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1 | # Proof
2 |
3 | ## Decentralized Certainty for Investments & Anonymous Participant Accountability
4 |
5 | **Mike De’Shazer** mike@proofsuite.com
6 |
7 | **David Van Isacker** david@proofsuite.com
8 |
9 | **Tai Kersten** tai@proofsuite.com
10 |
11 | To discuss further, join our [Discord](https://discordapp.com/invite/htAGDZg)
12 |
13 | ## 1. Introduction
14 |
15 | Humans are not infallible. This fallibility is a strong driver of the uncertainties around the
16 | outcomes of future events. Other factors, such as natural events outside the control of
17 | humans, also contribute to uncertainties. Any system which involves humans cannot be
18 | expected to work in an exact, predetermined fashion, as could a simple digitally computed
19 | algorithm. In financial markets, the level of uncertainty drives the perceived risk associated
20 | with a given investment. Systems which allow market participants to financially stake their
21 | predictions on future outcomes as a form of insurance for those that rely on certainty exist
22 | today in the form of futures and options markets. These futures and options markets are
23 | typically complex, commonly consisting of centralized marketplaces, trusted market
24 | participants, registered brokers, various regulatory oversight bodies, and varieties of
25 | process ambiguity.
26 |
27 | ## 2. Our Solution
28 |
29 | We propose a simple and digestible user experience for investing with simultaneous
30 | insurance protections governed by (and with the certainty of) immutable digitally computed
31 | algorithms. This proposed experience is driven by the Assurance Market Protocol (AMP).
32 | The AMP is a set of protocols and smart contracts that provide for a truly decentralized
33 | marketplace, involving untrusting counterparties whom might not be aware of each other's’
34 | true identities. The counterparties are able to trade ownership of physical and nonphysical
35 | assets without the need for brokers or traditional financial institutions to handle fiat
36 | currency. This activity occurs within a self-regulating, unambiguous environment built upon
37 | the cornerstones of deterministic, automated custodianship of financial assets and
38 | crowdsourced underwriting.
39 |
40 | Proof
41 | [1]
42 | is a diverse financial asset marketplace that leverages blockchain technology to track
43 | ownership records of market participants. Within Proof, market participants are
44 | represented by blockchain addresses which perform transactions directly between one
45 | another by leveraging smart contracts which act as autonomous, preconditioned, escrow
46 | accounts. Proof also produces tools for creating and deploying smart contracts, producing
47 | legal documents for blockchain-related activities, and managing blockchain-based
48 | promotions, such as Initial Coin Offerings, commonly known as ICO’s
49 | [2].
50 |
51 | Proof’s flagship product, the Proof Dashboard
52 | [3]
53 | , serves thousands of users, integrating with
54 | various Proof Suite blockchain-oriented tools to empower new kinds of businesses serving
55 | its investors and token holders. While all asset records are stored on various decentralized
56 | blockchains, there are areas of centralization which we are converting into decentralized
57 | processes. These processes include:
58 |
59 | * Curation of featured investments or coin offering based on trustworthiness of the
60 | issuers
61 | * Creditworthiness and reputation scores of token issuers
62 | * Holding of fiat currency, such as U.S. Dollars and Euros
63 | Conversion of fiat currency into cryptocurrency
64 |
65 | This paper examines how these four areas will be decentralized on Proof, as well as how
66 | initial token holders of the seeding mechanisms that help drive this decentralization will
67 | benefit.
68 |
69 | ## 2.1 Curation of featured investments for Purchase on Proof Dashboard
70 |
71 |
72 | There are a limited number of blockchain-backed assets listed on the first page of the Proof
73 | Dashboard. While all token offerings created with our tools can be found by search,
74 | featured assets on the first page, essentially indicate that Proof has validated the owner of
75 | the asset and screened the issuer to ensure financial solvency and ability to ensure investors
76 | recoup their investments. This is a centralized process. Proof is transitioning from this
77 | curation process by implementing the Assurance Market Protocol (or “AMP”).
78 |
79 | AMP consists of built-in insurance facilitation within token smart contracts utilizing the
80 | Event Verification and Settlement standards (EVS standard) outlined in the next section.
81 | AMP also consists of a prediction market smart contract in which speculators and analysts
82 | can stake their assumptions that a token offering participant will not recoup their
83 | investment. By automatically featuring token offerings valued at over $100,000 USD
84 | ensured by at least 60% of the initial valuation, Proof is decentralizing the curation process
85 | with a process that crowdsources and provides financial incentive for analysts to determine
86 | the risk of an asset, as well as protects investors from loss with automated insurance claim
87 | fulfillment.
