Original White Paper - Revision history

Misterpiggie49: Misterpiggie49 moved page White paper original to Original White Paper: Formatting

2022-01-28T01:47:09Z

Misterpiggie49 moved page White paper original to Original White Paper: Formatting

DeFiChain-Wiki: /* Governance */

2021-03-03T19:06:50Z

Governance

DeFiChain-Wiki: /* Asset Tokenization */

2021-03-03T19:05:26Z

Asset Tokenization

DeFiChain-Wiki: /* Decentralized Exchanges */

2021-03-03T19:04:15Z

Decentralized Exchanges

DeFiChain-Wiki: /* Decentralized Pricing Oracles */

2021-03-03T19:02:35Z

Decentralized Pricing Oracles

DeFiChain-Wiki: /* Turing-complete Solutions: Ethereum, EOS, Tron… */

2021-03-03T19:01:04Z

Turing-complete Solutions: Ethereum, EOS, Tron…

DeFiChain-Wiki: /* Consequences in the DeFi Market */

2021-03-03T18:59:17Z

Consequences in the DeFi Market

DeFiChain-Wiki: /* DeFi’s promises and challenges */

2021-03-03T18:58:27Z

DeFi’s promises and challenges

DeFiChain-Wiki: /* DeFi’s promises and challenges */

2021-03-03T18:57:04Z

DeFi’s promises and challenges

DeFiChain-Wiki at 18:54, 3 March 2021

2021-03-03T18:54:02Z

@@ Line 47: / Line 47: @@
 === DeFi’s promises and challenges ===
-Decentralized Finance promises to provide a variety of financial instruments without the need for middle(wo)men to ensure that the services are trusted. According to the OECD, financial services typically make up 20–30% of total service market revenue and about [https://www.investopedia.com/terms/g/gdp.asp 20% of the total gross domestic product] in [https://www.investopedia.com/terms/d/developed-economy.asp developed economies] [https://www.investopedia.com/ask/answers/030515/what-percentage-global-economy-comprised-financial-services-sector.asp (Link)]. This is an enormous industry dedicated to one thing: making sure that financial transactions are trusted. With the advent of blockchain, trustless systems and smart contracts can be used to replace much of the functionality of this industry, dramatically increasing the return on investment for the individual investor.
+Decentralized Finance promises to provide a variety of financial instruments without the need for middle(wo)men to ensure that the services are trusted. According to the OECD, financial services typically make up 20–30% of total service market revenue and about [https://www.investopedia.com/terms/g/gdp.asp 20% of the total gross domestic product] in [https://www.investopedia.com/terms/d/developed-economy.asp developed economies] [https://www.investopedia.com/ask/answers/030515/what-percentage-global-economy-comprised-financial-services-sector.asp (link)]. This is an enormous industry dedicated to one thing: making sure that financial transactions are trusted. With the advent of blockchain, trustless systems and smart contracts can be used to replace much of the functionality of this industry, dramatically increasing the return on investment for the individual investor.
 Financial services today are providing an important service, but at a very high cost, and despite many fintech developments, the following underlying issues persist:
@@ Line 90: / Line 90: @@
 ** The BIP 11: M-of-N Standard Transactions is a Bitcoin Improvement Proposal (BIP)designed to add multisig support to Bitcoin blockchain.
 ** Ethereum provides a Turing-complete command set for development of multisig on chain, leading to multiple entities providing multisig smart contracts. Bugs such as those in the Parity multisig (discussed below) have resulted in untold sums in lost funds.
-* As a result of the complexity of the code required for multisig, in 2017, more than 150,000 ETH was lost to a hack in the Parity multisig wallet, due to an error in the code [https://blog.zeppelin.solutions/on-the-parity-wallet-multisig-hack-405a8c12e8f7 (Link)]. The referenced article notes ways in which this code bug could have been avoided, but it emphasizes the point that these complexities in coding cause many different attack vectors. An entire industry has sprouted up around smart contract auditing, because the situation is so vulnerable.
+* As a result of the complexity of the code required for multisig, in 2017, more than 150,000 ETH was lost to a hack in the Parity multisig wallet, due to an error in the code [https://blog.zeppelin.solutions/on-the-parity-wallet-multisig-hack-405a8c12e8f7 (link)]. The referenced article notes ways in which this code bug could have been avoided, but it emphasizes the point that these complexities in coding cause many different attack vectors. An entire industry has sprouted up around smart contract auditing, because the situation is so vulnerable.
 * In the largest industry hack (or bug?!), The DAO was drained of 3.6 million ETH due to a coding error in the smart contract holding all of the funds of The DAO.
@@ Line 105: / Line 105: @@
 To date, a number of DeFi applications have been built on Ethereum, Tron, EOS and many other turing-complete chains. Since Ethereum has the biggest adoption it allowed the surfacing of issues that come with using a turing-complete blockchain for DeFi applications the fastest. The DAO hack was one of the first and most dramatic exposures of the vulnerability of using such a complex language. Anyone issuing a token on the network knows how difficult it is. Just to create and issue an ERC20 token can easily cost over 100,000 USD, considering the cost of smart contract auditing that is necessary for innovative solutions. Simply the fact that there’s an entire industry built around “smart contract audits” should be enough to illustrate the problem. Despite the fact that ERC20 is the industry standard, it’s still so easy to hack that it’s impossible to issue even a simple token without getting a high-cost professional auditor as well as a programmer.
-On an even more stark note, it’s now possible to scan for exploitable code using automation, and a 2018 study managed to scan a million smart contracts, finding over 34,000 hackable smart contracts [https://arxiv.org/pdf/1802.06038.pdf (Link)]. It’s unfathomable that 3.4% of financial transactions would be vulnerable. While this at the moment seems to be a problem mainly centered around Ethereum, we believe most other turing-complete chains will experience the same issues once more use cases get adopted on top of them.
+On an even more stark note, it’s now possible to scan for exploitable code using automation, and a 2018 study managed to scan a million smart contracts, finding over 34,000 hackable smart contracts [https://arxiv.org/pdf/1802.06038.pdf (link)]. It’s unfathomable that 3.4% of financial transactions would be vulnerable. While this at the moment seems to be a problem mainly centered around Ethereum, we believe most other turing-complete chains will experience the same issues once more use cases get adopted on top of them.
 The second problem stays mostly within Ethereum, which is the network’s usage being already close to maximum capacity. It simply does not seem feasible to use the network for all of the decentralized finance applications. Ethereum’s market cap is a tenth of that of Bitcoin. If the system is already near capacity, it’s hard to see how it can manage the capacity of becoming a true DeFi network for the rest of the ecosystem. Something Vitalik Buterin has acknowledged in an interview: [https://beincrypto.com/ethereum-founders-admit-never-designed-scalability/ https://beincrypto.com/ethereum-founders-admit-never-designed-scalability/.]
