Nervos Network (CKB): one of the first modular blockchains with a layered architecture

This approach provides a relatively high level of security. Still, at the same time, it makes the development process much more complicated: you cannot update a single element of a monolithic blockchain without affecting the entire network.

Taking into account the drawbacks of the traditional architecture of many blockchains, the developers of Nervos Network presented their multi-layered network, which became unique at the time of its appearance — we will tell you about it in this article.

What is Nervos Network?

Nervos Network is a multi-tiered modular decentralized blockchain protocol developed based on the Proof-of-Work consensus algorithm. Nervos Network was founded in 2018, but the blockchain only launched in November 2019. Some of the founders of Nervos Network were also among the developers of the second leading blockchain after bitcoin, Ethereum.

It can be said that Nervos Network and its solutions, due to its unique architecture, became the basis for the creation of many newer blockchains, such as:

How does the Nervos Network blockchain work?

The main features of the Nervos Network are its modular architecture and several layers of the network, each with its function.

The first layer, Common Knowledge Base (CKB), is the core of the Nervos Network ecosystem and is designed to provide security, flexibility, interoperability, and decentralization of the entire network. In addition, the Common Knowledge Base is the base layer for creating second-layer solutions. The security of the first layer of the blockchain is ensured by the Proof-of-Work consensus algorithm, which is a modified version of the mechanism embedded in the Bitcoin protocol. The first level also has its own RISC-V virtual machine, which provides network stability and flexibility to interact with various second-level networks.

Tiers 2 and above operate separately from the underlying blockchain and are designed to provide Nervos Network functionality by supporting smart contracts and decentralized applications (DApps). As in many Tier 2 solutions, transactions in the upper tiers are validated in the underlying blockchain Common Knowledge Base, which provides high security. Popular second-tier networks such as Arbitrum and Optimism use a similar approach: they collect transactions into packets and send them to the first tier (Ethereum) for confirmation.

The first second-tier solution based on the Common Knowledge Base blockchain is Godwoken, created by the Nervos Network team. Godwoken uses the exact mechanism as the second-level Optimism solution — Optimistic Rollups, where the network "optimistically" assumes that all transactions are valid but simultaneously allows them to be challenged within a specific time. This approach significantly improves network optimization and, as a result, transaction speed. The Godwoken Layer 2 solution, like many other similar networks, is compatible with the Ethereum Virtual Machine (EVM) but is focused on the GameFi market, which has been actively developing recently and is one of the most trending areas of the crypto industry, which may have a positive impact on the development of the Nervos Network ecosystem.

Nervos Network cryptocurrency

The decentralized protocol Nervos Network has a native cryptocurrency whose name comes from its first-level blockchain, CKByte (CKB). The CKB cryptocurrency has a unique tokenization:

12% of CKByte's issuance is allocated for miner rewards;
19.4% is allocated for various kinds of compensation;
68.6% of CKB coins are earmarked for gradual burning.

As of August 2024, the total number of CKB is 45.3 billion, of which 44.6 billion are circulating on the market. At the same time, the CKByte cryptocurrency has no maximum issuance: this means that new coins can be generated in the future. However, Nervos Network has a protocol to protect against inflation called NervosDAO, which also ensures a fair distribution of CKByte for long-term cryptocurrency holders.

Nervos Network outlook

Despite its many features and advanced ecosystem architecture, the CKByte cryptocurrency is repeating the negative dynamics of many altcoins. However, it is worth noting that the price of CKB has not fallen very much relative to its all-time high, which was reached in April 2021 — only about three times, which is much less compared to many other altcoins. At the same time, in terms of market capitalization in April 2024, CKByte surpassed the same indicator when the CKB price reached its absolute maximum.

However, one of the drawbacks of Nervos Network is its underdeveloped ecosystem, on which the project lags far behind leading protocols such as Ethereum, Solana and BNB Smart Chain, and even second-tier solutions Arbitrum, Base and Optimism.