CoinXP:

A public chain of digital asset management and settlement for exchanges

http://www.coinxp.io

All rights reserved by Nocenter Foundation

For open community review and subject to change

CoinXP Whitepaper Version 2, June 01, 2018

Abstract

CoinXP is a public chain for exchanges to transparently and securely access shared market liquidity. It inherently assures transparency and security through order books and settlements on public chains. It is optimized for user experience, community development, and system performance through locally centralized exchanges. More importantly, it is a globally shared service infrastructure that connects all exchanges / trading parties together. Thus, generating a network of market liquidity that is substantially larger than any single CEX/DEX in the market today. Through CoinXP, participating exchanges can obtain their much-needed market liquidity hassle-free without any addition cost. That is a challenge that many small/medium sized exchanges are unable to resolve, and many large CEXs are aggressively seeking solutions to improve on. Additionally, for those startups who are trying to disrupt the established market, CoinXP facilitates them by lowering the bar for becoming a trading party and extracting away the infrastructure service implementation layer.

The key innovations offered by CoinXP address the most challenging topics in existing exchanges, including security, market liquidity, and user experience. CoinXP provides impenetrable security through a combination of ledgers and order books on chain, threshold signature, automated proof of solvency, and many other technologies such as hot and cold storage, multi-factor authentication, intrusion detection/prevention, and insurance etc. CoinXP fundamentally solves the market liquidity problem with universally shared market place, globally optimized order price, and no-cost/hassle-free integration. Unlike ERC20 based projects, CoinXP builds its own pubic chain and specifically optimized it for serving other trading parties free of cost. On the user experience side, CoinXP nurtures a diversified ecosystem that includes other exchanges, brokers, and Dapps. Customers receive comprehensive supports such as training, market research, and investment advisory services from CoinXP ecosystem via many different participants. With increased market liquidity, investors can also expect improved trading speed and overall better price compared with any single CEX/DEX.

Table of Contents

Introduction

Market of Digital Assets

Blockchain technology and related applications have attracted incredible attention from investors, researchers, developers, bankers, and others. It is widely believed that blockchain technologies will lead to the next greatest technological revolution after the Internet. At the present time, most applications developed with blockchain technologies are centered around the management and trading of digital/crypto assets. This represents a rather limited application of blockchain technology’s potential. Nevertheless, it has attracted tremendous enthusiasm from many different parties. Consider Bitcoin, for example. Despite its dramatic swings in price, the daily trading volume of Bitcoin as of this writing is $7.6 billion. Centralized and decentralized exchanges (CEXs and DEXs) are at the center of those enormous trading volumes. The top 4 largest exchanges, namely OKEx, Binance, Upbit, and Bitfinex, hold more than $6.5 billion in market cap. The chart below shows the global market capitalization of digital/crypto assets in blockchain v.s. the trading volume in the last 24 hours.

In spite of the fast-growing market, the digital/crypto asset exchanges existing today often do not provide their customers with satisfactory services.

Pain Points of Centralized and Decentralized Exchanges

Centralized and decentralized exchanges have very distinct characteristics from each other, which we discuss in further detail below.

Centralized Exchanges

The majority of digital asset exchanges in today’s market are centralized. Many CEXs provide rich business features such as account systems, KYC, asset recharging, asset custody, brokering transactions, asset clearing, asset conversion, etc. With regard to most CEXs, investors are generally satisfied with the experience in terms of features, usability, and trading speed. However, CEXs often expose investors to much higher security risks. They are vulnerable to internal collusion, external cybercrime, commercial moral hazard, misappropriation, etc. The figure below shows a list of catastrophic security incidents of CEXs.

The CEX security incidents are infrequent but often devastating. Many led to unrecoverable losses of funds and permanent closure of CEXs. The figure below summarizes the pros (white) and cons (grey) of CEXs.

Decentralized Exchanges

In comparison, DEXs powered by blockchain technology inherently support immutability, security, and transparency. Therefore, DEXs are able to provide superior security and lower risk to investors. Unfortunately, DEXs are shunned by most investors due to their lack of basic usability and features. Several of the most common problems with DEXs are summarized below:

• Hard to use. As a result, most investors still manage their assets with CEXs despite the security risks just to avoid working with DEXs.
• Slow order processing due to low TPS.
• Lack of user education. DEXs emerged after CEXs. The technology caught up pretty fast. However, documentation, support, and user education are grossly insufficient.
• Liquidity in DEXs is very limited compared with CEXs, which results in higher average trading costs.
• Limited features. Most DEXs only support a very limited set of trading features.

