The international arm of one of China’s largest commercial banks, China Merchants Bank, today announced a partnership with upcoming layered blockchain network Nervos. China Merchants Bank International (CMBI) will work with Nervos to develop and launch decentralized apps (dapps) providing financial services, something known as decentralized finance, or DeFi.
“By working closely with CMBI, we'll be able to better understand the needs of financial institutions and build blockchain-based applications that solve real-world problems for the entire financial services industry,” Kevin Wang, co-founder of Nervos, told Decrypt.
China Merchants Bank is one of China’s largest and most influential banks. Last year, it brought in more than $36 billion and guards almost a trillion dollars in assets. The partnership follows other Chinese forays into blockchain, including the People’s Bank of China’s work on a Chinese digital currency. Though crypto exchanges and token sales are banned in China, CMBI is based in Hong-Kong and targets global markets.
“The wave of high-profile blockchain projects such as Libra and JPM Coin foreshadows a shift in the financial services industry,” said Wang. “As more financial institutions and enterprises get on board with blockchain technology, our partnership with CMBI will play an important role in modeling the future of decentralized finance and accelerating mainstream adoption of blockchain technologies.
Wang wouldn’t reveal details of the DeFi products that CMBI will be creating.
Nervos is a two-tiered proof-of-work blockchain network—set to launch later this year—that has a novel solution to blockchain’s scalability problem. Large blockchain networks like Ethereum are already running at close to full capacity due to high usage by gas guzzlers like Tether and the recently collapsed, alleged Ponzi scheme, Fairwin. Nervos’ CEO, Kevin Wang, told Decrypt that’s because Ethereum’s economics don’t encourage its users to use space on the network considerately, meaning that the network quickly gets clogged up.
Nervos’ plan is to directly connect the cost of transactions to the amount of space on the network.
Users of Nervos can stake its native token, the (CKB) Common Knowledge Byte, for space on the lower, permissionless layer of the network. 1 CKB is equal to 1 byte on the network. As the network becomes popular, space will become more scarce and thus more expensive. In theory, only the most valuable assets will end up being stored on the blockchain.
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Anyone else wanting to build on Nervos’ network can build applications on the top layer, and use the more expensive (but also more secure) bottom layer for more important things, like settling smart contracts and storing assets.
“While most enterprise use cases have been deployed on permissioned chains, we're now seeing more interest in public, permissionless chains like Nervos to deploy truly decentralized products and services at scale,” said Wang.
Nervos raised $28 million in a funding round last year from financial institutions including Sequoia and Polychain Capital. Its token sale is scheduled for October 16.