88 |
89 | ## 2.2 Creditworthiness and Reputation Scores of Token Issuers
90 |
91 | Proof’s current reputation system for users averages an issuer's cumulative 1-to-5 star
92 | ratings of token purchasers, weighing their vote according to their corresponding token
93 | holdings of an issuer’s offering. These rating records are stored in a traditional database like
94 | that of a typical marketplace such as Ebay or Amazon’s rating systems. These scores are
95 | being transferred to the Ethereum blockchain as immutable records for candidate token
96 | purchasers to assess the credibility of an issuer based on past performance.
97 |
98 | The biggest challenge to this kind of opaque recording system and rating process is the
99 | opportunity to game the system by purchasing assets from one’s self with a different
100 | account and repeatedly giving their initial account a positive rating. For this reason,
101 | blockchain-based rating records will only be stored for assets that meet the valuation
102 | threshold to be featured with the appropriate amount of insurance reserves. While this
103 | prevents lowly capitalized scams, it could offer highly capitalized ones to the greater Proof
104 | userbase. However, the more well-capitalized, the greater the return and incentive for
105 | analysts and speculators to investigate the offering, warn investors from investing, and
106 | publically wager on a negative outcome, signalling risk to investors while leaving an
107 | immutable mark for the issuer’s address in the Credibility Scoring Ledger.
108 |
109 | The following illustration demonstrates how these features are being prepared for
110 | presentation on the current Proof Dashboard by showing a simple asset token page. In this
111 | illustration, we feature a home. However, this could be a tokenized stock, bond, or other sort
112 | of underlying asset.
113 |
114 | ## 2.3 Safely Holding Fiat Currency For Users Without a Bank Account
115 |
116 | Currently, Proof Suite, Inc. receives USD and EURO in two ways. First, users purchase USD
117 | credits via credit card. Second, users load their accounts with Bitcoin or Ethereum and
118 | convert those funds into USD and EURO credits. Proof, like many cryptocurrency exchanges
119 | such as Coinbase or Coinplug, is responsible for maintaining a database of user balances and
120 | storing bank/credit card-deposit funds in a third-party financial institution for later
121 | purchasing of more cryptocurrency for conversion or issuing refunds.
122 |
123 | We are currently transferring the recordkeeping of USD balances from traditional relational
124 | databases to tokens on Proof’s Ethereum blockchain. While this helps reconcile transfer
125 | histories in more linked and tamper-proof manner, it poses the same problems that the
126 | cryptocurrency Tether [4] has. While there is transparency and immutability regarding the
127 | movement of funds, users must trust that their Tether token is actually backed by currency
128 | reserves. To solve this problem, we are introducing Crypto Fiat which pegs Ether to USD or
129 | Euro in an Ether reserve wallet. These Crypto Fiat smart contracts on the Ethereum
130 | blockchain will increase its pool of reserve Ether pegged to fiat from commission revenue
131 | generated from speculators in a corresponding cryptocurrency Price Prediction market. This
132 | system offers a truly decentralized cryptocurrency pegged to government-issued fiat and
133 | removes Proof as a type of trust fund, preventing exposure of crypto-fiat holders to reserve
134 | theft, account freezing or other factors.
135 |
136 | ## 2.4 Conversion of fiat currency into cryptocurrency
137 |
138 | Using the Proof Dashboard, users can convert their Bitcoin or Ether into USD or Euro credits
139 | and back. By leveraging our crypto-fiat smart contracts, users can securely convert between
140 | Ethereum and Crypto-USD and Crypto-Euro (C-USD and C-Euro respectively) without the
141 | need of Proof or other services like Coinbase to serve as exchanges. By transacting directly
142 | with a smart contract to accomplish this, the blockchain-exclusive system reduces reliance on Proof’s cloud services which could go down due to attack, overflow of traffic,
143 | cloud-service provider bugs, or government censorship. This turns capital controls
144 | preventing the movement of funds into different currencies to become, over time, an
145 | obsolete practice.
146 |
147 | ## 2.5 Asset Presentation Page with AMP Integration
148 |
149 | 
150 |
151 | *Figure 1 : Asset Presentation Page Concept Wireframe*
152 |
153 | Section 1 of Figure 1 demonstrates where a candidate-investor user can see how much of
154 | their investment is insured against loss by the issuer for associates close to the issuer or
155 | other users who have done due diligence to guarantee a large percentage of the asset. A link from this portion demonstrates the insurance terms and what triggers insurance payouts to
156 | investors.
