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Key Takeaways

Conflux (CFX) enhances blockchain scalability through its Tree-Graph structure and hybrid consensus, enabling high throughput and parallel transaction processing.

The CFX token facilitates governance, staking, transaction fees, and ecosystem participation.

EVM compatibility and cross-chain interoperability make Conflux a versatile platform for developers, allowing seamless integration with Ethereum-based DApps. 

Introduction

While blockchain technology continues to be adopted into the mainstream, it still faces some critical challenges. The greatest may be the issue of scalability. As decentralized networks grow, their transaction speeds tend to slow down while fees increase, which can slow down the broader adoption of blockchain.

Conflux (CFX) is a blockchain platform specifically designed to tackle such scalability issues. It employs a novel Tree-graph structure that aims to create a secure, scalable, and fast environment for Web3 development, including decentralized finance (DeFi) services and decentralized applications (DApps).  

The CFX token is at the core of the Conflux network, playing an important role in network governance, staking, and transaction fees.

What Is Conflux (CFX)?

Conflux is a public, permissionless, Layer-1 blockchain platform. Permissionless means no central authority controls who can join and participate in the network. Founded in 2018 in China, it aims to overcome scalability limitations while enhancing security and decentralization. 

Conflux is designed to provide high throughput at a relatively low cost for developers looking to build decentralized applications (DApps), decentralized finance (DeFi) platforms, and other Web3 services. 

It uses a hybrid consensus mechanism along with an underlying data structure known as the Tree-Graph. This structure allows Conflux to process transactions in parallel while reducing congestion. This can increase transaction speeds and improve network efficiency compared to some traditional linear blockchains. 

How Conflux Works

Hybrid consensus

Conflux combines elements of Proof of Work (PoW) and a Directed Acyclic Graph (DAG) structure to create a hybrid consensus mechanism. 

Traditional PoW systems, like Bitcoin’s, may require large amounts of energy to solve complex problems and secure the network. However, this hybrid approach can leverage the security of PoW while improving efficiency through the DAG structure. 

While not functioning as a separate consensus mechanism, Proof of Stake (PoS) allows users to participate and contribute to the network’s security by staking tokens and earning rewards. It is related to consensus as the actions of the stakers are recorded on the Tree-Graph. 

Tree-Graph structure

The Tree-Graph structure, a type of DAG, is central to Conflux’s technology. Unlike traditional blockchains that process transactions linearly, one after the other, Conflux’s Tree-graph structure enables the parallel processing of multiple blocks and transactions.

Instead of a single line, imagine a tree with multiple branches. Each branch represents a set of transactions. These transactions can now be processed across these different branches. 

While traditional linear processes can create bottlenecks as the network grows, the parallel processing offered by the Tree-Graph structure can increase the throughput of the network and allow for faster transaction speeds. 

GHAST

The Greediest Heaviest Adaptive Sub-Tree (GHAST) algorithm is a key component of Conflux’s consensus mechanism. This algorithm works in conjunction with the tree graph by identifying the heaviest sub-tree. This means that it selects the branch containing the most accumulated work and confirmations. 

Essentially, it is the GHAST algorithm that creates the selection process. It ensures that the network agrees on the order of transactions and thus prevents double-spending. It allows the network to process transactions in parallel whilst maintaining security and consensus. 

EVM compatibility and smart contracts

Conflux is fully compatible with the Ethereum Virtual Machine (EVM), making it easier for developers to transition existing Ethereum DApps to Conflux or build new ones, leveraging Conflux’s high throughput and low fees. 

Conflux also supports Turing-complete smart contracts. As these contracts can execute complex logic they enable a wider range of DApps on the platform. 

Cross-chain protocol

Conflux’s ShuttleFlow, a cross-chain bridge, enables interoperability. It allows assets and data to be transferred between networks like Ethereum, BNB Smart Chain, and other chains. 

This interoperability can expand the potential use cases for Conflux-based DApps, enhancing Conflux’s utility in the broader blockchain ecosystem. ShuttleFlow uses a separate token, FC (Function Coin), to facilitate these cross-chain transactions. 

Tokenomics

CFX token is the native cryptocurrency of the Conflux network. It powers and governs the ecosystem.

CFX utility

Network governance: Users who hold CFX tokens can participate in the governance of the Conflux network. They can vote on proposals and influence the future of the platform. 

Staking and security: Users can stake CFX, contributing to the network’s security. By locking up their CFX, stakers can help validate transactions and earn CFX token rewards. 

Fees: Transaction fees on the Conflux network are paid using CFX.

Ecosystem participation: CFX can be used to interact with DApps, access premium features, and participate in activities across the Conflux network. 

Initial distribution

CFX tokens from the genesis block of five billion tokens were initially allocated across five categories:

Category

Percentage

Private Equity Investors

Up to 12%

Foundation Holdings

4% + unsold

Genesis Team

36%

Community Fund

8%

Ecosystem Fund

40%

The unsold portion of the Foundation Holdings represents any token that wasn’t sold in the previous round of distribution (Private Equity Investors).

Token issuance

Tokens are issued via two mechanisms: 

PoW mining: Miners are rewarded with new CFX tokens for each block they successfully mine. The reward amount is approximately 1 CFX per block. This can vary depending on DAO votes. 

PoS interest: Users who stake their CFX can receive rewards in CFX. The reward amount is also adjusted by the DAO. 

Token burning

Like many networks, Conflux also employs token-burning mechanisms to keep the token supply healthy and control inflation:

Sponsored storage burning: A portion of a user's CFX is burned when they sponsor storage on the network. 

Transaction fees burning: A portion of transaction fees collected is also burned. 

DAO governance

The Conflux DAO (Decentralized Autonomous Organization) plays a crucial role in adjusting key network parameters. These include: 

Parameter

Description

PoW Block Reward

The amount of CFX awarded to miners per block.

Staking Reward Interest Rate

The interest rate used to calculate staking rewards.

Sponsored Storage Burn Ratio

The proportion of sponsored storage costs that are burned.

Transaction Fee Burn Ratio

The proportion of transaction fees that are burned.

Conflux Ecosystem

Although fully compatible with Ethereum, Conflux also has many native DApps, which include the Fluent Wallet, ConfluxHub, and Swappi.

Fluent Wallet

A Web3 wallet built specifically for Conflux Network. It enables users to manage assets and interact with DApps.

ConfluxHub

ConfluxHub is a platform that offers various DeFi services. This ranges from token launching and governance to airdrops and cross-chain bridging.

Swappi

As a decentralized exchange (DEX) operating on Conflux eSpace, Swappi offers users services such as token swaps, staking opportunities, and participation in various earning mechanisms.

Closing Thoughts

As the mainstream adoption of blockchain technology continues, Conflux aims to solve the remaining scalability challenges. 

Its Tree-Graph structure, along with its hybrid consensus and GHAST algorithm, enables parallel transaction processing and efficient validation. The CFX token powers the network, facilitating governance, staking, and ecosystem participation.

Further Reading

What Is Blockchain and How Does It Work?

What Is a Blockchain Consensus Algorithm?

What Is Proof of Work (PoW)?

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