First of all, the atmosphere, the atmosphere is a cracked ns system, itself can not run pirated games, each atmosphere update and ns system update must be slapped with the corresponding version of the pirated digital patch (the principle is to pretend that Nintendo gives you a bunch of certificates to prove that you have all the games). To play pirated games in digital format, so you need to install the game.
Then sx os, the system is paid, the bottom layer is to copy the atmosphere, and then added the ability to directly run the dumped Nintendo cartridges (xci directly run, this feature is blatant piracy), he simulated xci directly into the cassette inserted into the machine, and then ran. That's why it's been on Nintendo's radar from the start. The tx chip itself is only a means of cracking, not strictly illegal.