157 |
158 | Section 2 of Figure 1 demonstrates where a candidate-investor user see how much
159 | speculators have wagered on their belief the offering is fraudulent or that that investors will
160 | not recoup much of their investment.
161 |
162 | Section 3 of Figure 1 gives the user an assessment of risk based on the issuers’ credibility
163 | score, the insurance placed on the asset against tremendous loss, and the prediction
164 | markets’ staked assessment of failure. This area provides general accessibility to the risk
165 | profile of a potential token purchase.
166 |
167 | Section 4 of Figure 1 provides the user with the option to either insure the token
168 | investments or predict against the asset, with details of when an insurance claim is
169 | processed and in what event speculators will recoup their wagers with bonuses, along with
170 | current rate of reward in a given outcome.
171 |
172 | Section 5 of Figure 1 shows to a user the issuer’s star rating, along with previous offering
173 | results recorded by the EVS and the number of previous investor reviews stored on the
174 | blockchain. In this case, the issuer has 4 out of 5 stars.
175 |
176 | ## 3. AMP : Assurance Marketplace Protocol
177 |
178 | The Assurance Market Protocol (AMP) consists of a decentralized marketplace leveraging
179 | blockchain or tangle technology, tamper-proof credibility scoring, crowdsourced investment
180 | underwriting, a risk-signaling prediction market, and cumulatively, a method for validating
181 | the veracity of off-blockchain ownership claims, asset management competence, legality,
182 | and issuer reliability.
183 |
184 | Figures 2 demonstrates how the four smart contracts in an AMP standard trade interaction
185 | work. Figure 2 demonstrates what occurs when the pre-determined conditions of a
186 | EVS-compatible token smart contract are met positively and token holder funds are made
187 | available. Figure 2 also demonstrating how Proof token holders benefit from interactions
188 | within this process. It is important to note that another exchange could use the AMP
189 | protocol and issue benefits to a different set of token holder, typically seed investors or the
190 | company itself. In the case of Proof’s AMP implementation, the benefactors (token holders)
191 | are made up of 50% as Proof and 50% as outside Proof token holders. Figure 3
192 | demonstrates the opposite outcome of what is depicted in Figure 3, when the EVS smart
193 | contract determines that a token contract has not met its predetermined obligations
194 | towards token holders.
195 |
196 | 
197 |
198 | *Figure 2: AMP Standard Trade Interactions*
199 |
200 | In the above Figure 2, an underlying asset, which could be a commodity, real estate asset or
201 | other kind of financial instrument is represented by “Asset”. The token issuer is the owner(s)
202 | of the asset and tokenizes it by attaching a legal agreement hash to a smart contract, which is
203 | currently done on the Proof Dashboard when issuing an asset-backed token smart contract
204 | for trading fractional ownership as cryptocurrency. In Figure 2, the issuer then writes or
205 | leverages Proof to generate a EVS-Compatible smart contract. This smart contract then
206 | interacts with the EVS contract, described below. The EVS then communicates with the
207 | Prediction Market Smart Contract and registers the terms set by the issuer regarding what
208 | would be considered failure to return capital to token investors. Seasoned Risk analysts and
209 | speculators who know about the issuer can then wager against a successful result regarding
210 | the asset with blockchain-based funds. Additionally, insurers who know the token issuer can
211 | stake their confidence with blockchain-based funds to indicate to investors that the
212 | investment is safe by providing decentralized insurance of their future investments.
213 |
214 | ##3.1 Event Validation & Settlement Smart Contract (EVS)
215 |
216 | The centerpiece of the AMP is the Event Validation & Settlement Smart Contract (EVS)
217 | which:
218 |
219 | 1. Validates EVS-compatibility of a token smart contract via method calls and oracles to
220 | determine said token contracts’ methods and properties. This is shown in the EVS
221 | Handshake in Figure 2.
222 |
223 | 2. Gains rights within the handshake process as the sole controller of insurance funds
224 | within a corresponding token smart contract, the funds of which are either Ether
225 | (cryptocurrency) or crypto-fiat (tokens), as described in the following section, in the
226 | event of a negative outcome in the event of a predefined negative outcome by a
227 | token issuer.