The table below summarizes the pros (white) and cons (grey) of DEXs:

Examples of existing DEXs include IDEX, Waves Dex, OpenLedger Dex, CryptoBridge Dex, OasisDex, BarterDex, and Bisq (aka BitSquare).

Root Cause of the Pain Points

As mentioned above, both CEXs and DEXs have their own pros and cons. The common agreement on the divergence centers on the fact that CEXs have absolute power over all information/parties, whereas DEXs try to liberate their power using blockchain technology. Unfortunately, there is adeeper cause underlying the problems with these exchanges that is widely unrecognized. In both CEXs and DEXs, the functions are absolutely centralized. As a result, we only see two types of participants, namely the exchange and investors. In comparison, classical financial systems usually have many participants and roles, such as exchanges, brokerages, market makers, regulators, and endorsement etc. The concepts of centralization and decentralization in the classical financial systems are relative and heavily depend on the use case scenarios.

In our proposed CoinXP ecosystem, both power and functions are distributed to many different market participants. A function can be either decentralized or centralized based on its scope and use case. The significance of this distribution of functions is similar to the evolution of procedure programing to object oriented programming. It fundamentally revolutionizes the framework for building exchanges of digital assets. The potential of the new, multi-roles ecosystem is unlimited. We built the CoinXP system with this concept in mind, from the blockchain infrastructure layer to the application layer of asset management and trading. Thus, CoinXP’s unique system unlocks the supreme user experience of CEXs with the security, transparency, openness, and efficiency of DEXs.

CoinXP Multi-roles Ecosystem

The CoinXP ecosystem was built and designed to support multi-roles in its backbone. It utilizes the advantages of both centralization and decentralization, using different technologies at different layers. At the very bottom layer, CoinXP is a decentralized public chain. It provides the protocol services for managing and trading digital assets with smart contracts. On top of the public chain, CoinXP builds features to serve different interests of investors and exchange relayers (ERs). Investors can use CoinXP as a one-stop platform for managing and trading their digital/crypto assets. ERs, such as brokers, bankers, and third-party developers can establish brokerages, exchanges, or Dapps with their own customized features and can benefit from commissions. CoinXP also supports out-of-network wallets, exchanges, etc. to develop services with its open public APIs. The figure below shows the high-level architecture of the CoinXP system.

Decentralized Public Blockchain

At the infrastructure layer, CoinXP is a public chain that provides service protocols for managing and trading digital/crypto assets. All transactions in the CoinXP system are recorded on the CoinXP public chain, including personal ledgers, deposits/withdrawals, etc. Utilizing blockchain technology, CoinXP establishes a decentralized autonomous infrastructure and makes all trades transparent, fair and trustworthy.

Network of Multi Roles/Participants

Unlike pure CEXs or DEXs whose only participants are the exchanges and investors, CoinXP is a multi-layer ecosystem with various participants and roles. To support diversity and various roles for participants, CoinXP specifically designed its protocols to support trade through exchange relayers (ERs). A relayer can be a broker, a banker, a DApp/web service, or any other third-party service. The figure below summarizes various relayers in the CoinXP system and their functions.

Relayers enable distribution of functions to different roles while preserving the beneficial characteristics of centralized exchanges. Some of the key advantages of using Relayers are described below:

• Provide use-case specific features. For example, relayers can implement regulations specific to a region.
• Guide and educate investors. Relayers can provide early guidance and user education.
• Offer services, such as investment advice, facilitating trading, publishing investment research, etc.
• Incentivized by commissions, local relayers are motivated to bring more users and liquidity to the ecosystem.
• Improve system overall TPS by filtering out bad trade orders, batching valid trading orders etc.
• Provide smooth, uninterrupted service to investors with continuous connection to CoinXP service.

The network effect of relayers eventually leads to a healthy, sustainable, and self-improving CoinXP ecosystem.

CoinXP Open Public API

Openness is another important feature of the CoinXP ecosystem. Any organizations or systems can utilize CoinXP’s public API to access CoinXP’s public services. For example, out-of-network wallets can directly build in-wallet exchange without going through the CoinXP network. These collaborations will bring extra liquidity to the ecosystem, which can facilitate trades and drive down trading costs.

The three parts of the CoinXP ecosystem：

1. the underlying CoinXP public chain；
2. the network of many participants and roles；
3. the open public APIs — form a multi-layer, multi-roles financial ecosystem.

By leveraging the advantage of both the underlying decentralized public chain and the locally centralized exchange relayers, CoinXP is designed to provide ultimate security and superior user experience for managing and trading digital/crypto assets.

CoinXP Technologies and Specialties

Security

CoinXP puts security first and foremost. We developed several innovative technologies to protect our system from internal fraud and external cybercrime.

