Farewell to Liquidity restrictions: iCKBprotocol brings changes to Nervos DAO

In the world of blockchain, Liquidity is king. Recently, Nervos DAO stake tool NervDAO completed integration with iCKB protocol. This milestone development not only allows Nervos DAO depositors to escape the minimum 30-day deposit period, effectively solving the Liquidity dilemma, but also opens the door for users to achieve higher yields through "BTCFi Lego".

This article will detail the working principle of the iCKB protocol and its significant importance in the market.

CKB economic model, Nervos DAO and NervDAO

Before delving into the iCKB protocol, let's briefly review the economic model of CKB, the Nervos DAO, and the basic information of the stake tool NervDAO.

As of December 8, 2024, the total supply of CKB reached 46.202 billion, of which 8.133 billion CKB is locked in Nervos DAO. These CKB mainly come from three channels:

• Genesis block: a total of 33.6 billion, of which 8.4 billion entered the black hole address at the beginning of issuance (equivalent to "destroyed"), and the remaining 25.2 billion CKB are mainly allocated to institutional investors, ecological funds, development teams, and public investors. These CKBs are time-locked, but have all been unlocked at present.
• Level 1 issuance (base issuance): a total of 33.6 billion, all awarded to miners. Its issuance mechanism is similar to Bitcoin, halving approximately every four years until all are issued.
• Secondary issuance: 13.44 billion CKB are issued annually, which are distributed proportionally to miners, Nervos DAO depositors, and the treasury (currently this part is directly destroyed).

For a more detailed introduction to the CKB economic model, please read the article A Comprehensive Understanding of CKB's Economic Model and Its Ingenious Design.

Nervos DAO is an intelligent contract written in the underlying system, which can automatically allocate the secondary issuance of CKB to the depositors of Nervos DAO. In other words, if holders are willing to sacrifice the Liquidity of tokens and lock CKB in the Nervos DAO contract, they can obtain compensation from the system, thus avoiding asset dilution caused by the secondary issuance.

NervDAO is a stake tool for Nervos DAO, aiming to provide users with convenient stake and withdraw services. Compared with other tools that support Nervos DAO stake, such as Neuron Wallet and CKBull Wallet, NervDAO has two main advantages:

• Lower operating threshold: Users can directly operate on the web page without downloading additional apps or wallet software, nor do they need to synchronize block data.
• Support for multi-chain wallet login: Currently supports JoyID, MetaMask, OKX Wallet, UniSat, UTXO Global Wallet, and will support other major ecosystem wallets including SOL, DOGE, and Nostr in the future.

With the integration of NervDAO and iCKB protocol, users can stake not only in the 'traditional' Nervos DAO way but also through the iCKB protocol.

iCKB protocol explained

The iCKB protocol was proposed and developed by Phroi, a developer from the Nervos community, with the aim of addressing the Liquidity issue of Nervos DAO deposits: it allows users to deposit and withdraw any amount of CKB at any time.

So, how does the iCKB protocol work?

From a user's perspective, depositing CKB to Nervos DAO via iCKB protocol only requires one step: exchanging CKB for iCKB. Similarly, when withdrawing, only exchanging iCKB back to CKB is needed. Therefore, we can consider iCKB as a deposit certificate for users to store CKB in Nervos DAO.

Currently, 1 CKB can be exchanged for about 0.86287995 iCKB, and 1 iCKB can be exchanged for about 1.15890975 CKB. CKB deposited in the Nervos DAO enjoys secondary issuance compensation (current annualized yield is about 2.26%), so the representative deposit certificate iCKB will also appreciate over time, that is, as time goes on, the amount of CKB that iCKB can be exchanged for will gradually increase.

The iCKB protocol will divide users' CKB deposits into two parts: large deposits and small deposits. Each large deposit is equivalent to 100,000 iCKB, and the Market Maker mechanism is introduced to solve the Liquidity problem of small deposits.

Next, we will illustrate the working principle of iCKB through an example (to simplify the calculation, let's assume the exchange rate is 1 CKB = 0.8 iCKB, 1 iCKB = 1.25 CKB):

Assuming Alice has 300,000 CKB in her hands, she deposits it into Nervos DAO through the iCKB protocol. The iCKB protocol will divide this 300,000 CKB into: 125,000 CKB + 125,000 CKB + 50,000 CKB. Among them, 125,000 CKB is exactly equivalent to 100,000 iCKB, and this portion of CKB will be deposited into Nervos DAO (i.e., deposited in 2 portions, each with 125,000 CKB). The remaining 50,000 CKB will be placed as an order and consumed by the Market Maker. In the end, Alice will receive 240,000 iCKB.

It should be specially noted that the 240,000 iCKB here will be temporarily held in the on-chain contract. If Alice wants to immediately return them to her wallet, she needs to initiate an 'Extract' operation. If she does not initiate the 'Extract' operation, the 240,000 iCKB will automatically be released from custody and returned to Alice's wallet the next time Alice deposits CKB to exchange for iCKB or converts iCKB to CKB. iCKB in custody cannot be directly exchanged for CKB, transferred to other wallets, or participate in BTCFi.