228 |
229 | 3. Gains rights to a prediction market smart contract to send speculator-staked funds
230 | to insurers in the event of a predefined positive investment outcome, proven by
231 | currency deposit into a particular validated EVS token smart contract by insurers.
232 |
233 | 4. Submit reputation scores in the creditworthiness ledger smart contract based on
234 | payout events by the issuer to a token smart contract as shown in Figure 3 and
235 | Figure 4, based on the two different sorts of outcomes.
236 |
237 |
238 | The Token Smart Contract in all three Figure 2 depictions is dynamically generated and
239 | represent a given underlying asset or initiative. This smart contract consists of 6 main
240 | methods:
241 |
242 | 1. A purchase method that allows token holders to exchange cryptocurrency for a
243 | given token offered. Each token has a limited total supply or inflationary schedule
244 | either dependant on time or events.
245 |
246 | 2. An ensure method which allows users to place cryptocurrency into a reserve which
247 | will solely be controlled by an invocation of a method to payout to speculators or
248 | asset holders in the event of non-satisfaction of predetermined conditions during the
249 | token smart contract’s creation.
250 |
251 | 3. The EVSVerification method is a method called to the EVS contract to verify that the
252 | contract is EVS-compatible in the handshake process between the token contract
253 | and the EVS contract.
254 |
255 | 4. A depositPayout method which is invoked by the issuer(s) exclusively when the
256 | underlying asset generates revenue.
257 |
258 | 5. A sendInsurance method which can exclusively be invoked by the EVS contract and
259 | not the issuer or other users to control the movement of insurance funds based on
260 | token contract activity.
261 |
262 | 6. A receivePayout method which allows token holders to receive their cryptocurrency
263 | after the issuer invokes the depositPayout method.
264 |
265 | The Prediction Market Contract registers new prediction opportunities as requested
266 | exclusively by the EVS smart contract into its ledger. As requested, the prediction market
267 | contract registers the terms of the EVS-compatible smart contract and the contract address,
268 | reserving the right to transfer negative prediction market speculators’ funds in the event
269 | that insurers receive their funds back due to predetermined conditions of token investor
270 | success being met. In Figure 2, the Prediction Market sends speculator’s funds from the
271 | Prediction market smart contract as a distributed return on investment, proportional to the
272 | risk indicated by the prediction market.
273 |
274 | 
275 |
276 | *Figure 3 : Predetermined conditions are met*
277 |
278 | The Creditworthiness Smart Contract is accessible by token holders of an asset token
279 | offering that has been resolved or has received an incremental resolution step in the form of
280 | a reward by the EVS smart contract. The EVS registers a EVS-Compatible token smart
281 | contract issuer with the Creditworthiness Ledger smart contract if an asset is valued at over
282 | $100,000 USD and is insured for at least 50% of its initial valuation. When there is a
283 | resolution event or step within the EVS-Compatible token smart contract, the EVS registers
284 | this with the Creditworthiness Ledger contract. Additionally, recognized token holders of a
285 | particular token contract can issue their textual reviews with up to 256 characters, along
286 | with a 1-out-of-5 star rating based on their experience which is immutably stored in the
287 | Creditworthiness ledger for future candidate token purchasers to see. The amount of their
288 | token holdings is used as a weight to determine how much their rating affects the issuer’s
289 | total score and the order by which their reviews are presented to the public.
290 |
291 | 
292 |
293 | *Figure 4 : Predetermined conditions are not met*
294 |
295 | Figure 4 (above) demonstrates a scenario in which an issuer of an off-blockchain asset does
296 | not meet their pre-determined measures of success. The token holders receive 47.5% of all
297 | insurance held within the token smart contract, as triggered by the EVS contract. The
298 | accurate speculators and analysts who predicted against the token’s success receive 47.5%
299 | of the insurance pool. Meanwhile, Proof Token holders receive 5% of the insurance pool. 0%
300 | is returned to insurers who insured a token offering which was either fraudulent or
301 | unfortunate, in exchange for compensation to the token holders and rewards to the
302 | speculators who flagged risk to those investors by staking their financial assets.
