With the launch of ETFs, the explosion of the BRC-20 ecosystem, and the narrative of halving, the market's attention seems to be refocused on the Bitcoin ecosystem. Against this backdrop, CKB, as a long-established public chain project, has also been active recently. After announcing the adjustment of its mainnet positioning to Bitcoin Layer 2, it launched an asset protocol called RGB++. Leveraging the momentum of Bitcoin Layer 2's development, along with its inherent UTXO + PoW "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 to develop Bitcoin Layer 2, it is necessary to look back and gain a deeper understanding of CKB's history, background, and original intentions.
The Path to Birth#
In early 2018, when the market's focus was on the Ethereum ecosystem, CKB officially launched. In July of the same year, CKB completed a $28 million financing round, with participation from several well-known investment institutions including Polychain Capital, Sequoia China, Wanxiang Blockchain, and Blockchain Capital. Subsequently, on October 24, 2019, CKB completed an oversubscribed fundraising of $67.2 million on Coinlist. On November 16, 2019, the CKB mainnet "Lina" went live.
The CKB team is considered a star team, with founders who have been deeply involved in the crypto industry for many years. Olaf, the founder of Polychain Capital, has also expressed great confidence in the CKB team's background in interviews.
- Chief Architect Jan Xie: He has long contributed to the Ethereum clients Ruby-ethereum and pyethereum, and has collaborated with Ethereum founder Vitalik Buterin on the development of the Casper consensus and sharding technology. Additionally, he founded Cryptape, a company engaged in the development of underlying blockchain platforms and consensus algorithm research.
- Co-founder Kevin Wang: He previously worked on enterprise data solutions at IBM's Silicon Valley lab and co-founded an online school for software engineers called Launch School. Furthermore, Kevin Wang is also a co-founder of Khalani, an intent-driven centralized solver infrastructure. (Khalani is a multifunctional "collective solver" that can be seamlessly integrated into various intent-centric applications and ecosystems.)
- Co-founder and COO Daniel Lv: Co-founder of the Ethereum wallet imToken and former CTO of the cryptocurrency exchange Yunbi. In addition, Daniel Lv organized the Ruby China community for 10 years and co-founded ruby-china.org.
- CEO Terry Tai: He was a core developer at the cryptocurrency exchange Yunbi and co-founder of the tech podcast Teahour.fm.
Interestingly, despite the close ties between the CKB founding team and the Ethereum community, they chose to inherit the Bitcoin UTXO + PoW model for their Layer 1 architecture. This decision stemmed from the team's recognition of the limitations of Ethereum's infrastructure. They realized that Ethereum's architecture restricted a thorough reform of the entire system, making it impossible to fundamentally restructure and innovate boldly. Therefore, the CKB team decided to take a different path from Ethereum and build a new blockchain.
On the other hand, the reason the CKB team chose to rebuild a public chain may be inspired by the name Nervos. The term Nervos is derived from "Nerve," which also draws from Charles Darwin's theory of evolution: "Only species that adapt and flexibly adjust to the ever-changing environment can survive." This implies allowing the network to self-adjust and evolve at the lowest level. However, there is another interpretation of the origin of Nervos, as CKB's co-founders are also fans of esports and anime, and the abbreviation for the "United Nations Special Agency" in the anime "Neon Genesis Evangelion" happens to be "NERV."
To accelerate ecological progress, CKB began focusing on developing tools from early 2020, gradually launching a series of tools, including the JavaScript/TypeScript-based framework Lumos, the Ethereum-compatible layer Polyjuice that allows the use of account models on CKB, the cross-chain bridge Force Bridge connecting Ethereum and CKB, and the dApp development suite Tippy. These tools significantly lowered the barrier to application development. Based on these tools, the CKB ecosystem has launched 127 projects covering various tracks such as DID, wallets, and inscriptions.
Going Against the Mainstream: What Innovations Does CKB Architecture Offer?#
In a context where the community is generally focused on TPS and PoS, CKB has chosen a completely different technical route from the mainstream. They firmly believe that there can be no compromise on issues of censorship resistance and permissionlessness. Therefore, they opted to lower L1 performance to maintain sufficient decentralization and adopted an improved PoW and simple hash functions to ensure the network's security and permissionlessness.
Layered Concept#
The choice of a layered architecture is based on the team's reflection on the operating model 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. The ideal infrastructure for CKB's cryptoeconomic network should also adopt a layered and decoupled architecture. This means defining the network through a set of protocols rather than just one protocol, while providing native support for self-guarding protocols. Therefore, the team decided to build a secure and scalable layered network, where Layer 1 focuses on providing security and decentralization, while Layer 2 leverages Layer 1's security to provide unlimited scalability.
As Layer 1, CKB stands for "Common Knowledge Base." "Common Knowledge" is defined as knowledge that is universal and widely recognized, known by everyone or almost everyone, and understood that others also understand it. In the context of blockchain, "common knowledge" refers to states that are verified by global consensus and accepted by everyone in the network, which is also the property that allows us to treat cryptocurrencies stored on public chains as currency. Nervos CKB aims to store all types of common knowledge, not limited to currency. For example, it can store user-defined crypto assets, including FT, NFT, etc.
