Bachelor's Thesis PoC The aim of the project is to implement a PoC of a DEX based on xpeer protocol.
TODO
NOTE: the following protocol is an alpha version of a protocol that may be useful when it comes to implementing a fully functional DEX. Nevertheless, it contains all parts that are required to make a swap between two different tokens ex. Bitcoin and Ethereum
xpeer is a name of a protocol that provides trustless cross-chain exchanges. The protocol is also capable of connecting sellers with buyers.
To achieve all of above, xpeer protocol introduces a new intermediary blockchain. Here all the vital data is stored and it takes care of the consensus achieved across multiple chains. The protocol's design has a deeply integrated security against attacks.
Having introduced another blockchain, we also introduce a token xpeer coin. This is the currency in which the fees are paid. xpeer coin heavily bases on bitcoin - so it is a minable, fungible token. The protocol is meant to be run over a PoW blockchain.
To make a simple transfer user has to specify the amount of money to be sent, the receiver's address and the amount of money to be sent back. Our protocol enables only to send all the owner's funds (no less than one UTXO), so the only one solution is to transfer the rest of money to oneself. There is no restriction related to the quantity of receivers - the only limitation is the block size. The values of outputs must add up to the sum of inputs, the difference between inputs and outputs is implicitly treated as a fee. Transfer is getting valid when is included in xpeer's blockchain. To make it faster user should leave higher mining fee. Of course, there is an award for miners when they find a block, but it is slowly decreasing and one day will become 0, so eventually the fees will become the only incentive for the miners.
Making an offer is a first step of an exchange. Our protocol treats offers as simple transfers, but they contain more information - some extra fields. Maker has to specify which currency is being sold and the value, which currency is expected and also value. What is more, user has to provide an address for a payment. It is widely known that each currency has a specific addresses' lengths, usually different through the range of crypto, so it is also automatically included. Another important factor are fees (in xpeer currency) - for adding an offer, for confirmation of the offer and the deposit in case of cheating. Offers have more data to process than simple transfers, so miners have more expensive computations. This is the way to make the offer valid in a blockchain faster - the more mining fee, the more miners who want to catch it. It is worth mentioning that the offer becomes visible only when is included in xpeer's blockchain. The same with incentive for adding a confirmation block, which requires the most computations in our protocol. A deposit is a kind of protection for cheating. When the side of exchange plays the game, it is handed back. There is also another vital information - timeout. Timeout says how much time an offer is valid and, in case of match, how much time sides have for an exchange then. Once the fields has been set, the offer is hashed and the hash becomes an id of the exchange. One cannot send an offer with an id of some other transaction.
Taking an offer means that one find an offer and is willing to exchange its money. That info makes some kind of a contract between those two sides, each of them agrees to send funds on time. In our protocol it means that a match transaction is involved into xpeer's blockchain. In addition to inputs and outputs lists, match transaction contains hash of the offer, specifies taker's address for income and can be created only if matching offer exists in our blockchain. To make a match, user has to send fees that are the same as in the offer.
Transaction's confirmation is kind of information that both sides of a trade have sent money that they had agreed before. This is necessary for unlocking funds included in the exchange (each currency will have a mechanism that checks xpeer's blockchain for confirmations when the trade is done) and for getting back the deposit. Confirmations contain only inputs and outputs and hash of the offer, but requires the most calculations. They are automatically added when an exchange is finished, but not only depends it on our blockchain but also requires validation of other cryptocurrencies' transactions. To make an exchange valid, both parties must send their parts of the agreement within first timeout, the transfer must be of proper type, must point to the exchange hash (not to mention the receivers address and to value). If any of the requirements has not been met, the exchange cannot be confirmed as held.
When at least here one side of exchange does not honor an obligation of sending funds, confirmation is not added into xpeer's blockchain. It means that sides cannot get the deposit back. The honest one can make an order that verifies its innocence. The order is nothing but verification of sent currency's blockchain to prove that funds has been sent. Then the result of that research is added into xpeer's blockchain. This kind of commission requires transaction fee and additionally another deposit. That deposit is the same as the one that user want to get back. It is connected with minimization of possible jobs that may overload our network. Unlocking can be done when the time for an exchange is out.
In case of unaccepted offer, the way of getting money back is quite similar. Maker has to specify hash of the offer and pay transaction fee and a deposit. If there is no offer match the deposit and the fee for a confirmation block is unlocked, in other case those deposits and fees are finally blocked.
Both results are included into xpeer's blockchain as a kind of transaction.
In xpeer blockchain, blocks are mined every minute and their size is limited to 1MB. Each block consists of transactions, but the protocol approves mining of empty blocks. In each block, the first transaction is a transaction without inputs which outputs totals to the sum of fees and the value of mining award. Any other transaction must take inputs. xpeer's transactions are quite similar to bitcoin's - they take inputs and produce outputs, which until not spent (or blocked) exist as UTXOs.
NOTE: Although, the protocol is meant to run over a PoW blockchain, the PoC will implement a PoA blockchain (with only one node authorized to mine new blocks) as it simplifies the implementation.
xpeer coin is the currency in which all transactions on xpeer blockchain are being held. It has a total supply of ~100 millions. The smallest denomination of XPC is a bdzys and equals to 1e-18 XPC.
This is an extra amount of xpeer coins that can be transferred to a miner's account and together with transaction fees is the incentive for miners to mine. At the beginning of the chain, the award equals to 50 XPC and is halved each million of blocks.
It is presented as a Minting transaction - first transaction in every block that has no inputs.
