What is NKN: New Kind of Network sees money in web traffic

NKN boasts a massive blockchain network and pioneering algorithms. Is it here to stay?

Robotic hands touching globe map – Photo: Shutterstock                                 
NKN touts one of the largest operating blockchains in the world – Photo: Shutterstock
                                

Contents

As a global community of internet users, we create a lot of traffic. How much exactly? It is estimated that 3.9 trillion gigabytes of traffic travelled through our servers this year alone. 

That figure will undoubtedly continue to rocket as more and more people flock to streaming services and social media platforms, while the Internet of Things makes us more digitally dependent by the day.

But while data usage continues to climb, so too does the demand for lag-free streaming quality.

Enter NKN. short for New Kind of Network, the blockchain-based content delivery network (or CDN) founded in Beijing in 2017, which uses a peer-to-peer (P2P) connectivity protocol, deploying the world’s largest network of chain nodes to provide what it says are optimised routing solutions to its clients.

Powering this ecosystem is the native NKN token, which is used to incentivise the nodes operating NKN’s proof-of-relay (PoR) consensus algorithm.

It sounds complicated, but the way the NKN network works is actually quite simple, and the solutions it provides are useful for everybody from giant corporations to individuals. 

What problem is NKN trying to solve?

There is a common philosophy among innovators in the industry that blockchain provides the tools to solve problems you never thought to tackle in the first place.

The crypto giant Bitcoin took over the world through its novel (for the time at least) tokenised, decentralised currency platform. Storj, on the other hand, used similar technology to decentralise data storage by allowing any computer running its software to rent unused hard drive space to others, crowdsourcing data storage from individuals across the world, and incentivising them accordingly with its own STORJ token.

We now see blockchain technology used for mobile data roaming solutions, with Dent, while Ethereum today enables countless options for decentralised finance (DeFi) applications.

NKN represents the “blockchainisation” of data-transmission power, which it contends is one of  “the three pillars of internet infrastructure”. So what is NKN bringing to the table?

In basic terms, NKN makes it possible for anyone around the world to share their bandwidth, which bandwidth  NKN then provides to its clients in order to bring about faster data transmission. These bandwidth donors are called “nodes’” on the network and are incentivised through tokenised rewards according to the anount of bandwidth supplied.

In essence, NKN is a content delivery network (CDN), which is not a new concept. Netflix, Amazon et al would find it impossible to meet customer demand without employing a CDN.

Where NKN diverges is in its decentralised, trustless design, two concepts at the heart of the blockchain philosophy.

Making money: How incentives work

So what is NKN coin used for? NKN rewards nodes in a similar way to Bitcoin’s “mining” system, in that NKN tokens are distributed each time a node verifies a transaction. There are, however, some key differences.

Bitcoin’s immense processing and energy requirements for running a node are well documented. Bitcoin miners need massive resources. Nodes on the NKN network, however, can be handled by your average home PC, making it easy for people to join up. This is one reason why NKN’s node network is the largest in the world.

Image of world map, displaying where NKN nodes are situated
NKN's node network stretches across the globe, cutting potential latency – Photo: nkn.org

So should you get going as a node and start raking in those rewards? Well, several things should be considered first. Total rewards are capped at a certain amount year on year. The more nodes that joining the network, the more diluted the rewards will be.

Official statistics placed the current node count at 121,777. In comparison, Bitcoin currently has 14,964 operating nodes. This real-time node map estimates that each node earns approximately $5.36 per month. Using this node explorer, 640 functioning nodes can be seen in and around, for example, London in the UK.

You can, of course, run as many nodes as you wish, with the catch that each node requires its own unique IP address. NKN does place a cap of 250 nodes per miner, which would generate $1,340 per month, minus running costs. Put simply, an NKN node will never be able to generate the massive returns seen in the Bitcoin mining community.

It also seems likely that if and as the value of NKN increases, the number of nodes will go up as people seek a slice of the income from leasing bandwidth via NKN, reducing the amount each node can earn.

Although NKN is technically a proof-of-work (PoW) verification system, NKN gives it another name: Proof of Relay. Further information on NKN mining can be found here.

Some more tokenomics

At the time of writing, the NKN cryptocurrency is valued at $0.4935. The circulating supply is 700 million against a maximum supply of one billion, making for a market capitalisation of $345.45m. NKN is ranked number 183 on the market cap table.

Trading volume of 0.05% against market cap is relatively low, indicating only a modest transaction volume over the 24-hour period.

Just over a third – 35% – of tokens are reserved for purchasers of NKN tokens on the markets, 18% is distributed to the founders and developers and 17% is reserved for strategic investment in the project.

Another 30% of all NKN coins are reserved for mining rewards, with the amount decreasing per year as a deflationary measure.

Graph presenting NKN token metrics – Photo: nkn.org
Photo: nkn.org

We have plenty more detailed information on the NKN coin, including price forecasts, over at our predictor 

What on Earth are cellular automata?

Cellular automata (CA) is one of the more intriguing phrases in NKN’s white paper.

NKN states that its network uses “Cellular Automata methodologies to achieve full decentralisation”. Furthermore, CA is “the fundamental element of the network layer for blockchain, so as to ensure that the entire network layer can benefit from it.”

CA actually has it roots in the 1940s. It was a term first penned by the mathematician and physicist John Von Neumann for a system that evolves locally according to specific rules.

Applying that idea to NKN’s own blockchain, the mathematics of CA is used to achieve consensus among nodes (essential for any working blockchain) in a time and data-efficient way as each node learns from its “neighbours”.

Who is using NKN’s services?

Regardless of how cutting edge and sophisticated a blockchain innovation is, without sufficient numbers of users, the project is destined to fail.

Ardor and district0x are two examples of projects with exciting features that are struggling to take off because of tepid client uptake.

Thankfully, NKN attracted some big hitters throughout 2020, signing contracts with China’s largest mobile operator, China Mobile; the “network attached storage” company Asustor, a subsidiary of the Chinese computer giant Asus (network attached storage, or NAS, involves specialised computers used just for data storage); and Synology, also an NAS supplier.

The NAS sector seems to be a natural fit for NKN, which also signed with QNAP Systems, a Taiwanese compant that specialises in NAS appliances, in November 2021 to launch the nConnect joint venture, providing remote data access.

Scalability is one of the benefits of NKN’s decentralised network, meaning that smaller projects can benefit as well as large-scale endeavours. Individuals can use its services as well as giant corporations.

Where next for NKN?

With the release of its private messaging application nMobile, NKN successfully completed its roadmap for 2020.

Unfortunately the directors have yet to update their own public roadmap and tell the world what their future plans are. One could hazard a guess that NKN hopes to forge new commercial partnerships in a diverse range of sectors, all the while ensuring that its nodal network remains robust and reliable.

A stronger focus on the dApp-making community could also strengthen the NKN brand and ensure a future for the NKN cryptocurrency.

FAQs

There are currently 700 million NKN token in circulation, against a total of one billion.

NKN was established by Yanbo Li, previously a co-founder of OnChain; Bruce Li, alumni of Google and Nokia; and physics expert Dr Yilun Zhang. Dr. Stephen Wolfram was also brought in as a cellular automata guru. Business developer Allen Dixon and technical adviser Dr Whitfield Diffie complete the senior team

NKN was comprehensively audited in May 2020, the details of which can be reviewed here.

Further reading

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