ELI5: What is Nervos?
TL;DR: Nervos is a proof-of-work (PoW) L1 blockchain optimized for app-specific L2 chains. Nervos wants its native asset (CKB) to function as a more sustainable store-of-value (SoV) than BTC and its chain to function as a more secure smart contract platform than Ethereum.
Overview of Nervos
Nervos launched its mainnet in late 2019. It consists of a high-throughput L1 PoW chain.
The Nervos’ Axon SDK enables developers to run their own high-performance and Turing complete app-specific chains with custom VMs and consensus protocols.
Nervos tackles the unsustainable economic incentives of Bitcoin
Bitcoin’s capped supply (decreasing block rewards) and BTC’s role as a SoV asset (low tx activity) might lead to unsustainable economic incentives for miners in the long-run.
Nervos tackles the heavy asset dilemma of Ethereum
In Ethereum, the value of its native asset ETH is not directly tied to the value of L2 apps built on top of Ethereum.
This presents a security risk in case the value of L2 apps exceeds the value of the L1 native asset (ETH), in which case it would become economically rational to attack L1 to steal assets on L2.
Nervos has a perpetual secondary issuance for its native asset (CKB)
In addition to a base supply of 33 billion CKBs (capped similar to BTC’s 21 million), Nervos has a fixed (1.3 billion CKBs) annual secondary issuance to incentivize miners in the longer-term.
To make CKB a SoV asset, it’s used to pay for both tx fees and storage
All L2 apps need to continuously lock up CKB in proportion to the size of their app. The more demand there is for chain space on Nervos, the more valuable CKBs become.
Locked up CKBs are subject to “state rent” via inflation
Apps that lock up CKB forego the annual inflation rewards from the secondary issuance (= aka pay state rent). This model automates state rent payments.
Chain space in Nervos is subject to a secondary market
In Ethereum, data storage is paid for once and stored forever. This results in state bloat and higher requirements for full nodes. In Nervos, apps have an economic incentive to unlock and sell their CKBs if they no longer have relevant state to store.
CKB investors can offset inflation
- Investors buy CKBs.
- Deposit CKBs into NervosDAO.
- NervosDAO receives a part of the secondary issuance to offset inflation.
- CKBs in NervosDAO resemble “treasury bonds”.
Applications on top of Nervos
Nervos has set up a $30M grant to fund application development. Summa received a grant to build a BTC <> Nervos bridge similar to tBTC between Bitcoin and Ethereum. Check out the Nervos roadmap for 2020 here.
Blockchain in China is on the rise
The Nervos team has partnered with many notable investors (Sequoia China, Polychain, Dragonfly, etc.) to boost the blockchain innovation coming out of China.
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