It is a kind of encouragement for people to start mining - initially the main incentive.
Each transaction (beside first in the block) must take inputs (at least one) and optionally has outputs. The inputs specifies UTXOs to be spent and outputs create new UTXOs. This is a basic transaction, but the protocol introduces several other types that derive from this basic one.
The following types of transactions will be supported at the beginning:
- Minting transaction - first transaction in the block, takes no inputs, but produces outputs. No additional data is stored.
- Simple transfer - transaction only takes inputs and produces outputs. No additional data is needed.
- Exchange offer - transaction takes inputs, produces outputs (two of special type). The additional data describes the exchange offer.
- Offer match - transaction takes inputs, produces outputs (two of special type). The additional data describes the offer that is accepted. Containing this tx in a block defines the timeouts.
- Exchange confirmation - as inputs takes fees (ones of the special outputs) from the exchange offer and its match, produces outputs (one of deposit type). The additional data describes which exchange is to be confirmed and proves of the exchange proper execution.
- Deposit unlock - similar to the previous one, besides that the additional data contains the proof of only one side of the exchange had been executed.
Each transaction should leave some fee for the miner. Mining fee is another award for mining blocks. Higher fees are catchy for miners, so those transactions are faster included in blocks. Mining fee is a difference between inputs and outputs and is implicit:
The protocol specifies timeout for the transactions to be held. We must provide those timeouts in order to secure funds of a non-malicious player, when confronted with a malicious. The timeouts ensure that the honest player will have his funds blocked and they will be returned after the timeouts. We introduce two timeouts and both are counted from the time the offer match tx has been included in a block. The first timeout is one week - within this time both parties must make transaction on the external chains. The second timeout is two weeks - in case the exchange did not finish successfully, after this time the money will be returned to the honest parties. This is also the time, when one can prove its honesty and get the deposit back. This takes very long, but only this ensures that each transaction will be included in its blockchain and will then be of trust (ex. forks, reorgs).
Time for an exchange is specified while making an offer. Timeout says how much time takers have for accepting the offer, then it is becoming unreachable. It is crucial for receiver to transfer those funds another one, otherwise can lose it. If the exchange is not confirmed, the honest side can make an order to unlock its deposit. The same with unlocking deposit and confirmation fee in case of unaccepted offer(also after the second timeout).
There are two types of transactions' outputs:
1) Simple transfer to given address.
To unlock it, one have to provide its signature(private key) compatible with public key given in the UTXO.
2) Part of an exchange.
To make XPC xpeer-compatible, this kind of an output must be introduced. This is also a draft of what should be implemented in external currencies in order to be enable xpeer exchanges.
Here one has to specify hash of the offer and possible receiver's address and timestamp with address of
possible return. To unlock that funds there must be a confirmation block of that offer and given receiver's signature or time is out and previous owner's signature.
There is a possibility when both sides can unlock that funds - time is over and exchange was confirmed. The current owner has to remember to transfer its money another one on time, if not, the previous one can spend it. It eliminates amount of money which is unused.
NOTE: We as authors inform each user about that possibility and are not responsible for those deceits.
3) Exchange fee Once the exchange has been completed on the external chains, someone has to add the proof to the xpeer blockchain. One output left as an exchange fee is an incentive for the third party to search through the external chains and confirm exchanges that took place. This output is locked by the offer hash.
4) Deposit This is not a special kind of an output, but this is the best place to mention about the deposits and explicitly say that they are either of kind 1 or 2. One cannot deposit an exchange fee. The deposit is just an ordinary UTXO, but pointed in the transaction as a deposit. The deposit has to be at least 10 times larger than a transaction fee. It is a protocols requirement protecting from cheating and DDoS attack on xpeer's network(steady requests to unlock deposit). Transactions which do not meet this requirement are included in the blockchain, but are not valid and cannot be spent. Deposit is always paid in xpeer currency, user has to specify its value while making or taking an offer. In case of innocence verification(Unlocking deposit) deposit value must be the same as that to be released or else this operation will be invalid(but those funds will be unreachable).
As an input one provides hash of the block with previous transaction, position of the transaction in a block and its signing key.
Then outputs and inputs are verified in an enclave and as a result funds are unlocked or not.
As said before, the design of the protocol is profoundly influenced by the security of the parts of the exchange. To achieve this, each transaction requires high deposits, which in case of the malicious behaviour are burnt. The deposit is a normal transaction output, but the transaction itself points to the specified output and marks it as a deposit (DUTXO). A DUTXO cannot be used as a transaction input until the user was proven to have executed its part of the exchange. If a user has acted maliciously, the protocol assumes a DUTXO as blocked and therefore a BUTXO comes into existence.
A transaction of any kind can take outputs of type 1 and 2 without any restrictions (besides DUTXOs) as inputs, but an output of a third type can be ony consumed either by a exchange confirmation or by a deposit unlock.
Besides minting, sum of transactions' inputs cannot be greater than sum of transaction's outputs. It should be obvious that users cannot produce money.
Blocks' size is limited to 1MB. In xpeer's blockchain data is stored as a binary format to minimize amount of unnecessary information, each attribute has specified number of bytes and its position. There is also a strict convention how to serialize data with various length, e.g. other cryptocurrencies' wallet addresses.
Header - contains information about block
List of various transactions
Simple transaction
Minting
Minting is a special kind of transaction and it is a model of a decreasing award for mining block. Minting is the only one to have no inputs.
Offer
Match
Confirmation
Unlocking deposit
