Nervos CKB in order to build a long-running encryption economic model

Time:2019-8-31

In the 31/32 Miao ape science and technology class, we analyzed the problems of block chain and state explosion from the perspective of economic model. The economic model of Nervos CKB solves the existing problems and puts forward innovative design, such as Nervos DAO, basic issuance + secondary issuance policy.

Secret Ape Science and Technology Block Chain Classroom No. 33


Block Chain and State Explosion

Simply put, the block chain is an open book, and the status of the block chain refers to the current state of the book.

At present, most block chains have the problem of state storage. Especially for performance-oriented block chains, when performance is achieved, state explosion will occur, because the data written will be more huge. But at present, most block chains do not consider the problem of state storage, because the public chain is still trapped in the performance bottleneck.

This is a tragedy of the Commons in the block chain version, where users can permanently write data into the account book of the block chain for only one transaction fee, and the cost of data storage is not borne by themselves. Miners will bear the cost of state storage only when they receive the first handling fee, so it will cause the problem of “one-time payment, permanent occupancy”.

All miners maintain a public account book. Except for the users who write the data, the people who maintain the account book have no right to modify the account book. Otherwise, it will lead to inconsistencies in the account books. Thus, the status of the block chain can only accumulate continuously, leading to the problem of state explosion:

  • Because the validation of transactions needs to read the state, the state increases continuously, which makes the validation of transactions slow.
  • Packaging and validation of new blocks will also be slower;
  • In synchronization, the data of the surrounding node is requested, and the surrounding node prunes the state periodically to reduce its storage pressure. When the synchronization time is too long, the requested data will change, thus reducing the success rate of node synchronization.

Most importantly, the state explosion of block chains will increase the cost of participating in the operation of the whole node (e.g., requiring high hardware specifications), which will reduce the willingness of community members to participate in the operation of the whole node: if the storage space occupies too fast, only a few nodes will be able to afford the operation cost. That will affect the de-centralization and anti-censorship ability of block chains.

In a block chain system, both computing and bandwidth are instantaneous resources — if these resources are exhausted, the next cycle or the next block will be updated and reusable. State storage is a long-term resource (for the existing intelligent contract platform, the state storage space that has been occupied can not be updated), and there has been no good solution for how to charge for storage and how to link with the development of the ecosystem.

Highlights of Nervos CKB’s Economic Model

The greatest highlight of Nervos CKB economic model is that the storage space on the chain is regarded as a public resource: each native token CKB represents a unit of storage space. That is to say, if 300 million CKB Tokens are issued, it means that the whole CKB network has 300 million Kb of state storage space. The holder can write any data or contract in the storage space, and the miner can provide security for these spaces while obtaining incentives through workload certification mechanism.

CKB is divided into “basic issue” and “secondary issue”:

Basic issuance

The basic issuance strategy of CKB is similar to that of Bitcoin. Block awards are reduced by about half every four years until all the basic issuance is mined by miners.

Secondary issue

The secondary issue of CKB is a constant incremental reward. Unlike the basic issue, which is halved every four years, the block reward issued by the secondary issue is the same every year and will continue to increase.

NervosDAO

NervosDAO can help long-term investors fight against the inflation effect caused by secondary issuance. Assuming that I hold 10,000 original CKB tokens and expect this to be a long-term investment, I can lock the tokens into the NervosDAO contract in exchange for certain interest, which will not be affected by the inflation effect of secondary issuance. Loss.

Two-pronged issuance policy

Before the end of the basic issuance, the miners’income was as follows: “basic issuance + secondary issuance + commission”, which had a similar distribution curve with Bitcoin. In the first three halving cycles, the network will issue most of the block awards. Unlike Bitcoin, when the basic issue is completed, there will still be secondary distribution as the role of block awards.

For example, in the case of “60% of all CKBs are occupied by CKBs, 35% are locked in Nervos DAO, and 5% are freely circulating CKBs”, 60 CKBs will be allocated to miners and 35 CKBs will be allocated to the owners of DAO’s contracts if 100 CKB is awarded as a secondary issue. 5 CKB will be handed over to community governance.

Secondary issuance is first and foremost a charge for state occupancy, or a rent, which is to solve the problem of “one-time payment, permanent occupancy” mentioned in the previous paragraph. For developers, the holdings of KBs can be used. As long as the data occupies this space, they have to pay the cost of occupying space, which is equal to the burden of inflation caused by secondary issuance.

For storage space users, the fees (rents) paid will be distributed to miners through secondary distribution, which will allow miners to continue to invest in the protection of the entire network when the basic distribution gradually decreases due to the halving of block incentives.

Finally, there is a part of the free-flowing KB (which does not occupy storage space or lock into the Nervos DAO). The secondary issuance of this part of token will be handled by the governance mechanism, and the “secondary issuance” of this part will be burned down before the consensus of the mechanism is reached in the community.

Such mechanism design will encourage CKB holders to develop on CKB, either deposit CKB in NervosDAO or lease CKB to other developers. Another interpretation of the mechanism design is that when the holder enjoys absolute liquidity of CKB, it will also bear part of the dilution caused by secondary issuance.

Basic issuance plus secondary issuance will bring long-term predictable income to miners and holders. A stable issuance policy will present a linear development to the holding cost or mining cost of holders, miners and developers, and will not cause instantaneous fluctuations by changing the issuance policy and change the original participants. Motivation for participation.

Storage Problems Solved by CKB Design

CKB secondary issuance and NervosDAO’s precise design provide solutions to the state explosion problem of block chains: a fixed rent is charged to developers in long-term occupied state, and “one-time payment, permanent occupancy” no longer exists.

All data recorded on CKB is data of global consensus, but when a developer thinks that some data is no longer important, he can delete this data and replace other more important data to his CKB. New data will be saved and deleted through the consensus of all nodes. The data will remain on the historical nodes.

Because of the global consensus, the maximum storage space is the total distribution of CKB, which makes the cost of participating in the whole node predictable. At the same time, because of the characteristics of CKB “calculation under the chain, verification on the chain”, the cost of participating in the whole node will be sufficiently low, which will also bring better decentralization experience.

There are two kinds of nodes most related to state storage on CKB, one is the full node that participates in global state consensus, the other is the historical node that records historical data. So when we say global state, we mean limited storage space. Limited resources will bring a series of effects, that is, more developers will occupy it. After CKB, the supply of CKB will be smaller, and the value of CKB will increase under the condition of constant demand. At the same time, due to the increase of related applications, the processing costs will also increase, and the income of miners will be increased.