• Ledger and order book on chain
• Threshold signature
• Automated proof of solvency

Ledger and Order Book on Chain

At the infrastructure layer, CoinXP is a public chain. It has two components: a main-chain that stores personal ledgers and a side-chain that processes order books. The communication and synchronization between the main-chain and side-chain are both secure and efficient through synchronous locking and asynchronous execution.

• Main-chain

The main-chain of CoinXP (MCXP) is a DPOS consensus based public blockchain. All transactions, including personal ledgers, deposits/withdrawals, exchange, payment/transfer, and daily settlement for organizations are recorded on MCXP.

Individual users interact with MCXP in the form of a digital wallet (CoinXP wallet). Users can use their wallet to perform the following operations:

• Deposit/withdraw: User deposit/withdrawal are processed through an asset custody gateway and executed on MCXP via main-chain smart contract.
• Exchange: CoinXP wallet provides the function of exchange between different digital assets such as BTC/ETH pair. Benefiting from CoinXP’s double-chain structure and the market built on the side chain, users can process instant exchange of different pairs via cross-chain smart contract.
• Payment and Transfer: CoinXP supports both in and out of network payment and transfer services. In-network payment and transfers are executed instantly by main-chain smart contract and block confirmation. Out-of-network services to other wallets and Dapps are supported by payment/transfer gateways.

Brokers, bankers, other originations, Dapps, and other third parties can interact with MCXP either through smart contracts or CoinXP public open APIs.

• Side-chain

Side chain in CoinXP (CXPDEX) is a decentralized platform that provides the infrastructure layer services of the system. As a real decentralized protocol layer, user registration, deposit/withdraw processes, make/cancel/take orders are all executed with smart contracts on CXPDEX. All user ledgers, order history, order books and matched orders are stored in CXPDEX. CXPDEX also provides a quote system in three different levels:

• Level 1: shows the highest bid and lowest ask；
• Level 2: shows all public quotes of market makers together with information on market dealers wishing to buy or sell stock and recently executed orders. (Known as the order books and matched orders)；
• Level 3: shows personal ledgers with special restrictions and access authorities.
• Asset Custody

Asset custody is a very import component that manifests many challenges in digital/crypto asset exchanges.

• It can suffer from high transaction costs and slow confirmations. In December 2017, the average Bitcoin transaction fee skyrocketed over $30 and the average confirmation time was more than 40 hours.
• It is vulnerable to fraud. Digital currency transactions are irreversible and there is no trusted third-party to enforce the trading agreement. One trading party may end up losing its asset to the other party.
• Finally, hackers may also carry out attacks such as distributed denial-of-service (DDoS) etc.
• CoinXP Solution for Asset Custody

Our solution to the above problems is to have customers put their assets under the custody of a consortium. Specifically, the customers deposit their assets into CoinXP custodian accounts consisting of a combination of hot (online) and cold (offline) storages secured with threshold signatures (discussed in greater detail in the next section). Compared to centralized asset custody, CoinXP asset custody has the following advantages:

• Transparent with immutable records of ownership and transactions
• Highly secure with decentralized access control
• Automated proof of solvency without the need of trusted 3rd-party auditors

Once inside the CoinXP system, all asset trades boil down to the bookkeeping of the balances of user assets. No actual transactions need to be conducted on external blockchains unless users need to deposit or withdraw assets. CoinXP consortium custody of assets insulates users from high transaction cost and slow confirmations of digital currencies and significantly improves trading efficiency and user experience. CoinXP consortium custody also significantly reduces counterparty risk since user assets are fully committed for both trading and exchange orders. It also secures the CoinXP system against high volumes of fake buying and selling orders.

• Asset Deposit

To put assets under CoinXP consortium custody, users must deposit their assets into custodian accounts guarded by a threshold signature scheme. The asset deposit process is described in the figure below.

Assuming user Alice wants to deposit 10 BTC. The following steps are performed sequentially,

1. Alice initiates a request to deposit 10 BTC through the CXP wallet interface.
2. CXP generates a multi-signature wallet on the Bitcoin chain and sends the wallet address back to Alice. This address is tied to Alice’s CXP account. Any future deposits to this address will be recorded under Alice’s account. To improve throughput, a buffer pool with pre-generated multi-signature addresses is added.
3. Alice transfers 10 BTC to the given wallet address, using her bitcoin wallet or some third-party service.
4. CoinXP cross-chain interface listens to Alice’s address. Once the BTC transfer is confirmed, Alice’s ownership of the transferred BTC is recorded on the CoinXP main-chain. Alice’s BTC balance is updated accordingly in her CoinXP account.