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A few days later, Alice decided to exchange back to CKB. For the convenience of calculation, we assume that the exchange rate remains unchanged. After receiving 240,000 iCKB from Alice, the iCKB protocol will decompose it into: 100,000 iCKB + 100,000 iCKB + 40,000 iCKB. Among them, these two 100,000 iCKB will be destroyed, and at the same time, iCKB will select 2 deposits from the Nervos DAO that can be withdrawn in the fastest time and withdraw them. The remaining 40,000 iCKB will be placed on the order book and eaten by the Market Maker. Finally, Alice will receive 300,000 CKB (similarly, these CKB are also in the on-chain contract custody state, and can be returned to the wallet immediately through the 'Extract' operation, or automatically released from custody and returned to the wallet during the next exchange).

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Through this example, we can clearly see how iCKB effectively solves the liquidity problem of Nervos DAO deposits: The liquidity of large deposits is achieved by aggregating deposits from other users, while the liquidity of small deposits is guaranteed by Market Makers. It should be noted that anyone can become a Market Maker under the iCKB protocol, and their main income comes from service fees paid by users.

The profound impact of the iCKB protocol

There are two major limitations to the 'traditional' Nervos DAO stake method:

• Amount limit: Deposit at least 102 CKB (excluding mining fees).
• Time Limit (Liquidity Issue): There is a minimum deposit period of about 30 days, and withdrawals are also affected by the compensation cycle (i.e., after initiating a withdrawal transaction, it may not be immediately available for withdrawal).

By clever design, the iCKB protocol allows users to deposit and withdraw any amount of CKB at any time, successfully resolving the amount and time restrictions of the 'traditional' Nervos DAO stake method, greatly improving the Liquidity of Nervos DAO deposits.

In addition, the iCKB token is also an RGB++ asset, which means that iCKB holders can not only earn interest from Nervos DAO, but also participate in various BTCFi applications to earn more profits. For example, iCKB holders can create pools on UTXOSwap and become Liquidity Providers (LPs) to earn transaction fees. The next step for the RGB++ protocol is to expand to DOGE and eventually to other UTXO chains. Through RGB++'s Leap cross-chain technology, iCKB can be securely transferred to UTXO chains like DOGE and participate in the ecosystem of these chains.

Moreover, when the CKB Lightning Network Fiber Network mainnet goes live, iCKB can also be integrated into the Lightning Network to enjoy the advantages of low cost, high privacy, and instant confirmation transactions brought by the Lightning Network.

Operation Guide

The NervDAO website provides two ways to stake: one is the 'traditional' staking method, which can be done on the Deposit page of the NervDAO website; the other is to stake via iCKB, which can be done on the iCKB page of the website. These two staking methods are independent of each other.

As mentioned earlier, by using the iCKB protocol to deposit CKB into Nervos DAO, users only need to take a simple step: exchange CKB for iCKB. To withdraw the corresponding CKB, simply exchange iCKB for CKB. The specific operation steps are as follows:

Deposit

1. Open the NervDAO website (JoyID, MetaMask, OKX Wallet, UniSat, UTXO Global Wallet).

2. Click on iCKB in the left navigation bar, select 'Deposit', enter the amount of CKB you want to deposit, then click the 'Swap' button and sign in the wallet to confirm.

3. Wait for about 90 seconds for confirmation. When the order in 'Active Orders' is displayed as 'Completed', it means the on-chain operation is completed.

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4. At this point, your iCKB will be in a contract custody state on the chain. To extract it, click 'Extract' and confirm the signature in your wallet. If you do not extract it, the iCKB will automatically be released from custody and returned to your wallet the next time you deposit CKB to exchange for iCKB or exchange iCKB for CKB. Whether to perform the 'Extract' operation or not does not affect the interest of Nervos DAO. The only difference is that the iCKB in custody cannot be directly exchanged for CKB, nor can it be directly transferred to other wallets or participate in BTCFi.

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Withdraw

1. Open the NervDAO website and connect your wallet.

2. On the iCKB page, select "Withdraw", enter the desired amount of iCKB to exchange, then click the "Withdraw" button and confirm the signature in the wallet (if you want to exchange all iCKB and there are iCKB hosted by the on-chain contract in "Active Orders", you need to retrieve all iCKB first through the "Extract" operation).

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3. Wait for the transaction confirmation on the chain. When the order in 'Active Orders' is displayed as 'Completed', it means that the on-chain operation has been completed. Similarly, these CKBs are also in the on-chain contract hosting state. You can immediately extract them back to the wallet through the 'Extract' operation, or they will be automatically released from hosting and returned to the wallet during the next exchange.

Conclusion

The launch of the iCKB protocol marks a significant step forward for the Nervos DAO stake tool, which not only solves the Liquidity problem for users, but also provides them with more flexible investment options and income methods. Through iCKB, users can fully enjoy the opportunities and value brought by the Nervos DAO and the entire BTCFi ecosystem.