A Comprehensive Deep Dive into Conflux: China’s Pioneering Regulatory-Compliant Blockchain and Its Latest Bitcoin Layer 2 Innovation
Introduction:
In the rapidly evolving world of blockchain technology, Conflux stands out as a unique and significant player, particularly in the Chinese market. Dubbed as the „Chinese Ethereum,“ Conflux is the only regulatory-compliant, public permissionless blockchain in China. Recently, it has made a substantial leap by integrating Bitcoin into its ecosystem and introducing an EVM-compatible Bitcoin Layer 2 (L2) solution. This article aims to provide an in-depth exploration of Conflux, its innovative features, and its latest Bitcoin L2 development.
Key Takeaways:
- Conflux is a hybrid proof of work/proof of stake blockchain, offering a unique blend of consensus mechanisms.
- The introduction of the EVM-compatible Bitcoin Layer 2 (L2) solution aims to foster greater interoperability within the Conflux ecosystem.
- The native token of Conflux, CFX, is used for transactions and can be earned as a mining or staking reward, with staking also providing governance rights.
- The Hydra upgrade introduced the concept of Spaces, with Core Space and eSpace being the two main Spaces, each offering unique advantages for project deployment.
- Conflux’s Tree-Graph structure and GHAST consensus algorithm provide scalability, security, and the ability to process multiple blocks simultaneously.
What is Conflux Network?
Conflux (CFX) is a hybrid blockchain that combines proof of work (PoW) and proof of stake (PoS) consensus mechanisms. Initially, Conflux was a PoW blockchain, but in 2022, it underwent a significant upgrade known as the Hydra upgrade, which added a PoS component. This upgrade allowed CFX token holders to earn rewards by staking their tokens to the PoS system.
The Hydra hard fork also enhanced the Conflux blockchain technology by providing protection against security attacks and offering greater project flexibility for developers.
Spaces:
The Hydra upgrade introduced the concept of Spaces into the Conflux network. There are two main Spaces: Core Space and eSpace. Core Space represents the original Conflux network, while eSpace operates as a sub-chain over Core Space and is fully EVM-compatible. eSpace allows for the easy deployment of Ethereum projects at a low cost, while Core Space is ideal for launching brand-new projects and regulated public blockchain DApps.
These Spaces are not separate blockchains; they exist on a single distributed ledger called the Tree-Graph. The ConfluxHub enables asset transfers between these Spaces.
Bitcoin Layer 2 (L2) Solution:
In January 2024, Conflux unveiled an EVM-compatible Bitcoin L2 solution as an additional Space. This development aims to facilitate seamless asset transfers between Conflux and Bitcoin, potentially catalyzing the growth of decentralized finance (DeFi) and GameFi apps. The L2 solution comes with built-in BTC staking, allowing users to contribute to the security of Conflux’s platform. The PoS consensus mechanism also supports Ordinals and inscription protocols, promoting a more diverse range of asset creation.
Despite the prohibition of fiat-to-crypto trading and initial coin offerings (ICOs) in China, crypto-to-crypto trading is permitted. This allows Conflux to remain compliant with China’s regulations and enables new crypto projects to enter the local market.
How Does Conflux Work?
Conflux is a Layer 1 public blockchain technology that also offers some benefits of a private blockchain through its hybrid format. It differs from Bitcoin and Ethereum with its Tree-Graph system, which allows the Conflux network to process multiple blocks simultaneously. This parallel processing results in a dramatically higher throughput than that of blockchains with a linear structure, such as Bitcoin and Ethereum.
Tree-Graph and GHAST:
Conflux’s Tree-Graph structure is combined with a consensus mechanism known as Greedy Heaviest Adaptive SubTree (GHAST) to manage the execution order of transactions with scalability in mind. Additionally, GHAST enhances security by detecting and preventing certain types of chain attacks.
The GHAST consensus algorithm is maintained through a decentralized node structure, which allows for scaling as more nodes join the network. To participate as a node, one needs to set up and run the node on their computer. There are three types of nodes on Conflux’s network, categorized according to the amount of data required for storage: Full Node, Archive Node, and Light Node.
