm. After March 2020, it gradually transitioned from CPU, GPU, FPGA to the ASIC mining machine era, currently supporting ASIC mining (GPU and FPGA mining machines have too low CKB mining returns to profit) such as Antminer K7 and Goldshell CK6.

Currently, the network mining power is 240.06 PH/s and the mining difficulty is 2.31 EH. Mining pools currently supporting CKB include F2Pool, Poolin, 2miners, etc.

Controversy Continues. What to View Bitcoin New Layer 2 Ideas?

On February 13, CKB co-founder Cipher proposed the RGB extension protocol: RGB++, which to some extent affected CKB’s secondary market price and sparked discussions about the orthodoxy of Bitcoin Layer2. Some users believe that, compared to the EVM compatible camp, RGB++ inherits the orthodoxy of Bitcoin UTXO, and the team has deeply cultivated the Bitcoin ecosystem. Whether it’s the layered architecture, UTXO abstraction, or the recently proposed OTX protocol CoBuild Open Transaction, they are all extensions and innovations of Bitcoin ideas. However, some views believe that CKB is over-positioned. From collaborations with Huobi in 2019 to 2020, to the gaming direction from 2020 to 2022, none have made substantial progress. Therefore, this shift towards Layer2 may have speculation suspicions. In addition, regarding the meaning of the RGB++ name, Bitcoin native developers have also expressed disagreement, believing it implies it’s “Better than RGB”. Currently, CKB has launched the RGB++ roadmap, and how it performs in the future may only be answered with the test of time.

Since early 2024, the competition between Bitcoin Layer2 solutions has intensified. However, regardless of the solution adopted, they have all promoted the sustainable development and implementation of the Bitcoin ecosystem to some extent. This competition may stimulate more creativity and solutions. Fortunately, in this process, CKB seems to have always adhered to its original intention, insisting on being isomorphic with Bitcoin, and further bridging the gap.

Disclaimer：

1. This article is reprinted from [Foresightnews]. *Forward the Original Title‘重返初心：CKB 转向比特币 Layer2 赛道，炒作还是机遇？’.All copyrights belong to the original author [LINDABELL]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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