Layer 2 protocols can utilize CKB's guarantee of security while providing unlimited scalability. The layered architecture proposed by CKB has also been recognized by Ethereum, which abandoned its previous research on execution sharding in 2019 and shifted to Layer 2 as the core for scaling, continuing to this day.
PoW Mechanism Ensures Decentralization#
CKB firmly believes that Layer 1 is the cornerstone of the cryptoeconomy, and therefore it must be a permissionless network. In contrast, PoS determines block production ratio allocation based on staking weight, which leads to conflicts with decentralization and neutrality goals. In comparison, PoW is completely permissionless; users only need to purchase mining machines and electricity to participate in block production. Additionally, in terms of security, it is extremely difficult to forge or reconstruct a PoW chain because it requires recalculating the computational power of each block. Vitalik has also introduced the concept of "weak subjectivity" to explain that the security of PoS is not lower than that of PoW.
Therefore, the CKB team believes that although PoS does outperform PoW in terms of performance, if the goal is to keep Layer 1 as decentralized and secure as possible, PoW is more suitable than PoS.
Cell Model Achieves Scalability#
With the rise of the Bitcoin ecosystem, the debate between account models and UTXO models has garnered renewed attention. In the early days, both models were interpreted around assets, but over time, UTXO continued to view assets as core (peer-to-peer), while the account model has evolved to serve contracts, with users' assets being held in smart contracts and interacting with them. This has led to the security level of assets issued on UTXO chains being higher than that of ERC-20 assets issued on Ethereum. Besides security, the UTXO model offers better privacy, as each transaction changes addresses and naturally supports parallel transaction processing. Most importantly, unlike the account model, which computes and verifies on-chain simultaneously, the UTXO model places the computation process off-chain, with only verification occurring on-chain, simplifying the implementation of applications and eliminating the need to consider optimization issues on-chain.
CKB not only inherits the architectural ideas of Bitcoin but also abstracts the UTXO model to create the Cell model, which retains Bitcoin's consistency and simplicity while gaining the ability to support smart contracts. Specifically, the Cell abstracts the nValue field representing token value in UTXO into two fields: capacity and data, where data stores the state and can hold arbitrary data. Additionally, the Cell data structure includes two fields, LockScript and TypeScript, where the former mainly reflects ownership, and the latter can be customized with many rich functions.
In summary, the Cell model is a more general UTXO model that gives CKB smart contract capabilities similar to Ethereum. However, unlike other smart contracts, CKB adopts an economic model designed for common knowledge storage rather than for payment for decentralized computation.
High-Level "Abstraction"#
The concept of "abstraction" is not unfamiliar to crypto users; it refers to removing the specificity in a system to create generality, making the system applicable to a broader range of scenarios. The development from Bitcoin to Ethereum is essentially a process of abstraction. Bitcoin lacks programmability, making it difficult to build applications. Ethereum, on the other hand, introduced a virtual machine and runtime environment, providing a platform for building various types of applications. Throughout its development, Ethereum has also continuously engaged in abstraction, whether it is the "account abstraction" frequently mentioned by Vitalik or the "cryptographic abstraction" achieved by adding precompiles.
Just as Ethereum is an abstraction of Bitcoin, CKB is, to some extent, an abstraction of Ethereum, providing smart contract developers with more freedom to innovate.
- Account Abstraction
CKB achieves account abstraction through the Cell model. For example, the Nervos ecosystem wallet UniPass has created an identity authentication system based on email and mobile phones. Users can log in using their email and password, similar to traditional internet accounts. The decentralized identity service provider d.id team has also developed the decentralized domain protocol .bit, utilizing the characteristics of Nervos's abstract accounts, allowing internet users, Ethereum users, and EOS users to directly interact with applications, not just limited to CKB users.
2) Cryptographic Abstraction
The core of cryptographic abstraction is an efficient virtual machine. CKB uses CKB-VM, which, leveraging the characteristics of the RISC-V instruction set, allows developers to implement cryptographic algorithms using languages such as C and Rust. For instance, the JoyID wallet built on CKB fully utilizes the advantages of Nervos CKB's custom cryptography, enabling wallet creation and transaction confirmation using biometrics like fingerprints without the need for passwords or mnemonic phrases.
3) Runtime Abstraction
CKB aims to build higher-level abstractions to improve performance and throughput. As the level of abstraction increases, the Nervos network can migrate more work off-chain or to Layer 2. For example, while the XBOX is an abstract general platform, it still has some limitations, such as hardware that cannot be changed. In contrast, a PC allows users to replace hardware components like graphics cards, CPUs, memory, and hard drives. Therefore, a PC is a more abstract system. CKB's goal is to transition from XBOX to PC, thereby meeting more needs and providing more convenience for developers.
Analysis of CKB's Economic Model: Mining Rewards and Inflation Mechanism#
The native token of CKB is CKB (Common Knowledge Byte), representing the global state of the blockchain that holders can occupy. For example, if you own 1,000 CKB, you can create a Cell with a space of 1,000 Bytes and use these 1,000 Bytes to store assets, application states, or other types of data.