• Asset withdrawal

The withdraw request transfers assets from the custodian account to a user-provided destination account. The withdrawal process is described in the figure below.

Assuming user Alice wants to withdraw 5 BTC. The following steps are performed sequentially,

1. Alice initiates a request to withdraw 5 BTC through CoinXP wallet interface；
2. Alice inputs the destination address where the BTC should be sent；
3. CoinXP verifies Alice’s BTC balance is sufficient and locks 5 BTC in her CoinXP account；
4. CoinXP delegates take turns to sign off on the withdrawal transaction and then start the transaction on the Bitcoin chain；
5. Once the withdrawal transaction is confirmed, the CoinXP cross-chain interface deducts 5 BTC from Alice’s CoinXP account. Meanwhile, the transaction hash for the withdrawal is recorded on the CoinXP main-chain for future audits.

• Cross-chain Gateway

The interoperability between CoinXP and external blockchains such as Bitcoin and Ethereum is provided by a decentralized cross-chain gateway/interface. The gateway communicates with CoinXP through smart contracts and interacts with external chains through their public APIs. CoinXP sends requests to the cross-chain gateway in the form of smart contract events. Examples of such requests include creating wallet addresses, withdrawing assets from external blockchains, etc. The cross-chain gateway constantly listens to and fulfills requests from CoinXP. It also continuously listens to events on external chains and reports the status back to CoinXP. To improve robustness and security, the cross-chain gateway in CoinXP has a decentralized design with multiple nodes. Each node runs independently and reports back results with their signatures. The cross-chain gateway adopts a threshold signature scheme to reach consensus when different/missing results are observed, thereby providing non-interrupted service with high security.

It’s worth noting that unlike some other cross-chain services such as Ark SmartBridge (https://blog.ark.io/), the gateway in CoinXP doesn’t require any changes on external blockchains. This allows us to support as many digitalcurrencies as we need without relying on the development of external blockchains. To add support of a new digital currency, we only need to add capability to the cross-chain gateway so that it knows how to communicate with that external chain. It can also be easily extended in a similar way to support interactions with off-chain entities such as banks.

Threshold Signature

Both cross-chain gateway and hot & cold storages in CXP are secured with a (t, n) threshold signature scheme that enables the accounts to be jointly controlled by a consortium of (n) elected delegates. A valid transaction must be locally signed by a minimum threshold (t) of (n) delegates. The private keys used for signing are generated separately in isolation and are never shared. During the signing process, each delegate locally signs the transaction and passes the signed message to the next delegate. The private keys are never stored or assembled together at any given time. The proposed threshold signature has many advantages over standard single-signature schemes:

• Better security against external cybercrime. Threshold signature requirements preserves security even when an active adversary compromises up to t-1 parties.
• Proactiveness. It allows the system to have more time to react (e.g., shutting down the system) while an adversary builds-up knowledge of the system.
• Better security against internal theft or fraud. Threshold signatures eliminate the need of trusting a single party. No theft or fraud is possible unless t joint cosigners conspire together
• Robustness and reliability. The (t, n) threshold cryptosystem avoids the single point of failure when t < n. For a single signature wallet, the loss of the single private key leads to the permanent loss of funds within the wallet. In contrast, a (t, n) threshold signature scheme can recover from loss of n — t private keys. It enables uninterrupted services in CoinXP even when some nodes in the system are down for maintenance or repair.
• Implementation of Threshold Signature

Bitcoin has natively supported “multi-signature” wallets. Ethereum supports multi-signature wallets through smart contracts (reference to consensys wallet). The existing multi-signature wallets suffer the following drawbacks:

• Limit on the number of joint owners. Bitcoin multi-signature wallets have hard-coded limits on the number of joint owners (n<=20). The total number of joint owners in Ethereum smart wallet contract is limited by the contract bytecode size.
• High transaction cost. Relying on multi-signature implementations out of CoinXP inevitably increases the number of transactions which leads to higher costs.
• No universal support. Some crypto concurrencies simply do not support multi-signature.

To address the above limitations, CoinXP develops a Unified Threshold Signature Scheme (UTSS) proposed by Goldfeder et al. to provide universal threshold signature support for all crypto concurrencies. The cross-chain gateway in CoinXP’s system is also guarded by the same threshold signature scheme. The following picture demonstrates the differences of the existing multi-signature scheme and CoinXP’s implemented threshold signature scheme.

Multi signature scheme

CoinXP threshold signature scheme

As depicted in the above picture, the signing process of CoinXP threshold signature scheme happens inside CoinXP. The out-of-network overhead for the threshold signature scheme is essentially zero.

