CKB is the native token of the Nervos Network, a layer 1 and layer 2 blockchain network that privatizes the network’s storage space. Doing so is meant to address the long-term challenge of state bloat that has beleaguered rival Ethereum. The CKB, or CKByte (short for “Common Knowledge Byte”) entitles holders to store 1 byte of data on the layer 1 blockchain.

CKB launched in November 2019 at about $0.009. The coin didn’t trade above a full cent – indeed, it fell to lows of $0.002 in March 2020 – until the crypto boom of 2021, when CKB reached highs of $0.043 in March of that year, and a market capitalization of $1 billion.

The coin crashed along with the rest of the crypto market in the summer and had fallen back to $0.009 by July 2021. A second wave in the autumn brought CKB to $0.034 in November, and again a market cap of about $1 billion, but the market for the coin withered away shortly thereafter. It continued to fall, and by June 2022, had slumped to $0.004.

Nervos launched with a supply of 33.6 billion CKB. It burned 25% of these immediately, so the total supply at launch was 25.2 billion CKB.

This initial supply included the approximately 7 billion CKB that Nervos sold to investors in its $72 million November 2019 public initial coin offering (ICO). It also includes two-thirds of the 14% sold to private ICO investors, a third of the 15% given to the team, and less than 1% allocated as testnet incentives. The rest, including 5% for the founding team, and 19.5% was reserved for developing the ecosystem.

Another 33.6 billion CKB will be issued as mining rewards. The amount issued halves every four years. The network will issue 16.8 billion tokens in the first four years until late 2023. Half of what remains will be issued in the following four years, and so on, until the network has run out of coins from the primary issuance – similar to Bitcoin’s issuance model.

A secondary, constant issuance of 1.344 billion tokens per year will persist indefinitely – this is generated by collecting rent for storage space on the blockchain. The funds will go to miners, long-term holders and, eventually, a treasury fund for the protocol’s DAO.

Nervos comprises several layers. The first is the base layer, or layer 1. This is the secure foundation of the network, responsible for processing transactions and enforcing the rules on higher layers of the network through a proof-of-work consensus mechanism. Space on this blockchain is scarce, however, meaning that higher layers of the network – layer 2s and beyond – handle most of the network’s throughput.

Indeed, Nervos was in part created as a response to the problem of state bloat on Ethereum, the largest smart-contract network, and other smart-contract platforms. On these networks, developers pay once to deploy a smart contract, and every node on the network stores it forever, incurring storage and computational costs. If a poorly optimized smart contract sucks up all the space on the network, then too bad: Gas prices will rise for everyone who uses the network.

Nervos attempts to resolve this tragedy of the commons with its utility token, CKB, a currency that allows holders to reserve space on the network. The more CKB they hold, the more they can take up of the network’s scarce state storage.

Because CKB is scarce, the invisible hand of the market should, at least in theory, dictate the kind of projects that store data on Nervos’s layer 1. If the Nervos Network becomes popular, lower-quality projects would probably prefer to sell their tokens for a profit than reserve space for, say, an unprofitable DeFi (decentralized finance) yield farm.

In addition, CKB that is used to reserve space on the blockchain can’t also earn secondary rewards from the Nervos DAO. That means that anyone reserving space has to really need it.

Nervos was founded by Jan Xie, Daniel Lv, Terry Tai and Kevin Wang in 2018. Tai is the CEO of the Nervos Foundation, the nonprofit that serves as the steward of the network. Xie is the CEO of Cryptape, a software development company in Hangzhou that builds software for Nervos.

Despite having a DAO, Nervos does not use on-chain governance mechanisms. Developers can submit proposals to upgrade the protocol on GitHub. These are discussed by the community, and are implemented following general agreement by the developers. The DAO is used to fund projects.

In November 2019, Nervos raised $72 million in a token sale on CoinList. In July 2018, it raised $28 million in a private token sale that included such investors as Sequoia Capital China and Polychain Capital.