New Kind of Network (NKN) is a project aiming to implement blockchain in network connectivity and data transmission power. This decentralized network will be the third piece of the decentralized internet, joining decentralized computing and decentralized storage. The NKN Protocol is a new kind of peer-to-peer network connectivity ecosystem powered by a public blockchain designed to tokenize network connectivity and data transmission capability as a useful proof-of-relay. NKN introduced the concept of a Decentralized Data Transmission Network (DDTN) using Cellular Automata in order to create a protocol for sharing network connectivity. DDTN combines multiple independent and self-organized relay nodes to provide clients with connectivity and data transmission capability. The sharing of network resources allows both ISPs and consumers to pool unused bandwidth and earn mining rewards for relaying data to an NKN client. Cellular Automata is a state machine with a collection of nodes, each changing its state following a local rule that is dependent on its neighbors. Each node in the NKN network is constantly updating based on its current state as well as the states of neighbors. The neighbors of each node are also dynamically changing so that the network topology is entirely dynamic without changing its underlying infrastructure and protocols.TEAM
NKN was founded in January 2018 by a group of entrepreneurs and engineers with great experience building blockchain technology. The NKN team is led by Yanbo Li, who has over 10 years of P2P/Mesh network protocol development experience at Qualcomm. Yanbo Li was also a co-founder and lead blockchain developer at OnChain, a company known for their work on Neo and Ontology. Also, co-founder Bruce Li, who oversees strategy and operations, has founded multiple internal startup projects at Nokia and Google. Recently, NKN added Stephen Wolfram as a technical advisor. The NKN project was inspired partly by Wolfram’s book A New Kind of Science. Wolfram is also the creator of WolframAlpha, a well-known mathematics website. He also has been published for his work on public key cryptography the mechanism behind all cryptocurrency ownership. Wolfram will provide technical guidance and entrepreneurial mentorship to the NKN project.
NKN has around 9,000 followers on twitter and 900 subscribers on Reddit. NKN is active on GitHub with over 1,000 commits and many recent updates. A project like NKN which wants to turn internet access into a sharing economy will need to build out it marketing in order for average consumers to be familiar with their project. However, NKN is still not available to US and Canadian investors unless they choose to use Switcheo a NEP5 based DEX. As NKN becomes listed elsewhere, its safe to assume that the pool of investors will increase and thus add to the overall sentiment. For now it has mostly been receiving traction in Chinese media, which makes sense considering the NKN team and the current limitations concerning exchange jurisdiction.
UTILITY AND INCENTIVE SCHEMES
The NKN token will primarily be used to pay for data transmission over the NKN network. Improving data relay while avoiding wasting resources is highly desired. NKN proposes an alternative to the current proof-of-work mechanism by providing a more decentralized and dynamically evolving network infrastructure, and by designing an entirely new set of consensus mechanisms. NKN is a peer-to-peer sharing economy and does not result in the negative network externalities associated with conventional proof of work currencies. Participants receive rewards by contributing more network resources than they consume. NKN uses a proof-of-relay mechanism to guarantee network connectivity and data transmission capacity. Essentially, “mining” is redefined on the NKN protocol to be contributing to the data transmission layer, and the only way to increase your “mining” rewards is to provide more power for the transmission of data. The competitive nature of this type of mining creates a platform with low latency and a high bandwidth for data transmission. 30% of tokens are reserved to pay mining rewards. Mining on the NKN network means proving you have relayed data, so miners are incentivized to relay as quickly as possible, which improves network latency and bandwidth. In doing so, NKN offers utility to developers, consumers and businesses. Developers gain access to a universal P2P networking stack that provides direct connectivity between any clients without centralized servers. Consumers gain access to better connectivity and more choices for access, and earn rewards for sharing their own network connection. Lastly, businesses like ISPs can improve network coverage and trade unused bandwidth for new revenue streams.
The NKN ICO achieved it’s hard cap of $12.6 million. Initially, 70% of the total supply were created and distributed amongst token purchasers, developers and the NKN Foundation.The total supply of NKN tokens will be 1 billion. The 35% of tokens allocated to the NKN Foundation and developers have a three year vesting period. The 35% of NKN tokens allocated for sale were split according to the following metrics: 25% for private sale which have a 6+ month vesting periods and 10% for crowd sale. The remaining 30% will be rewarded to miners for securing the network. The rewards will decrease linearly for 25 years, which incentivises early participation in the NKN network. The total mining rewards for the first year will be 18 million NKN and will reduce by 500K per year, totaling 300 million NKN. Currently 700 million NKN is held in 14,253 different addresses.
