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Interoperability Update: Understanding Permissioned VS Permissionless

Overview

  • Key benefits of the Hyperledger System
  • Permissioned vs Permissionless Hyperledger & why the LODE System enables both
  • Understanding LODE’s Baton, which bridges interactions to public networks, and how it differs from Atomic Swaps

In a previous communication, LODE introduced the implementation of Hyperledger and its benefit to the interoperability of the LODE Project. Since then, the community has had several questions with respect to how a “Permissioned Hyperledger” will improve the accessibility of AGX and LODE.

The Hyperledger model is designed to allow organizations to build and run industry-specific blockchain applications, platforms, and hardware systems that support business transactions. It is a hub for open-source, collaborative industrial blockchain development.

The key benefits of Hyperledger Fabric include:

  • Enterprise backing: With the likes of IBM, Intel, and Cisco behind it, Fabric has strong backing from enterprise companies. This can provide a degree of stability, inspiring confidence in blockchain’s future.
  • Modular architecture: Fabric has a very modular architecture and provides a lot of flexibility in terms of how LODE can use it to develop the project further.
  • Private channels: Fabric’s distributed ledger and smart contract platform allow for private channels. In other words, Fabric allows private transactions — something that isn’t possible in other blockchains like Ethereum.
  • Transparency: A higher degree of transparency for the community. As an example, the community will be able to see how many coins are allocated to public chains. This fosters greater trust in the LODE System.
  • Smart contracts: Like Ethereum, Fabric allows for smart contracts, called “chaincode.”

Now that you have a greater understanding behind the key reasons for using the Hyperledger Fabric, it is important to highlight that there are a few different “types” of blockchain. Today’s communication will center around the two types that relate to the LODE project: Permissioned and Permissionless.

Due to the need to secure, insure, and validate a hard, tangible asset such as silver, the project will utilize both types to achieve its mission.

Permissioned (Distributed)

Permissioned ledgers have several key advantages that make them ideal for LODE. Private permissioned ledgers differ from public permissionless networks in their ability to censor read and write access. For a global payments currency, or a store of value, censorship is an undesirable property. For security tokens such as LODE, on the other hand, regulatory requirements (which are subject to change by region and over time) are much easier to comply with on a private permissioned network. LODE, being issued as a security token, is the primary motivation for issuing it on our Hyperledger network.

AGX is intended to be minted and circulated freely on public permissionless networks, offering holders all of the advantages those networks provide. While the public network flavors of AGX adhere to the rules of each network (double spend protection, etc.), there is an obligation to regulators and the community to ensure that every gram of silver is represented only once in a tokenized form; across any public network we support. Our private permissioned network makes that possible while allowing for standard accounting compliance practices and adding additional transparency for the community.

The LODE Association and its partners are required to record both vault balances and public network AGX in circulation. Doing so on a private network allows the control needed for traditional commercial record keeping while adding a layer of non-repudiation and transparency (properties shared by permissioned and permissionless ledgers). Recording vault balances and AGX public network minting transactions on our Hyperledger network raises the bar compared to traditional bookkeeping and provides regulators, auditors, and our community a tamperproof record of our relevant business activities.

Given that anyone interacting with the vaulted silver needs to be identified, it is important to prevent anonymous accounts on the ledger in order to maintain the integrity of the LODE system. Permissioned chains make this possible and ensure all the validators are known and trusted.

Permissionless (Decentralized Public Networks)

A decentralized — or permissionless — system means that our trust in the system is not dependent on the intentions of any particular party in said system, which could be arbitrarily malicious. In other words, it doesn’t matter to you if the counterparty is someone you trust, the system works as intended even if there is misconduct.

However, there are problems that arise from permissionless systems that can hinder the progress of the LODE project. There are different strategies to solve these problems, but none are as easy as adding in permissions and taking the network private. That is why the LODE system will utilize both Permissioned and Permissionless blockchains to achieve its mission.

Putting it all together

Understanding the Permissioned/Permissionless flow within LODE can be fundamentally understood through this graphic:

(*AGX-T, AGX-S, AGX-E are used in the image above for illustration purposes. These names may be subject to change)

As new silver is vaulted, it is audited, insured and then tokenized into AGX on Hyperledger, which is in the Private Permissioned Network.

Once users have their Hyperledger Native AGX, they can use the Interoperability Relay (known as Baton™) to transition their Hyperledger native AGX into the Public Permissionless Networks of their choice based on where and what they intend to use their AGX for.

This relay works both ways; so if an individual wished to return to the permissioned network, they can do so by using the baton to convert their public network AGX into the Hyperledger Native AGX.

Understanding Baton by LODE vs Atomic Swaps

To put it simply, Baton — which was created by the LODE project — is a relay between Hyperledger and public networks. Baton is not to be mistaken with Atomic Swaps. Unlike Atomic Swaps, Baton does not enable the exchange of one cryptocurrency for another without using a centralized intermediary, in this case, LODE. Instead, Baton is designed to hold coins in Hyperledger and release new coins on the specified public network. It will function in a similar manner to double-entry bookkeeping because the total number of grams in the vault will be represented by the AGX Coins on Hyperledger while their allocation will be based on the wallets they are stored in.

How it works?

To use AGX on other platforms, such as Syscoin, a specific amount of AGX will be locked up — or frozen — on Hyperledger to show that it’s been allocated to Syscoin. Once those tokens are frozen, the exact same number of tokens are allocated on Syscoin and can be distributed. The Baton will not change the total number of Coins on Hyperledger. That number only changes as silver is added into the vaults and new AGX is minted. It is only the ownership of those coins that is changing.

To illustrate, here are a few examples:

  • Let’s say one million AGX are allocated to the Syscoin network. These tokens can be considered to be “owned” by the Syscoin network. That ownership is reflected by the newly minted AGX on Syscoin.
  • Let’s say someone wants to transfer 50,000 AGX-S from Syscoin back to Hyperledger. They can send the AGX-S to the Syscoin side of the relay and they will be taken out of circulation. This would free up 50,000 AGX on Hyperledger, which will be transferred from the “Syscoin” wallet to the individual’s personal Hyperledger wallet.

The relay will maintain a one-to-one relationship between the two networks.

To ensure that the LODE Association is not part of any money laundering or nefarious transactions, the relay will only allow users to transfer between their own wallets — one on Hyperledger and the other one on a public network. Once the user has transferred to their own wallet on a public ledger, they take full responsibility for those tokens and can transfer them to anyone they like without restrictions.

The figures below illustrate how the relay works even further.

(1) No silver, money etc. is being solicited, and if sent, will not be accepted.
(2) No LODE Token sales will be made or commitments to purchase LODE Tokens accepted until a regulatory compliant prospectus is in place.
(3) A prospective LODE Token purchaser’s indication of interest is non-binding.

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The Latest News on LODE and AGX as we build the future of money

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LODE Project

LODE Project

The LODE Project is a collectively organized community of sound money advocates. The mandate of the community is to restore silver to the monetary system.

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