Automated Proof of Solvency

Given the historical tendency of exchanges/wallet sites to be suspected of holding only a fraction of customers’ assets, it’s becoming important to customers of these sites to be able to verify these sites really hold the assets they claim to. Most centralized exchanges operate in a black-box and users have no idea whether the exchanges are solvent or not. For the very few centralized exchanges such as Kraken that do provide proof of reserves, the proofs rely on trusted third-party auditors. As a result, the solvency audits are conducted infrequently and are often outdated, which fails the objective of the proofs.

In contrast, CXP provides fully automated Merkle tree-based cryptographic proof of solvency [2] that is verifiable by any party without the need for trusted auditors. The proof of solvency can be determined in a continuous manner and provide up-to-date results. This is feasible because CoinXP operations are decentralized and all the assets and liabilities live on transparent blockchains. In particular, the proof of solvency includes two components: proof of liabilities and proof of assets.

• Proof of liabilities

The liabilities of an exchange equal the total balance held by its customers. The proof requires that an exchange publish its total liabilities so that any customer can verify that his/her balances are included in the total liabilities. This is achieved by constructing a Merkle hash tree from all customer balances so that each leaf node of the Merkle hash tree contains a customer’s balance and the hash of the balance concatenated with the customer id and a fresh nonce (i.e., a hash-based commitment) [1]. Each internal node stores the aggregate balance of its left child (lc) and right child (rc) as well as the hash of its aggregate balance concatenated with the hash of its left and right children. The root node stores the aggregate of all customers’ balances, representing the total liabilities, see Figure below.

The Merkle tree from the Maxwell protocol for proof of solvency (Source: [3])

When a customer wants to verify that their balance is included in the total liabilities declared by the exchange, the exchange sends the customer her nonce and the sibling node of each node on the unique path from the customer’s leaf node to the root node. The customer accepts that their balance is included if and only if their path terminates with the same root broadcast by the exchange.

• Proof of Assets

The proof of assets requires that the exchange publicly demonstrates control of a set of addresses holding at least as much assets as the exchange’s total liabilities. This can be achieved by first signing a challenge message with the private key associated with each custodian account. The control of accounts can then be easily verified using the public key associated with each custodian account.

• Other Technologies

Apart from the above-mentioned innovations, classical technologies such as hot and cold storages, multi-factor authentication, intrusion detection and prevention, and reserve pool as insurance are also adopted in CoinXP for maximum security.

• Hot and Cold Storage

In CoinXP, most (96% — 98%) of the assets in custody are stored in cold storage and only a small percentage (2%-4%) are stored in hot storage. For cold storage, the digital assets are stored in offline computers that are not connected to the internet. Both the cold and hot wallets are jointly controlled by CoinXP threshold signature schemes. The multiple private keys controlling the cold wallets are stored on offline devices (e.g. USB keys, hardware wallets, or smart phones) that are never connected to the internet. To withdraw from the cold wallets, a raw transaction is first created on the offline computer. The raw transaction needs to be signed offline with the required number of signatures before being transferred from the offline computer to an online computer that eventually executes the transaction.

Since cold storage access is cumbersome, a small portion (2%-4%) assets are stored in hot storage to support the daily operations of the exchange. The percentage of hot storage assets is allowed to float to minimize the number of cold storage accesses. An optimization algorithm is used to direct the new deposits to either the cold or hot storage depending on the relative speed of deposits and withdrawals. When hot storage amounts reach the maximum threshold (4%), all new deposits are added to the cold storage. When the hot storage assets are on the low end, new deposits are added to the hot storage. With the smart optimization algorithm, it is expected that cold storage access will be rare.

• Multi-factor Authentication

CXP employs an adaptive and configurable multi-factor authentication protocol to confirm user identities and grant access only after one or more pieces of evidence are provided, such as:

1. Username and password
2. Email verification
3. SMS
4. Fingerprint recognition
5. Face recognition
6. Software tokens such as Google authenticator
7. GPS location

The level of security control is adaptive to the risk of attempted operations to strike a balance between usability and security. Low risk operations such as account viewing may only require single-factor authentication using username and password. High risk operations such as withdrawals require much more stringent authentication that necessitates 2 or more factors. CXP also allows the users to configure the authentication methods based on their privacy preferences, risk tolerance levels, and accessibility of authentication factors.

• Intrusion Detection and Prevention

An intrusion detection and prevention system will be deployed to detect suspicious malicious activity and stop potential intrusions. The system monitors abnormal user behaviors and suspicious activities such as device changes and IP changes. Based on the severity and nature of the threats, the system can block the user’s access or require more authentication steps to counter the threats. For example, if the system detects there is a high probability that the user’s email is compromised, the system can require further authentication based on evidence other than emails.