CKB's economic model is very unique. In addition to halving mining rewards every four years (similar to Bitcoin), it also introduces an inflation design similar to mainstream PoS coins, issuing 1.344 billion new tokens each year. As of now, according to statistics from CKBDAPPS, the total issuance of CKB is 44.379 billion, with a circulating supply of 43.69 billion. The specific design is as follows:
1) Genesis Issuance:
A total of 33.6 billion tokens were issued in the genesis block. To pay tribute to Satoshi Nakamoto, 8.4 billion CKB were deposited into Satoshi's address at the time of issuance. The remaining 25.2 billion CKB were allocated to institutional investors, ecological funds, development teams, and public investors, all of which have been fully unlocked.
2) Primary Issuance:
The total amount of primary issuance is 33.6 billion. Similar to Bitcoin, it halves every four years until all primary issuance is mined. Currently, CKB has undergone its first halving in November 2023, reducing the issuance to 2.1 billion CKB per year. The second halving is expected to occur in November 2027, reducing the issuance to 1.05 billion CKB per year. All CKB from primary issuance will be rewarded to miners.
In terms of specific allocation:
- 21.5% is allocated for public token sales, fully unlocked at the mainnet launch.
- 17% is allocated to the ecosystem fund, with 3% unlocked at the mainnet launch and the remainder unlocked over three years.
- 15% is allocated to the Nervos team, with a four-year vesting period and 1/3 unlocked at the mainnet launch.
- 14% is for the private placement in 2018, locked for two years.
- 5% is allocated to founding partners, locked for three years and will not circulate on the mainnet.
- 2% is for the foundation's reserve fund, which was unlocked in July 2020 and will not circulate on the mainnet.
- 0.5% is for testnet incentives, providing rewards to testnet participants through mining competitions and bug bounty programs.
- The remaining 25% has been burned.
3) Secondary Issuance
To ensure that miners' income sources are not affected by halving and on-chain transaction volumes, CKB introduces the concept of "secondary issuance," issuing a fixed amount of 1.344 billion CKB each year. The specific allocation method depends on how CKB is used on the network:
- Miners: Proportional to on-chain state occupancy.
- NervosDAO: Proportional to the amount of CKB locked in NervosDAO relative to the total issuance.
- Treasury: Proportional to the amount of circulating CKB relative to the total issuance. Currently, the governance mechanism is not yet perfected, and this portion is directly burned.
Secondary issuance can be viewed as a "inflation tax" mechanism. If users need to store data or states on CKB, they must pay a certain amount of CKB to miners as "state rent." If storage is no longer needed, they can unlock CKB and deposit it into NervosDAO. Those users without storage needs can directly deposit their CKB into NervosDAO and receive subsidies to avoid dilution of token value from secondary issuance.
According to data from the CKB Explorer, 11.4% of the secondary issuance tokens are used for mining rewards, 19.1% for locked subsidies, and 69.5% are allocated to the treasury fund and burned.
Network Hashrate#
CKB mining began on May 18, 2019, using the Eaglesong hashing algorithm. After March 2020, it gradually transitioned from CPU, GPU, and FPGA to ASIC mining, currently supporting ASIC miners such as Antminer K7 and Goldshell CK6 (mining CKB with GPU and FPGA miners yields insufficient profits).
Currently, the network mining hashrate is 240.06 PH/s, with a mining difficulty of 2.31 EH. Current mining pools supporting CKB include F2Pool, Poolin, and 2miners.
Controversies: How to View New Ideas for Bitcoin Layer 2?#
On February 13, CKB co-founder Cipher proposed the RGB expansion protocol: RGB++, which to some extent affected CKB's secondary market price and sparked discussions about the legitimacy of Bitcoin Layer 2.
Some users believe that compared to EVM-compatible solutions, RGB++ inherits the orthodoxy of Bitcoin UTXO, and the team has deep roots in the Bitcoin ecosystem. Whether it is the layered architecture, UTXO abstraction, or the recently proposed OTX protocol CoBuild Open Transaction, all are extensions and innovations of Bitcoin's ideas. However, there are also viewpoints that CKB has too many positions. From 2019 to 2020, collaborating with Huobi, and from 2020 to 2022, focusing on gaming, it has not made substantial progress. Therefore, this shift towards Layer 2 may be suspected of hype.
Additionally, regarding the meaning of the name RGB++, the RGB developers have also expressed disagreement, believing it implies "Better than RGB." Currently, CKB has released the RGB++ roadmap, and how it performs in the future may only be answered through the test of time.
Since the beginning of 2024, competition among Bitcoin Layer 2 solutions has intensified. However, regardless of which solution is adopted, they all contribute to the sustainable development and implementation of the Bitcoin ecosystem to some extent. This competition may spark more creativity and solutions. Fortunately, throughout this process, CKB seems to have consistently adhered to its original intentions, insisting on being isomorphic with Bitcoin and further bridging its shortcomings.