Designed to drive the adoption of digital currencies in payments
The payments space is massive. Pioneering digital currencies offer a new paradigm for the storage and transfer of value, yet they favour security and immutability over scalability and usability. This may prove prohibitive in their goal to achieve widespread adoption in payments. COTI,on the other hand, combines the best of traditional payments systems with the best of pioneering digital currencies in order to satisfy the payments needs of typical consumers and merchants.
COTI’s base layer protocol, a DAG-based approach
The Cluster, COTI ‘s base layer protocol, is modeled off of a directed acyclic graph (DAG) data structure that involves the use of Trust Chains to validate unconfirmed transactions. By developing a new consensus method, rather than relying on an existing Blockchain standard, COTI will be ideally-positioned to support scalable, instant, zero-to-low fee payments in a decentralized manner.
DAG-based distributed ledger technologies do away with a number of the limitations of traditional Blockchain technologies — including the scalability limitations which result in high fees and poor usability, particularly in the context of retail payments. DAG-based distributed ledger technologies are inherently scalable and, in contrast to Blockchain, yield improved usability as the volume of network transactions increases.
While there are several digital currency initiatives currently employing DAG-based approaches, the novelty in COTI’s approach lies in the way it incorporates the trust scoring and mediation layers as mechanisms for achieving rapid consensus while mitigating the risk of double spend, thereby creating COTI’s innovative Trust Chains.
Introducing Trust Chains
COTI is introducing the concept of Trust Chains, a new consensus mechanism that is utilized for the purpose of transaction validation and risk mitigation to facilitate efficient confirmation times. A transaction Trust Score is characterized by an Initial Trust Score and Cumulative Trust Score.
Each new transaction generated by a transaction issuer (i.e., sender of funds) is required to validate two prior transactions in order for it to be added to the ledger. In the Cluster illustrated below, each blue node represents a transaction that has been validated by two subsequent transactions. Each orange node represents a new, unvalidated transaction. When transactions are validated they then form part of the Trust Chain.
Double Spend Prevention (DSP) nodes
The DSP node will then verify if there has been a double spend attempt from the same address. If two transactions are simultaneously sent from the same address, they will be flagged; the DSP nodes will then run a consensus mechanism to decide whether a double spend occurred. In a case of double spend, one of the transactions will be deleted from the Cluster, and the sender’s trust score will be reduced. To enable efficient double spend validations, case load balancing will be effectuated across all neighboring DSP nodes.
Seamless connectivity via user-friendly applications
COTI’s network is comprised of three categories of users: consumers, merchants and mediators. Users within each of these categories are provided with intuitive applications and services that enable connectivity to the network.
For Consumers
• A multi-currency wallet that supports payments to merchants, peer-to-peer transactions, as well as the storage and exchange of currencies (digital and fiat)
• Built for mobile and web, and designed in such a way as to serve as a catalyst for the mainstream adoption of digital currencies
For Merchants
• Processing tools that facilitate the acceptance of digital and fiat currencies
• Straightforward integration with third party e-commerce platforms For Mediators
- Application that enables mediators to receive caseload data, vote on disputes and, when successful, receive pay-outs
- Provides wallet-like functionality that enables mediators to convert their earnings into other currencies via COTI’s currency exchange
The COTI network’s fundamental components
COTI’s Trust Scoring Engine, Mediation System, native currency, currency exchange and decentralised governance all work in concert to streamline the digital payments experience.
External projects
The COTI network will enable external projects to build various applications based on COTI’s distributed ledger technology. To this end, COTI is developing a suite of tools, services and incentives programs that will support third parties with migrating their technology to COTI’s base layer protocol.
Shaping the regulatory future of digital currencies
COTI innovates responsibly and adopts regulatory prudence as a core value. As such, the COTI ecosystem will work only from a regulated environment, and the entities powering COTI are pursuing licensing authorisations globally in respect of their activity. COTI welcomes greater clarity regarding the regulation of digital currencies and will strive to remain at the vanguard of the regulated environment.
COTI is implementing a risk-based approach to AML (anti-money laundering) and KYC (Know Your Customer) policies and will establish TCF (Treat Clients Fair) procedures at banking industry standards in all aspects of its activity. COTI is committed to protecting user privacy while ensuring that its network and digital currency cannot serve as conduits for money-laundering or other illicit activity.
COTI is registered in Gibraltar and is working closely with guidelines set forth by the Gibraltar Financial Services Commission (GFSC) and distributed ledger technology (DLT) regulations.
The COTI community is continuously growing at a rapid rate. If you have any questions, you are welcome to get in touch with us on Telegram or via email. We will be providing further updates in the near future.