• Reserve Pool as Insurance

Apart from all the protection measures built into its system, CoinXP also builds in an insurance mechanism with a pre-allocated reserve pool. In case of unfortunate security incidents, the reserve pool is used to reimburse users’ losses.

User Experience

Choice of DPOS Consensus

Consensus and incentive mechanisms play a central role in any blockchain ecosystem. Existing blockchain systems are built with consensus such as POW, POS, DPOS, PAXOS, PBFT or sometimes even a mixture of two. Each consensus has its advantages and suitable scenarios. The golden rule of selection is how the mechanism applies to the use case scenario.

Characteristics of CoinXP Ecosystem

Diversity of participants — One of the major and unique features of the CoinXP ecosystem is the diversity of participants and roles. The ecosystem allows individuals and organizations to join the network in a form that maximizes their interests. Different roles have different levels of participations and resources. They perform different functions based on their use cases.

Requirement of high TPS and QPS — CoinXP records all market orders and dealings. It must be capable of processing large numbers of transactions simultaneously. In other words, CoinXP requires high TPS and QPS throughput. Apart from the consensus mechanism, the power and ability of servers in the Block Producer (BP) nodes also have a crucial impact on the overall throughput of the system. These servers are very expensive and not all individuals are willing to setup and maintain them. CoinXP handles these scenarios inherently by only allowing a subset of qualified participants to become BP nodes. Any individual or organization needs to demonstrate their capability and willingness to maintain these high-end serves in order to be considered as a delegate. Most regular/non-delegate participants jointly manage and improve the CoinXP ecosystem by voting on delegate elections.

As we can see from the discussion, CoinXP is a mixed ecosystem with many participants that process different levels of resources and power. It is thus quite natural for CoinXP to select DPOS as its consensus mechanism. Once such selection is fixed, the mapping of delegates to BP nodes are quite apparent.

Exchange Relayers (ERs)

As discussed in the previous sections, CoinXP is a many-participants, multi-roles ecosystem. Apart from the exchange and investors, exchange relayers (ERs) play essential roles in various parts of the system. Each participant optimizes their services for maximum customer satisfaction in order to grow and expand. The network effect leads to optimized features, better user guidance/education, smoother trading experience, and lower costs. Different participants in the CoinXP ecosystem compete for investors and commissions in a positive manner that eventually leads to an ever evolving CoinXP platform with better and better customer satisfaction.

Market Liquidity

Market liquidity is another important aspect that heavily impacts customer experience in digital/crypto assets trading. CoinXP inherently supports participants of many roles to bring liquidity to the system and specially designs its incentive mechanisms to reward participants accordingly (The details of the incentive mechanisms are discussed in greater detail in the next section). As a result, the users of the CoinXP system can expect a smoother trading experience with lower costs that are guaranteed by sufficient market liquidity.

Incentive Mechanism and Token Economy

Commission-based Incentive Mechanism (CBIM)

Apart from consensus selection, incentive mechanisms play another key role in supporting a successful well-functioning Decentralized Autonomous Corporation (DAC) system. It is crucial to properly design the incentive mechanisms based on the specific use case and requirements of the target system. In the standard incentive system of DPOS, the block reward comes from predesigned inflation of the tokens. Since the inflation is issued to the BPs and BP candidates only, it devalues the tokens owned by common users. There is no benefit compensation mechanism such as saving interest. It is also unnatural according to fundamental physics law: per the 2nd Law of Thermodynamics, entropy increases naturally. Reduction of entropy necessitates increased energy. To solve this issue, CoinXP invented a brand-new incentive mechanism in the underlying protocols to benefit all participants of the CoinXP ecosystem.

The Principle of Paid Services (PoPS)

In DAC systems, the principle of paid services, i.e. the receiver of services pays service fees to the service provider is a natural and reasonable principle. In the CoinXP ecosystem, an investor pays a minimal amount as the commission of the trade. The commission is distributed to reward the participants of the trade and maintain/improve the ecosystem.

