Amid widespread price corrections affecting most of the top 100 cryptocurrencies, one digital asset bucked the trend, reaching impressive highs. Nervos Network, along with its parent token CKB, not only recorded significant gains but also reached the 79th position in the market, raising questions about the factors behind its growth.
Nervous network decoded
The 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 underlying asset, CKB, as a more durable store of value (SoV) than Bitcoin (BTC) while providing a more secure smart contract platform than Ethereum (ETH).
Bitcoin’s limited supply and shrinking block rewards raise concerns about long-term financial incentives for miners.
Notably, the Nervos Network solves this problem by introducing a fixed annual secondary issue of CKBs and a base supply, providing long-term incentives to miners.
Nervos Network also addresses a potential security risk associated with Ethereum. In Ethereum, the value of its underlying asset, ETH, is not directly tied to the value of the Layer 2 apps built on top of it.
The Nevos Network aims to create a strong financial link between the underlying asset and the overall network, by ensuring that CKB is used for transaction fees and storage.
How secondary issuance and the state promote rent stability
Nervos uses a permanent secondary release model to enhance the SoV properties of CKB. This model encourages 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.
The Nervos Network introduces a secondary market for chain space, enabling apps to unlock and sell CKBs without requiring the associated storage.
Investors can compensate for inflation by purchasing CKB and depositing it into NervosDAO, a mechanism that receives a portion of the secondary issuance to counter inflation. Interestingly, it resembles “treasury bonds” and offers potential investment opportunities.
Bitcoin is approaching ATH during consolidation announcement
After studying the fundamentals, CKB has experienced a significant increase in value recently, breaking out of a long consolidation phase that lasted almost two years.
After trading in a range of $0.0024 to $0.0035, the cryptocurrency has broken this price level since January 30 and has seen significant gains over the past few months.
Currently trading at $0.032, CKB is close to its all-time high (ATH) of $0.043, which was reached in March 2021. The price of the token has seen significant increases of 47%, 69%, 75% and 14% in the past. Fourteen days, seven days and 24 hours respectively.
According to CoinGecko data, CKB has also seen a significant increase in trading volume, reaching $207 million in the past 24 hours, up 9.7% from the previous day’s trading.
In addition, CKB’s market capitalization has grown significantly, almost doubling from $740 million on April 2 to approximately $1.35 billion in a week.
The price increase can be attributed to the announcement that Nervos Network’s CKB token will join the Bitcoin network. With its interoperability and modularity features scheduled for 2024, the token’s introduction of smart contract functionality has generated excitement among investors.
As Bitcoin approaches the halving that has historically boosted its value, Nervos Network is well-positioned to capitalize on its strong ties to the market’s largest cryptocurrency.
With its continued bullishness and the predicted rise in BTC price, CKB will soon be poised to hit a new all-time high.
Featured image from iStock, chart from TradingView.com