@@ Line 191: / Line 191: @@
 === Decentralized Pricing Oracles ===
-DeFiChain will include pricing oracles to collect data from outside blockchains. Oracles are used to collect data such as pricing of other cryptoassets [https://cointelegraph.com/explained/blockchain-oracles-explained (Link)]. Oracles are an important way for blockchains to collect accurate information from both other blockchains and from non-crypto markets [https://hackernoon.com/oracles-help-smart-contracts-resolve-subjective-events-d81639d8291c (Link)].
+DeFiChain will include pricing oracles to collect data from outside blockchains. Oracles are used to collect data such as pricing of other cryptoassets [https://cointelegraph.com/explained/blockchain-oracles-explained (link)]. Oracles are an important way for blockchains to collect accurate information from both other blockchains and from non-crypto markets [https://hackernoon.com/oracles-help-smart-contracts-resolve-subjective-events-d81639d8291c (link)].
 Participating as an oracle allows earning of tokens based on the accuracy of the oracles. The built-in oracle function will allow smart contracts to determine the number of oracles, consensus percentage, and the parameters for rewarding oracles for the data they provide.
@@ Line 198: / Line 198: @@
 === Decentralized Exchanges ===
-The decentralized exchange function will allow atomic swap of cryptocurrencies in a peer-to-peer fashion [[wikipedia:Decentralized_exchange|(Link)]]. The decentralized exchange function matches people for trading directly, without the need to buy and sell currency through an exchange. Using decentralized exchange reduces the risks associated with using exchanges, and ensures that the cryptoasset doesn’t leave the custodianship of the token-holders. It also removes the risk of custodianship from the exchange itself, because the mechanism is peer-to-peer based on an agreed-upon price or on the market price at the time of the exchange.
+The decentralized exchange function will allow atomic swap of cryptocurrencies in a peer-to-peer fashion [[wikipedia:Decentralized_exchange|(link)]]. The decentralized exchange function matches people for trading directly, without the need to buy and sell currency through an exchange. Using decentralized exchange reduces the risks associated with using exchanges, and ensures that the cryptoasset doesn’t leave the custodianship of the token-holders. It also removes the risk of custodianship from the exchange itself, because the mechanism is peer-to-peer based on an agreed-upon price or on the market price at the time of the exchange.
-While a number of decentralized exchanges are available on the market today [https://coinsutra.com/best-decentralized-exchanges-dex/ (Link)], DeFiChain solution allows integration of atomic swap capabilities in third-party applications by creating a decentralized exchange as a service.
+While a number of decentralized exchanges are available on the market today [https://coinsutra.com/best-decentralized-exchanges-dex/ (link)], DeFiChain solution allows integration of atomic swap capabilities in third-party applications by creating a decentralized exchange as a service.
 === Transferable Debts and Receivables ===
@@ Line 217: / Line 217: @@
 === Asset Tokenization ===
-Asset tokenization is the representation of an asset, such as real estate or company equity, in immutable tokens on the blockchain [https://www2.deloitte.com/lu/en/pages/technology/articles/tokenization-assets-disrupting-financial-industry.html (Link)]. This particular area of decentralized finance has tremendous potential and is one of the most exciting areas of investment for holders of cryptocurrency [https://www.forbes.com/sites/laurencoleman/2019/04/25/heres-why-interest-in-tokenizing-assets-is-starting-to-surge/#2ddeec4640a5 (Link)].
+Asset tokenization is the representation of an asset, such as real estate or company equity, in immutable tokens on the blockchain [https://www2.deloitte.com/lu/en/pages/technology/articles/tokenization-assets-disrupting-financial-industry.html (link)]. This particular area of decentralized finance has tremendous potential and is one of the most exciting areas of investment for holders of cryptocurrency [https://www.forbes.com/sites/laurencoleman/2019/04/25/heres-why-interest-in-tokenizing-assets-is-starting-to-surge/#2ddeec4640a5 (link)].
 While several attempts have been made at asset tokenization in the blockchain space, most of them have pivoted and now provide services not directly related to asset tokenization (LAtoken, Etherparty). Tokeny and Tokenize-IT advertise themselves as tokenization platforms, but as of the writing of this paper, their processes are still fairly manual, and are heavily reliant on specific localities and regulatory requirements for those specific jurisdictions. Other blockchains, such as Tezos, have been mentioned as good platforms for asset tokenization, but, as with other multi-use blockchains, the Turing-complete set of commands will create complex smart contracts that are unnecessary when using DeFiChain.
@@ Line 689: / Line 689: @@
 === Community Development Fund ===
-The DeFiChain Foundation will create a community development fund with up to 10% of the block rewards under management. This percentage can be updated by submitting a DAO proposal that will be voted on by all masternodes. Community development funds were popularized by DASH10 and are used in some selective DAOs today. The community will determine the use of these funds for development, marketing, or research that forwards the DeFi community. DFI masternodes vote for projects they like and the highest voted proposals every month will be funded.
+The DeFiChain Foundation will create a community development fund with up to 10% of the block rewards under management. This percentage can be updated by submitting a DAO proposal that will be voted on by all masternodes. Community development funds were popularized by DASH [https://docs.dash.org/en/stable/governance/understanding.html (link)] and are used in some selective DAOs today. The community will determine the use of these funds for development, marketing, or research that forwards the DeFi community. DFI masternodes vote for projects they like and the highest voted proposals every month will be funded.
 It costs 500 DFI to submit a budget proposal and a proposal can be submitted by anyone. This fee is burned and non-refundable regardless of whether the budget is approved. Budgets are proposals which receive a net total of yes votes equal to or greater than 10% of the total possible votes (for example over 448 out of 4480). Budgets can be nullified at any time if vote totals (cast or re-cast) fall below the approval threshold. Budgets are processed (paid) in order of yes minus no votes. More popular budgets get payment priority. Voting happens on a monthly basis but can be changed by a masternode vote.