CoinXP Commission Distribution

In CoinXP, we specifically designed our commission distribution to foster a healthy and self-improving ecosystem. The commissions in CoinXP are divided into five parts,

• Incentive for BP: As the witness and recorder of the trade, BP will be rewarded with a certain proportion of the total commission of the trades that are packaged in the block it produces. Unlike the fixed reward from inflation, BP’s reward is linearly proportional to the trades it packed. This mechanism will encourage BP to upgrade its servers to get more reward, which leads to better performance of the whole system.
• Reward for broker: The broker as the relayer for the trade will only take commissions from the part of the trades in which it participates. For example, if user Alice is registered under broker A who trades with user Bob registered under broker B. Broker A will only take a part of the commission from Alice and broker B will take part of the commission from Bob. The broker can rebate its users with commissions as promotions and expand his/her user population. Each broker determines the rebate percentages individually.
• Reserve Pool: A small amount of commission is reserved as insurance and compensation in case of accidents.
• Reward Pool: Besides the parts mentioned above, the rest of the rewards would go into a reserved reward pool for system maintenance and improvement and to award global community activists. The major awards are allocated to,
• Incentives for the BP candidate: The BP candidate, as the backup of the BP, will monitor and supervise the BP procedures and prevent BP from engaging in malicious activity. Part of the income in the reward pool will be distributed to BP candidates for covering their expenses.
• Reward for voting based on the coin age: This is an innovation in the CoinXP system. In traditional DPOS mechanism, there is no reward for voting. Ordinary voters have extremely weak contribution to the voting result, thus causing DPOS to suffer from ‘voter apathy’. To avoid ‘voter apathy’, the CoinXP system introduces rewards for voting based on the coin age. In this new voting system, the reward will proportional to based on the coin age.

The following figure describes the flow of incentives/rewards and distribution of commissions.

Distribution of commission

Token Usage

The CoinXP token (CXP) is the native token on the CoinXP chain. Apart from trading and investing in different digital assets, CXP is also used in the following scenarios,

• CXP is the recommended payment for the trading and exchange fees across the platform. Customers will get discounts for using CXP. It will be the payment used for enhanced features developed by participants.
• CXP is the circulation currency in the CoinXP system. CXP is the only payment method as rewards that are distributed to BPs, BP candidates, and other service providers.
• CXPs is used as the security deposit for certification and endorsement of exchanges/brokers in the ecosystem
• Individuals or organizations get coinage based reward for any activities that benefits the ecosystem.
• CXP is the only method for risk protection fund for any new listed crypto currency. The fund will refund to the project party gradually within 12 months.

Advantages of CoinXP Incentive Mechanism and Token Economy

• Unlike fixed incentives based on inflation in traditional DPOS or POS, the incentives in the CoinXP system for block producers and brokers are linearly proportional to their performance, i.e. the more trades they handle, the more incentives they get. This will encourage brokers to expand their user base, which in turn brings more market liquidity and encourages block producers to upgrade and maintain high-end servers, thereby improving TPS. These two improvements are the two essential keys of good user experience for any digital/crypto asset exchanges.
• All rewards come from CXP in circulation, this not only increases market liquidity of CXP, but also avoids inflation due to incentives.
• CoinXP team and foundation don’t take any profit from commissions.

Token Distribution

CXP denotes the native token in the CoinXP system. A fixed amount of 10 billion CXPs is planned to be issued with no further additional issuance. The CXP token allocations are designed as follows:

Allocation:

Use of Proceeds

Roadmap and Milestones

The roadmap and milestones for booting up and first two releases are shown below,

CoinXP Management Profile

Liang Liang /CEO

Liang received DBA from Southwestern University of finance and economics, China and EMBA in London University, UK. Liang Liang is a successful serial entrepreneur with vision, leadership, and business acumen. He founded and cofounded several companies in various industries from traditional advertising, internet and sharing economy, to financial industry. His first company Brandnew Sign Express is now a top company in sign manufacturing industry in China. It has been profitable for 20 consecutive years with total revenues of multi-billion RMB. His later endeavor of an internet sharing economy startup, Dora’s dream, received 20 million USD Venture Capital investment and he was awarded as China’s top 10 innovative entrepreneurs in 2016. His entrepreneurship experience was featured in an exclusive interview with CCTV. Liang Liang is an avid stock trader with many years’ experience of algorithmic trading and in-depth understanding of the financial markets. He cofounded Zhongheng Fund and led the development of market analysis tools, system trading platform and various trading algorithms. As he started trading cryptocurrency by leveraging his extensive experience and knowledge in the financial markets, he saw opportunities in founding CoinXP to provide solutions for the major pain-points in crypto-asset management and trading such as non-transparency and asset security vulnerability.

Hua Chen /CTO

Hua enrolled in Tsinghua University when he was 15 years old and received Bachelor & MS degree majored in Computer Science and technology. PhD study in UC Riverside in the states. He engaged into Bitcoin mining since 2012, and is the expert in the field of distributed system with over 15 years’ experience working in IBM Watson Research Center & IBM Silicon Valley Lab. Prior to CoinXP, Hua Chen served as CTO of Dora’s dream, a startup company in internet commerce, and have 10+ years’ background of quantitative investment management as one of the partners of a private fund.