303 |
304 | ## 4. The Crypto-Fiat Smart Contracts
305 |
306 | For an exchange that implements AMP in order to drive truly decentralized trades, there will
307 | be different preferences among investors and token issuers regarding what currencies
308 | should be leveraged to settle investment purchases and sales. Traditional exchanges such as
309 | Nasdaq uses US Dollars, while Euronext uses Euros. The aforementioned currencies are
310 | commonly perceived as stable, albeit inflationary, stores of value. However, these currencies
311 | as of today cannot be stored in blockchain-based smart contracts. Solutions such as the
312 | cryptocurrency Tether focus on solving this issue by pegging their currency to dollars and
313 | storing the physical dollars in vaults. This requires Tether holders to trust a centralized
314 | organization to be honest, and are at odds with the principles of trustless transactions.
315 |
316 | Ethereum’s cryptocurrency, Ether, can be stored in smart contracts. Today, Ether is not used
317 | as a common means of exchange, however, in part due to its large fluctuations against
318 | today’s most popular means of exchange. In order for AMP exchanges to gain adoption,
319 | investments will need to be made and resolve with stable stores of value. To solve this
320 | problem, while maintaining a trustless system, we are developing smart contracts which
321 | manage, issue, and exchange tokens pegged to the value of the US Dollar and Euro.
322 |
323 | Figure 5 depicts this implementation. To summarize:
324 |
325 | 1. The initial contract is seeded with vast amounts of Ethereum in its reserve.
326 |
327 | 2. Users can purchase fiat-pegged tokens directly via the smart contract by
328 | contributing to the reserve.
329 |
330 | 3. Half of 1 percent of each purchase of fiat-pegged tokens is sent to the original
331 | reserve seeders of the smart contract, while half of that 1 percent is taken as a fee by
332 | the smart contract to help protect against price volatility.
333 |
334 | 4. Additionally, in order to protect against price volatility, and particularly Ether price
335 | decline, a currency prediction market contributes funds to the reserve of Ether in the
336 | fiat-pegged token smart contract.
337 |
338 | 
339 |
340 | *Figure 5 : Crypto-Fiat Smart-Contract Implementation*
341 |
342 | Figure 5 demonstrates Crypto-Euro (C-Euro) being purchased by a C-Euro purchaser, as well
343 | as C-Euro being exchanged for Ether. The amount of Ether the C-Euro purchaser receives is
344 | based on the current exchange rate average across more than 20 popular exchanges,
345 | ignoring outliers. The purchase price is the C-Euro is based on this same exchange rate.
346 |
347 | ## 4.1 Volatility Protection
348 |
349 | If the Ether smart contract holds 10,000 Ether from all depositor purchases in a day and the
350 | exchange rate is €240 per Ether, then all participants can withdraw their funds on that same
351 | day and receive the cumulative €2,400,000 worth of Ether they put into the smart contract
352 | on that day. However, if all C-Euro holders do not sell their Ether, but the value of Ether
353 | suddenly drops to €120 per Ether, C-Euro holders will receive a cumulative €1,188,000
354 | worth of Ether (taking into account the deduction of .5% of deposits that went to Proof
355 | Token seeders) and 99.5% of the Ether they deposited but at a lower value than they
356 | deposited as compared to the Euro.
357 |
358 | One may wonder what would then be the rationale of purchasing such a token that is
359 | supposed to protect against volatility. The aforementioned scenario demonstrates a worst
360 | case scenario and, in this scenario, all participants recoup a vast majority of what the
361 | currency they began with, all the while not relying on trust in a centralized institution or the
362 | fear of reserve theft. This worst-case scenario, however, does not take into consideration
363 | the protection designed to maintain the peg. These protections include the initial seed in the
364 | reserves. This is one of the largest keys to drive adoption of crypto-fiat. If there was a seeded
365 | reserve, not owned by anyone, but seeded by entities receiving 0.5% fees for crypto-Euro
366 | purchases (Proof Token holders), totaling 25,000 Ether, then the participants in the
367 | worst-case scenario, would receive their cumulative €2,400,000 worth of Ether that they
368 | deposited, except while there was 10,000 Ether deposited by token purchases, 20,000 Ether
369 | would be withdrawn by participants because of the 50% ETH-Euro price decline.
370 |
371 | ## 4.2 The Currency Prediction Market
372 |
373 | Another protection built into the system is a corresponding currency prediction market. This
374 | prediction market allows speculators to stake Ether based on their prediction of Ether’s
375 | price movement within a smart contract. For example:
376 |
377 | 1. Two participants could stake a cumulative 1000 Ether that the price declines during
378 | a 4-hour interval, while three participants stake a cumulative 500 Ether that the
379 | price will rise.