Other Conflux Features:
Conflux boasts several key aspects that make it stand out in the blockchain space. For instance, it supports Turing-complete smart contracts, enabling developers to create new projects on the blockchain. Conflux is also interoperable, with its Shuttleflow cross-chain solution supporting the use of Bitcoin and Ethereum assets, as well as allowing users to add any new ERC-20 token for their DeFi projects.
Furthermore, Conflux’s blockchain technology features a robust software development kit (SDK) to help developers create projects. It specifically supports four mainstream programming languages: Python, Java, JavaScript, and Golang. It also offers community-developed SDKs and Solidity SDKs. The network’s DApp development tools include Truffle, Hardhat, ChainIDE, and Studio.
What is CFX?
CFX is the native coin of the Conflux network, used to pay gas fees and cover storage expenses. It also supports the network’s maintenance through staking and mining rewards. Miners earn 1 CFX per block, while PoS stakers earn CFX rewards in proportion to their stakes at an annual base interest rate of 0.04%, plus an APY of 12.9%.
Users who stake their CFX tokens for more than a quarter annually gain voting rights for the network’s governance, with longer staking periods earning more voting rights (up to one vote for a stake of over a year). While the stake’s locked duration can be extended, it cannot be reduced or withdrawn while staked.
With the integration of the Bitcoin L2 solution, CFX is effectively converted into an ERC-20 token, enabling interaction with DApps in the BTC L2 space. In this new space, BTC is used as a gas token to pay for transaction fees.
Conflux Wallets:
CFX can be stored in three crypto wallets: Fluent, MetaMask, and Ledger. Fluent is the Conflux network’s native web3 wallet, built to store CFX and ERC-20 tokens and interact with DApps in the Conflux ecosystem. It supports both Conflux Core and eSpace. MetaMask is a popular hot wallet among crypto enthusiasts, although it only supports eSpace assets. Ledger is a secure hardware wallet that can store CFX assets in both Core and eSpace, with the ability to connect Fluent and MetaMask to Ledger Nano S or Nano X.
CFX Tokenomics:
CFX is an inflationary token, with a current inflation rate of 1.9%. At its genesis, 5 billion pre-mined CFX tokens were allocated to Conflux Network’s direct builders and ecosystem contributors. The genesis tokens are distributed as follows:
- Private Equity Funders: 12% (released over two years)
- Foundation Holdings: 4% (plus the remaining tokens that weren’t sold to private round investors, unlocked monthly over two years)
- Genesis Team: 36% (released over four years)
- Community Fund: 8% (offered as rewards to incentivize community user participation, unlocked within four years)
- Ecosystem Fund: 40% (provided to community developers supporting DApps in the Conflux ecosystem, unlocked within four years)
Conflux Network (CFX) Price Prediction:
Conflux Network’s token, CFX, has experienced a significant surge in early 2024, likely due to the unveiling of the network’s BTC L2 space and the overall bull market led by Bitcoin’s rally. Many experts anticipate favorable growth for the CFX token, with predictions suggesting it could reach $0.84 in 2025 and $2.40 by 2030. However, it is crucial to consider the key factors that will contribute to this growth and conduct thorough research before investing in any cryptocurrency.
Is CFX a Good Investment?
While price predictions for CFX indicate the potential for growth, it is essential to understand the factors that will likely contribute to this growth. Some of Conflux’s achievements in 2023 include collaborations with major Chinese companies, such as Little Red Book and China Telecom. Its latest innovation, the EVM-compatible BTC L2 space, extends the possibilities for seamless interaction of DApps across its three Spaces, bolstering cross-chain interoperability.
Conflux has also been steadily advancing in its NFT and web3 journey, which could promote mass adoption. For instance, it has partnered with the renowned esports team JTeam and Blossom House, a luxury resort in China, to create unique NFTs and experiences.
While these developments may be indicative of Conflux’s high growth potential, they should not be viewed as investment advice. Always remember to do your own research before investing in any cryptocurrency, as crypto prices tend to be volatile.
Closing Thoughts:
Conflux is a significant player in the blockchain space, particularly in the Chinese market, driving innovation to enhance interoperability and foster a thriving ecosystem. As China’s economy continues to flourish, Conflux is well-positioned to grow as the country’s first regulatory-compliant public permissionless blockchain. With its latest Bitcoin Layer 2 development and a range of other innovative features, Conflux is undoubtedly a project to watch in the coming years.