Yang Wang /Market Value Principle

Yang got his bachelor degree in the College of Life Sciences, Peking University in 2005. He got his M.A. in experimental pathology in 2009(quit from the Ph.D. program of Roswell Park Cancer Institute at SUNY Buffalo). Wang Yang was in the administrator team in one of the most famous Chinese BitTorrent website when he was an undergraduate student. He was also an administrator of a famous Diablo II private game server at that time. He started his future contract trading in 2008 and quit ph.D. program the next year. He started the career of a professional trader in 2012 ,and later joined Zongheng quantitative fund as a co-founder. He kept a 46% annualized return in HS300 Future Index trading for 30 month. He stopped trading in Sep. 09 2015 due to severe financial supervision. He desire a market which is secure, transparent, and equal to all investors from that time.

Weijia Che /Leading Platform Architect

Weijia received his B.S. degree from University of Science Technology of China and Ph.D. degree from Arizona State University. His expertises are in distributed platform and high-performance computing. He received a 2 million USD grant from Raytheon for advancing the field of artificial intelligence and defense in 2007–2008. He also worked with S.R.C. in the area of distributed systems and high-performance computing (2011–2012). He won the Best Paper Award in the 9th IEEE Symposium on Embedded Systems for Real-Time Multimedia and has been an crucial reviewer for ACM Transactions on Embedded Computing Systems. He was also awarded outstanding researcher in 2014. Weijia started his R&D career with MathWorks in the area of modeling, simulation, and verification in 2012. He later joined the Pre-IPO startup, Sumo Logic, in 2015 and focused on big data and cloud computing. He and his team in Sumo Logic built a cloud-based, high-available SaaS (software as a service) platform that analyzes 100+ petabytes data and runs 200+ million searches per day. His devops experiences in high performance and multi-tenant service in AWS is crucial for building and operating container/orchestration based high-performance, scalable public blockchain architecture.

Wuwei Liang /Principal Research Scientist

Wuwei was admitted into Tsinghua University without taking the college entrance exams because of his outstanding performance in Chinese Physics Olympiad. After earning Bachelor and M.S. degrees at Tsinghua University, Wuwei received his Ph.D. degree in computational material sciences from Georgia Institute of Technology in Atlanta, US. With his outstanding computational thinking, Wuwei has 6 years Research Engineering background at Southwest Research Institute, US, where he led the R&D of the DARWIN software sponsored by Federal Aviation Administration (FAA) to help improve the reliabilities of commercial aircraft engines through advanced probabilistic computational algorithms. Wuwei also has 6 years of software engineering background at MathWorks with expertise in Compiler Technology and Automatic Programming or Code Generation. He leads the R&D of the computer code generation traceability for the Validation and Verification (V&V) of automatically generated computer programs, especially for safety-critical industries. Wuwei started to study into Blockchain since 2014, and has expertise in blockchain interoperability and blockchain security, especially crypto wallet security.

Wei Wang /Principal Developer

Wei has bachelor degree of Mathematical Science of Peking University, and Ph.D. of Computational Mathematics in Louisiana Tech University, LA, US. He published over 10 papers in academic journals of mathematics and computer science. He is the leading developer of The MathWorks Inc®, and he has more than 7 years experience on Model Based Design, Compiler and Code Generation. He and his team designed a high-reliable infrastructure for Simulink® Coder. With his background on Asymmetric Encryption and Elliptic-curve Cryptography, he is currently the Encryption Scientist of CoinXP and working for the CoinXP blockchain security and digital signature system.

Guoqing Sun /Match Engine Architect

Guoqing has over twenty years’ experience in leading software architectural design and engineering in various areas including financial trading system and risk management system, derivative valuation and management, and information security. He earned his M.E. in Artificial Intelligence & Pattern Recognition from Institute of Automation, Chinese Academy of Sciences in 1996. He earned his B.E. in Computer Science from Tsinghua University in 1993. Currently he is leading a group of software engineers and data engineers working on very large scale distributed data processing, search, and analysis platform for the largest catalog system on Earth.

Kay Lin /Operation Director

Kay received her MBA degree from Tsinghua University in 2017. She also studied in Boston College in her second year of MBA program and majored in Entrepreneurship. Key is an avid supporter of Blockchain startups. She helped many early startups raise fund from private equity firms or cryptocurrency private presale foundations. She is also co-founder of XiPan investment consultation, and co-founder of SNZ Holding, a crypto investment and consulting firm. Kay has 9 years of IT experiences prior to entering the crypto-currency field, including working at Legend Star, a China’s first tier angel investment institution as an investment associate and 8 years of experience working for MNCs as Business Consultant, BD Manager and KA Manager at BU level.