@@ Line 217: / Line 217: @@
 === Asset Tokenization ===
-Asset tokenization is the representation of an asset, such as real estate or company equity, in immutable tokens on the blockchain8. This particular area of decentralized finance has tremendous potential and is one of the most exciting areas of investment for holders of cryptocurrency9.
+Asset tokenization is the representation of an asset, such as real estate or company equity, in immutable tokens on the blockchain [https://www2.deloitte.com/lu/en/pages/technology/articles/tokenization-assets-disrupting-financial-industry.html (Link)]. This particular area of decentralized finance has tremendous potential and is one of the most exciting areas of investment for holders of cryptocurrency [https://www.forbes.com/sites/laurencoleman/2019/04/25/heres-why-interest-in-tokenizing-assets-is-starting-to-surge/#2ddeec4640a5 (Link)].
 While several attempts have been made at asset tokenization in the blockchain space, most of them have pivoted and now provide services not directly related to asset tokenization (LAtoken, Etherparty). Tokeny and Tokenize-IT advertise themselves as tokenization platforms, but as of the writing of this paper, their processes are still fairly manual, and are heavily reliant on specific localities and regulatory requirements for those specific jurisdictions. Other blockchains, such as Tezos, have been mentioned as good platforms for asset tokenization, but, as with other multi-use blockchains, the Turing-complete set of commands will create complex smart contracts that are unnecessary when using DeFiChain.

