: title: Nervos Network: Expanding Bitcoin's Core Technological Primitives with CKB

Nervos Network aims to expand on Bitcoin's core technological primitives with (Common Knowledge Base (CKB) a scalable Layer-1 blockchain that enables Layer-2 support for Bitcoin.

output: Key Insights

Primer

Common Knowledge Base (CKB) is a scalable Layer-1 blockchain that enables Layer-2 support for Bitcoin. CKB employs a Proof-of-Work consensus mechanism like Bitcoin but generalizes Bitcoin’s limited UTXO model and scripting capabilities. To improve Bitcoin’s limited programmability, Nervos Network leverages a custom Cell Model for state storage and a virtual machine (CKB-VM) for transaction execution. The cell model is core to CKB’s data structure and features a dual script model that allows any data to be stored and verified onchain. CKB-VM is CKB's execution engine for running smart contracts and decentralized applications. The VM utilizes the RISC-V instruction set, a flexible and simple open-source hardware architecture set (ISA) that supports multiple programming languages, including popular ones like C and Rust.

Launched on mainnet in November 2019, Nervos Network has since evolved into one of the few independent blockchains scaling Bitcoin. Nervos scales Bitcoin through RGB++, an asset issuance protocol inspired by the RGB protocol. RGB++ allows users to issue assets on Bitcoin mainnet that are mapped to CKB cells through isomorphic binding. Although CKB serves as the data storage and verification layer for RGB++ assets and transactions, these assets inherit Bitcoin security. That is, these assets cannot be double spent as each asset is mapped to a UTXO on Bitcoin. Beyond asset issuance, Nervos aims to enable improved programmability for Bitcoin with the RGB++ layer, an extension of the RGB++ protocol that enables RGB++ assets to be mapped across other UTXO blockchains. The RGB++ layer serves as the smart contract and interoperability layer for RGB++ assets, enabling developers to build and deploy more flexible decentralized applications similar to those in EVM-compatible environments.

For a full primer on Nervos, refer to our Initiation of Coverage report.

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Key Metrics

Financial Analysis

Nervos Network’s native token CKByte (CKB) plays an essential role in maintaining the network’s security and incentivizing efficient storage. CKB serves the following key functions on the network:

In Q3’24, CKB’s marketcap rose 36% QoQ to ~$752 million, recovering from a 38% decrease in Q2’24. Despite broader market contractions and mixed price sentiments in Q3’24, CKB’s price remained resilient in Q3’24, with its price rising by 35% QoQ to $0.017. This growth in marketcap and price was largely fueled by CKB’s exchange listing event in mid-September by the South Korean exchange Upbit. The listing reignited significant market interest in CKB, especially from the asian market, driving the token’s price to a quarterly high of $0.018. Consequently, CKB’s marketcap ranking improved from 119 in Q2 to 89 by the close of Q3’24.

Secondary Issuance

CKB manages state bloat through two methods. Firstly, to store data onchain, users must lock CKB tokens. Rather than directly charging a fee for users locking CKB tokens to pay for state rent, CKB indirectly charges fees through an inflationary mechanism known as secondary issuance. Each year, 1.344 billion CKB tokens are minted through secondary emissions and distributed to miners, Nervos DAO depositors, and eventually, an onchain protocol treasury. As such, the network’s secondary issuance introduces inflation targeted at users storing data, as locked CKB tokens are automatically exposed to value dilution, which is an indirect way of paying for State Rent. As of Q3’24, over 700 million CKB tokens have been distributed to miners as state rent, ~1.20 billion CKB tokens have accrued to Nervos DAO depositors, and over 4.7 billion CKB tokens meant for the proposed Treasury Fund have been burned since the protocol’s treasury remains inactive as of Q3’24.

Nervos CKB revenue is measured as total transaction fees and is distributed to Miners through Nervos CKB”s Proof of Work mechanism (along with a portion of the network’s secondary issuance. In Q3 2024, network revenue increased by 47% QoQ to $568 million, driven by a 36% QoQ rise in circulating market cap. This growth was also fueled by CKB’s exchange listing on Upbit in September, which boosted trading activity and price, significantly increasing transaction fees in USD terms. Additionally, the launch of key infrastructure developments, including the RGB++ Layer and Fiber Network, further enhanced network activity by enabling more smart contract transactions, particularly for BTCFi applications.

Network Analysis

Common Knowledge Base transactions and new addresses rose 34% QoQ to