Re-examining CKB in 2021

Original title: "A journey of a thousand miles begins with a single step | Re-examining CKB in 2021"

Original source: TalkChain

Not long ago, the famous hedge fund Bridge Water released a research report, and Ray Dailo's attitude towards Bitcoin changed dramatically. He wrote in a Bridge Water research report, "Bitcoin is a remarkable achievement."

No matter how cautious Dailo, the author of "The Debt Crisis", is in his words, it is undeniable that he has re-examined the value of Bitcoin. A fund industry tycoon who is famous for his heavy holdings in Moutai also publicly stated on Weibo that "I have purchased 1% of the Bitcoin ETF fund. Although it is a bit late, I will practice it once I figure it out! I hope to maintain my curiosity about new things!"

Dan Bin, chairman of Oriental Harbor Investment Management Co., Ltd. and author of "The Rose of Time", said on Weibo, "I have purchased 1% of the Bitcoin ETF fund. Although it is a bit late, I will practice it once I figure it out! I hope to maintain my curiosity about new things!

You see, big guys are never afraid of being slapped in the face. Not being bound by old acquaintances and not being stubborn in one's own opinions should be one of the most valuable qualities of an investor. The so-called investment is always a bet on the future, not the past.

CKB's original intention to break out of the circle has never changed

What kind of public chain is Nervos?

In my understanding, Nervos is not a public chain, but a blockchain system based on CKB. From the beginning of its design, Nervos hopes to be a multi-layer network. The underlying CKB network is mainly used for verification and storage of core data, and all architectures based on the CKB main network (including Rollup, sidechain, etc.) are collectively referred to as Nervos.

From the beginning, Nervos has had great ambitions. What it wants to do is to build a public chain system that can be truly commercialized and "out of the circle".

The most important thing for commercial use and going beyond the circle is "stability". Therefore, the Nervos team emphasizes security the most, and the contract code must be audited continuously. While other public chains are busy building a flourishing ecosystem, the CKB team is steadily consolidating the underlying foundation.

Because Nervos has always focused on adoption, or applications, to attract more people who really need blockchain. From this perspective, a secure, stable, and developer-friendly underlying layer is crucial. The height of a building depends on how deep its foundation is. So far, what CKB has been doing is to lay a solid foundation.

From this perspective, I think the CKB team is worthy of respect. Because I can imagine that there must be a lot of people, whether they are institutions, big investors, communities or partners, who will keep telling the team that you should go in this direction, you should try DeFi, you should pull the market. Although only God knows, you know and I know, this is not a long-term way to play.

But in the end, they were not shaken and persisted. Like all investors, I look forward to the explosion of the Nervos ecosystem, but I also know that if you want to go the "out of the circle" path, you are destined to go through a period of obscurity.

Note: Blue is CKB/USD price, yellow is CKB/BTC price

Fortunately, CKB's performance did not disappoint me. The closing price on January 12 was 0.004436, and the closing price yesterday was 0.01134, with an overall increase of 155.6%.

But compared to the price, I would like to share with you Nervos's quarterly report. Brocade clothes should not be worn at night, and pearls should not be covered in dust.

Infrastructure and Interoperability 2.0

To "go beyond the circle", Nervos must have a secure and stable underlying layer. In the second half of 2020, everyone was discussing Layer 2, zk-SNARK and Rollup, but there was a premise that everyone had enough trust in the underlying network of ETH.

To put it bluntly, Ethereum’s current status is the result of the blood (and money) of many project parties. As a latecomer, CKB cannot and should not let developers and users go through the same process again - so the underlying security should be done well from the beginning.

Building a second-layer network on an insecure base layer is like building a tall building on a dangerous wall. Therefore, in 2020, the Nervos team is focusing on the development of CKB's infrastructure, and the most important thing among them is stability and security.

In addition to this, the developer tools need to be improved. The UTXO model has its advantages, but it also brings a relatively high development threshold for developers. Therefore, the team needs to abstract an account model based on the UTXO model to facilitate developers who are accustomed to the account model.

These are the two tools Animagus and Polyjuice made by Nervos in 2020.

Animagus can bridge the gap between the UTXO model and the account model, while Polyjuice can make CKB directly compatible with Ethereum code. In other words, from now on, developers can develop on CKB just like developing dApps on Ethereum.

In addition, the team has developed two components: Force Bridge and Godwoken. Force Bridge is a cross-chain bridge that supports connecting data and assets of other blockchains such as Ethereum. Godwoken is a framework that can build Rollup on CKB.

Together with the previous sidechain framework Muta, the core infrastructure in the Nervos strategy has been developed. However, these tools have not yet been fully launched to the market. In the words of the team, 60% of the products are ready, but they want a better product.