@@ Line 198: / Line 198: @@
 === Decentralized Exchanges ===
-The decentralized exchange function will allow atomic swap of cryptocurrencies in a peer-to-peer fashion6. The decentralized exchange function matches people for trading directly, without the need to buy and sell currency through an exchange. Using decentralized exchange reduces the risks associated with using exchanges, and ensures that the cryptoasset doesn’t leave the custodianship of the token-holders. It also removes the risk of custodianship from the exchange itself, because the mechanism is peer-to-peer based on an agreed-upon price or on the market price at the time of the exchange.
+The decentralized exchange function will allow atomic swap of cryptocurrencies in a peer-to-peer fashion [[wikipedia:Decentralized_exchange|(Link)]]. The decentralized exchange function matches people for trading directly, without the need to buy and sell currency through an exchange. Using decentralized exchange reduces the risks associated with using exchanges, and ensures that the cryptoasset doesn’t leave the custodianship of the token-holders. It also removes the risk of custodianship from the exchange itself, because the mechanism is peer-to-peer based on an agreed-upon price or on the market price at the time of the exchange.
-While a number of decentralized exchanges are available on the market today7, DeFiChain solution allows integration of atomic swap capabilities in third-party applications by creating a decentralized exchange as a service.
+While a number of decentralized exchanges are available on the market today [https://coinsutra.com/best-decentralized-exchanges-dex/ (Link)], DeFiChain solution allows integration of atomic swap capabilities in third-party applications by creating a decentralized exchange as a service.
 === Transferable Debts and Receivables ===

@@ Line 191: / Line 191: @@
 === Decentralized Pricing Oracles ===
-DeFiChain will include pricing oracles to collect data from outside blockchains. Oracles are used to collect data such as pricing of other cryptoassets4. Oracles are an important way for blockchains to collect accurate information from both other blockchains and from non-crypto markets5.
+DeFiChain will include pricing oracles to collect data from outside blockchains. Oracles are used to collect data such as pricing of other cryptoassets [https://cointelegraph.com/explained/blockchain-oracles-explained (Link)]. Oracles are an important way for blockchains to collect accurate information from both other blockchains and from non-crypto markets [https://hackernoon.com/oracles-help-smart-contracts-resolve-subjective-events-d81639d8291c (Link)].
 Participating as an oracle allows earning of tokens based on the accuracy of the oracles. The built-in oracle function will allow smart contracts to determine the number of oracles, consensus percentage, and the parameters for rewarding oracles for the data they provide.

