Amid a widespread price correction affecting the majority of the top 100 cryptocurrencies, one digital asset has defied the trend, surging to impressive heights. Nervos Network, along with its native token CKB, has not only recorded significant gains but has also climbed to the 79th rank in the market, raising questions about the factors behind its surge.
Nervos Network Decoded
Nervos Network is a proof-of-work (PoW) Layer 1 (L1) blockchain designed to optimize application-specific Layer 2 chains. The network aims to establish its native asset, CKB, as a more sustainable store of value (SoV) compared to Bitcoin (BTC) while providing a more secure smart contract platform than Ethereum (ETH).
Bitcoin’s capped supply and decreasing block rewards raise concerns about long-term economic incentives for miners.
Notably, the Nervos Network tackles this issue by introducing a fixed annual secondary issuance of CKBs and the base supply, providing long-term incentives for miners.
Nervos Network also addresses the potential security risk associated with Ethereum. In Ethereum, the value of its native asset, ETH, is not directly linked to the value of Layer 2 apps built on top of it.
Nervos Network aims to mitigate this risk by ensuring that CKB is used for transaction fees and storage, creating a stronger economic relationship between the native asset and the overall network.
How Secondary Issuance And State Rent Drive Sustainability
Nervos utilizes a perpetual secondary issuance model to increase CKB’s SoV properties. This model incentivizes users to continuously lock up CKB in proportion to the size of their applications.
Furthermore, locked CKBs are subject to “state rent” through inflation, which automates state rent payments and ensures a sustainable economic model.
Nervos Network introduces a secondary market for chain space, enabling apps to unlock and sell CKBs without requiring relevant storage.
Investors can offset inflation by purchasing CKBs and depositing them into NervosDAO, a mechanism that receives a portion of the secondary issuance to counterbalance inflation. Interestingly, this resembles “treasury bonds” and offers potential investment opportunities.
Approaching ATH Amidst Bitcoin Integration Announcement
Having delved into the fundamentals, CKB has recently experienced a significant surge in value, breaking out of a long consolidation phase that lasted almost two years.
After trading in a…
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