Security and stability are areas where CKB will never compromise. Therefore, these products still need to wait for multiple rounds of audits by security companies, but they should be launched before Q1 2021.

Another one is interoperability 2.0, which is also the biggest difference between CKB and other public chains. Interoperability 2.0 mainly involves three components: PW Lock, Force Bridge, and Layer 2 (Rollup solution Godwoken and EVM compatibility layer Polyjuice).

Layer 2 We have mentioned Godwoken and Muta before, which are Layer 2 solutions developed by the CKB team.

Figure 1: PW Lock demo

PW Lock allows dApps to directly call wallets of different cryptographic primitives. How to understand this sentence? It is equivalent to a dApp on CKB that can interact directly through Metamask, through Tron's wallet, or even directly through WeChat QR code scanning (a sample version has been released: https://pay.lay2.dev/#/).

Users do not need to understand what CKB is, nor do they need to understand what a wallet is. Blockchain will become an "unknown" underlying layer, just like the TCP/IP protocol.

This is something that other public chains cannot do, and it is also the first step for Nervos to break out of the circle. Only by making the entrance wide enough and the threshold for user adoption low enough can it be possible to acquire users outside the circle.

Next is Force Bridge, a one-way cross-chain bridge from BTC to CKB, which already has a mature decentralized solution. The two-way bridge between ETH and CKB has been deployed and tested on the test networks of both parties, but for security reasons it will not be officially launched before the audit is completed.

To put it simply, Force Bridge and PW Lock can seamlessly connect existing Ethereum users (refer to GliaDEX, which is a product based on the Gilaswap framework produced by CKB, which can realize cross-chain exchange of ETH/CKB and has been deployed on the test network).

In the long run, Force Bridge and PW Lock will be the beginning of exposure to crypto assets for tens of millions of new users. Just like the Internet, users do not need to understand what crypto assets are, they just need to know that their assets are safe and controllable.

Reasons to be optimistic about CKB

In my previous article, I wrote a point of view that the value discovery process of mining coins will be longer and often starts with miners. The growth of computing power indicates an increase in network security on the one hand, and on the other hand, it also means that miners are optimistic about CKB in the long run.

I am bullish on CKB for three main reasons (this bullishness does not mean that it will rise tomorrow, but that the return of CKB will be higher than most targets in the next three to five years):

- CKB’s valuation is much lower than other public chains, only one thousandth of Ethereum;

- CKB is the most likely to carry Ethereum overflow assets and users;

- CKB is the most likely to become the underlying public chain for commercial use.

Since the entire market is still in its early stages, there is actually no systematic valuation method for the target, so I mainly look at the price of CKB from the perspective of horizontal comparison.

Ethereum's current market value is approximately US$200 billion, Polkadot's market value is US$29 billion, Cardano's market value is US$27 billion, BNB's valuation is US$20 billion, and NEAR's valuation is US$1.2 billion.

So what is the valuation of CKB? Only 230 million US dollars. This is also a problem that the community has been criticizing. No one doubts the ability and determination of the CKB team, but the unlimited issuance and miners' selling pressure have always affected the confidence of the secondary market.

But in fact, this is not a problem. If you look closely, all public chains will face this problem. Ethereum has unlimited issuance, EOS has unlimited issuance, and Flow has unlimited issuance.

And CKB has a hard cap. As time goes by, the amount of additional issuance will become lower and lower. After 10 years, the available storage space on the CKB chain will not exceed 100G. It will not have a definite peak like BTC, but the issuance will become smaller and smaller over time.

Therefore, additional issuance and miners’ selling pressure are false propositions. The real core question is, when will the zero point where demand exceeds supply come?

In my opinion, this time point is very close. After the infrastructure is improved, Force Bridge and PW LOCK will make CKB the best choice for Ethereum assets and user overflow. Moreover, CKB can provide two-way cross-chain interoperability, which other public chains cannot do.

You need at least a NEAR or Polkadot wallet to use these public chains. However, the most complete wallet entrances on the user side are currently concentrated on Ethereum. CKB's dApp and asset management can be done directly through the Ethereum wallet.

The demand for the CKB public chain (including writing data, executing smart contracts, etc.) will be directly reflected in the price of CKB. Because CKB is not designed to be a tip for miners, but a land rent. 1CKB = 1 Bytes, as long as you use the on-chain space, you must lock up CKB.

CKB directly links the value of the public chain to the native token, so I am not worried about the return issue after the ecological explosion.

The only question is when ecological development will break through that turning point.

To be honest, I am an investor, not a prophet. All I can do is speculate based on logic and existing information, and this turning point is getting closer and closer.

Finally, I would like to say something more inspiring: "Before we travel a thousand miles, all we have to do is accumulate enough small steps."