@@ Line 105: / Line 105: @@
 To date, a number of DeFi applications have been built on Ethereum, Tron, EOS and many other turing-complete chains. Since Ethereum has the biggest adoption it allowed the surfacing of issues that come with using a turing-complete blockchain for DeFi applications the fastest. The DAO hack was one of the first and most dramatic exposures of the vulnerability of using such a complex language. Anyone issuing a token on the network knows how difficult it is. Just to create and issue an ERC20 token can easily cost over 100,000 USD, considering the cost of smart contract auditing that is necessary for innovative solutions. Simply the fact that there’s an entire industry built around “smart contract audits” should be enough to illustrate the problem. Despite the fact that ERC20 is the industry standard, it’s still so easy to hack that it’s impossible to issue even a simple token without getting a high-cost professional auditor as well as a programmer.
-On an even more stark note, it’s now possible to scan for exploitable code using automation, and a 2018 study managed to scan a million smart contracts, finding over 34,000 hackable smart contracts<sup>3</sup>. It’s unfathomable that 3.4% of financial transactions would be vulnerable. While this at the moment seems to be a problem mainly centered around Ethereum, we believe most other turing-complete chains will experience the same issues once more use cases get adopted on top of them.
+On an even more stark note, it’s now possible to scan for exploitable code using automation, and a 2018 study managed to scan a million smart contracts, finding over 34,000 hackable smart contracts [https://arxiv.org/pdf/1802.06038.pdf (Link)]. It’s unfathomable that 3.4% of financial transactions would be vulnerable. While this at the moment seems to be a problem mainly centered around Ethereum, we believe most other turing-complete chains will experience the same issues once more use cases get adopted on top of them.
 The second problem stays mostly within Ethereum, which is the network’s usage being already close to maximum capacity. It simply does not seem feasible to use the network for all of the decentralized finance applications. Ethereum’s market cap is a tenth of that of Bitcoin. If the system is already near capacity, it’s hard to see how it can manage the capacity of becoming a true DeFi network for the rest of the ecosystem. Something Vitalik Buterin has acknowledged in an interview: [https://beincrypto.com/ethereum-founders-admit-never-designed-scalability/ https://beincrypto.com/ethereum-founders-admit-never-designed-scalability/.]

← Older revision	Revision as of 01:47, 28 January 2022
(No difference)

@@ Line 47: / Line 47: @@
 === DeFi’s promises and challenges ===
-Decentralized Finance promises to provide a variety of financial instruments without the need for middle(wo)men to ensure that the services are trusted. According to the OECD, financial services typically make up 20–30% of total service market revenue and about 20% of the total gross domestic product in developed economies1. This is an enormous industry dedicated to one thing: making sure that financial transactions are trusted. With the advent of blockchain, trustless systems and smart contracts can be used to replace much of the functionality of this industry, dramatically increasing the return on investment for the individual investor.
+Decentralized Finance promises to provide a variety of financial instruments without the need for middle(wo)men to ensure that the services are trusted. According to the OECD, financial services typically make up 20–30% of total service market revenue and about [https://www.investopedia.com/terms/g/gdp.asp 20% of the total gross domestic product] in [https://www.investopedia.com/terms/d/developed-economy.asp developed economies]1. This is an enormous industry dedicated to one thing: making sure that financial transactions are trusted. With the advent of blockchain, trustless systems and smart contracts can be used to replace much of the functionality of this industry, dramatically increasing the return on investment for the individual investor.
 Financial services today are providing an important service, but at a very high cost, and despite many fintech developments, the following underlying issues persist:
@@ Line 895: / Line 895: @@
 This is what DeFiChain is all about - To make the world a better place!

← Older revision		Revision as of 18:54, 3 March 2021
Line 895:		Line 895:

	This is what DeFiChain is all about - To make the world a better place!		This is what DeFiChain is all about - To make the world a better place!
		+
		+	# <nowiki>https://www.investopedia.com/ask/answers/030515/what-percentage-global-economy-comprised-financial-services-sector.asp↩</nowiki>
		+	# <nowiki>https://blog.zeppelin.solutions/on-the-parity-wallet-multisig-hack-405a8c12e8f7↩</nowiki>
		+	# <nowiki>https://arxiv.org/pdf/1802.06038.pdf↩</nowiki>
		+	# <nowiki>https://cointelegraph.com/explained/blockchain-oracles-explained↩</nowiki>
		+	# <nowiki>https://hackernoon.com/oracles-help-smart-contracts-resolve-subjective-events-d81639d8291c↩</nowiki>
		+	# <nowiki>https://en.wikipedia.org/wiki/Decentralized_exchange↩</nowiki>
		+	# <nowiki>https://coinsutra.com/best-decentralized-exchanges-dex/↩</nowiki>
		+	# <nowiki>https://www2.deloitte.com/lu/en/pages/technology/articles/tokenization-assets-disrupting-financial-industry.html↩</nowiki>
		+	# <nowiki>https://www.forbes.com/sites/laurencoleman/2019/04/25/heres-why-interest-in-tokenizing-assets-is-starting-to-surge/#2ddeec4640a5↩</nowiki>
		+	# <nowiki>https://docs.dash.org/en/stable/governance/understanding.html↩</nowiki>