CONsensus algorithm and Scalability
Unlike the Bitcoin blockchain, which requires all nodes in the network to communicate with each other and share a common ledger, NKN utilizes a DDTN where millions of nodes and clients can join and leave at any time. To reach consensus over their network, NKN developed Major Vote Cellular Automata (MVCA), which uses a combination of CA and the Ising Model. CA is naturally a large distributed system with only local connections, which makes it possible to achieve guaranteed global consensus using a message passing algorithm based only on sparse local neighbors for a set of updating rules. The Ising Model is a mathematical framework originally developed in physics to describe state transitions of matter (solid, liquid and gaseous) and how those state changes are interrelated to properties of the matter. For example, a liquid may become a gas upon heating to its boiling point, resulting in an abrupt change in volume. Combining these two processes, MVCA reaches consensus when all nodes have the same state which depends on initial conditions. Each node evaluates network state transitions independently of other nodes and changes its state accordingly, allowing for a constant evolution of the network topology. This process allows only nodes that are in neighboring regions to share data and reach consensus amongst each other, which then builds up to the overall consensus of the network . Mining rewards are driven by proof-of-relay, where the rewards a node gets depend on its network connectivity and data transmission power. NKN incentives nodes to prove their relay workload by adding a digital signature when forwarding data, which is then accepted by the system through the MVCA consensus algorithm. The competition between nodes for mining rewards should eventually drive the network to be highly scalable. Furthermore, the alternating states of nodes due to Cellular Automata provide the network with a robust security mechanism. To engage in a 51% attack, local nodes would have to be compromised as well as a majority of nodes on the network, effectively reducing attack vectors. As proof-of-relay progresses, the network will become more and more expensive to attack, deterring someone from being able to bootstrap a large amount of computing power to compromise the network.
As NKN is a protocol level cryptocurrency for data transmissions, it differs from projects aiming to be decentralized VPNs like Mysterium. VPNs run alongside current ISP networks but NKN is looking to reorganize the way the internet is accessed. A project somewhat similar in scope is Substratum, which is aiming to create a decentralized network to access the internet. Substratum is looking to create a network of independent users and hasn’t shown the intent to work with ISPs. Currently, Substratum has a $16 million market cap, which is 2.5x the $7.8 million market cap of NKN . Compared to Substratum, which is narrower in scope and also has yet to launch its mainnet, NKN is very much in the running to be the leading cryptocurrency project in the telecommunications industry for data transmission. Another competitor to NKN is Skycoin, which similarly is aiming to use blockchain to decentralize the internet. One drawback to Skycoin is that in order to join their network as a node you must use their proprietary Skyminer hardware. This aspect of Skycoin may ultimately limit adoption as there is no such requirement to join the NKN network as a data relayer. Currently, Skycoin has a $11.8 million market cap which is 1.5x the market cap of NKN .
NKN is targeting the trillion-dollar telecommunications industry, and aims to provide better connectivity to everyone by incentivizing the sharing of unused networking resources. Today’s centralized networks include a client-server model, which is expensive, complex, prone to failure, and inefficient. Internet accessibility is also threatened by an endless stream of attacks and restrictions from external entities, leading to censorship and biased information propagation. Furthermore, the internet has become fragmented as countries can censor websites and searches, like China and Turkey. This impedes the connectivity and dispersion of information as a result of the internet. Effectively, individuals from oppressive countries operate within an entirely different network than those from countries with less censorship.
Adoption of NKN has yet to be seen as the tech is still being hashed out. However, the technical prowess of the team and current scalability indicated by the testnet are very good indicators. NKN has partnered with IoTeX, a privacy-centric blockchain platform for the Internet of Things. They are working together on a smart home sharing economy use case, which provides a decentralized alternative to traditional short-term home rental solutions. Utilizing NKN’s network to communicate between users, IoT devices, and IoTeX’s blockchain to authorize access and run smart contracts, they have created a proof of concept for “the Airbnb of the Future.” NKN has also released a mining application which allows users that are not the most tech savvy to easily join the network and start sharing resources and earning NKN tokens. This will help drive adoption as users will be able to easily earn the NKN token at no added cost.
Current Status and Growth Opportunity
The launch of the NKN mainnet is scheduled for June 2019, which should be a short-term price catalyst as individuals will want to run nodes and earn rewards from mining. In the long term, NKN has the potential to become a major player in the trillion dollar telecommunications industry if it disrupts the current power structure maintained by large ISPs. Today, the price of NKN is entirely determined by speculation, but after the launch of the mainnet, the NKN token can be used pay for network usage, and can be earned by sharing unused internet connectivity. Even though the token is still heavily speculative like most assets in this space, NKN doesn’t have the full breadth of investors that other tokens have. The largest exchange NKN is listed on is Gate.io which doesn’t allow US or Canadian investors. As the tech develops, its safe to assume that the project will be listed on exchanges with larger and more international user bases.
 NKN: a Scalable Self-Evolving and Self-Incentivized Decentralized Network. March 13, 2018 Version: 1.0