380 |
381 | 2. Once the 4-hour interval concludes, the average price across exchanges is
382 | determined. If the price of Ether rose, then the three participants who staked Ether
383 | on a rise are awarded a their original 500 Ether in addition to 900 Ether from the
384 | other side of the market, for a cumulative 1,400 Ether.
385 |
386 | 3. The remaining 100 Ether is sent as a commissions into the Crypto-Euro smart
387 | contract. If the Crypto-Euro has a sufficient buffer of over 20%, plus the 100%
388 | reserve based on the current exchange rate, of outstanding C-Euro in circulation,
389 | then 30% (30 Ether in the above scenario) of the revenue generated for the
390 | Crypto-Euro contract by the prediction market is made available to Proof Token
391 | holders, while the remaining 70% (70 Ether) is added to the buffer defending against lower-than Ether-Euro exchange rate conversions by C-Euro holders converting to
392 | Ethereum at future dates.
393 |
394 | The same model as described for C-Euro applies for the initial C-USD smart contract being
395 | initially launched by Proof, with a corresponding prediction market and seed reserves. As the
396 | reserves in these smart contracts grow from purchases and the buffers grow from revenues,
397 | C-Euro and C-USD can be a dependable, decentralized, means of exchange in AMP
398 | exchanges. To make this a success, Proof is building easy-to-use, intuitive tools for
399 | speculators to participate in the currency prediction market and open-sourcing the
400 | development to encourage others to make the offering available within their websites,
401 | earning a portion of revenues from Proof’s internal holding of Proof Tokens. Additionally,
402 | this architecture can support other fiat and other cryptocurrencies which can take on either
403 | role of backing currency or currency-of-issuance.
404 |
405 | In order to get a fair exchange rate, an oracle contract will create an average from 20
406 | exchanges with outlying price data which falls outside 2 standard deviations excluded. Both
407 | smart contracts will import from the Oracle Smart Contract data provider whose sources
408 | will be verifiable by the public. A significant percentage of the Web-based Price Data
409 | sources will come from high volume exchanges, however, there is also a possibility to utilize
410 | prediction markets or other mechanisms for a more decentralized form of price
411 | determination.
412 |
413 | Upon implementation of these contracts, all assets on The Proof Dashboard will be
414 | purchasable with C-Euro or C-USD. Likewise, speculation and insurance market activity will
415 | occur through these fiat-pegged tokens. Although we anticipate this being a popular way for
416 | users on the dashboard to transact, the cryptocurrencies Bitcoin and Ethereum can also be
417 | used based on the currency determined by that asset’s issuer.
418 |
419 | ## 5. The Proof Token
420 |
421 | The Proof Token will be issued publicly for the first time on 1 November, 2017. Initially, Proof will issue 2,362,062 tokens and publically offer 1,181,031
422 | tokens at a price of .088 Ether per token. The publically offered 1,181,031 tokens will be
423 | available for purchase via the Proof Token smart contract. The other half of the tokens will
424 | be held by Proof. Proof tokenholders recieve the benefit from Proof ecosystem purchases as new paid offering emerge, by leveraging Proof tokens, as well as are elligable to collect rewards based on marketplace activity if legal bountries do not prevent this allocation in their jurisdiction.
425 |
426 | 
427 |
428 | *Figure 6: Proof ICO Funds Distribution*
429 |
430 | A maximum of 50% of all proceeds raised will be placed in the Crypto-Euro and Crypto-USD smart
431 | contracts to capitalize the issuances of the fiat-pegged tokens. If a viable, trustless, and well-collateralized alternative is possible, that solution will be leveraged as a replacement solution to Crypto-Euro and Crypto-USD, with collateralization proceeds allocated to AMP ecosystem development. Another 15% of revenue
432 | from token sales will be leveraged by Proof to issue bounties towards the further
433 | development of Ethereum blockchains to support the move towards scalability. The
434 | remaining 35% of the token sale proceeds will also go towards the core operations of the
435 | Proof platform as well as the full decentralization of the entire Proof application ecosystem.
436 |
437 | Upon conclusion of the tokensale, half of all funds raised will go into the Crypto-USD and
438 | Crypto-Euro contracts in order to capitalize those markets if a trustless alternative is not found by the development team. If a third-party custodian contract is not found, the created contracts will be built with the intent to prevent the ability for a member of Proof to extract funds in a manner different from anyone else, thus locking in the funds and creating a utility contract for all.
439 |
440 | This also contributes to why Proof is keeping half of the tokens. Since The Proof Dashboard
441 | is a functional marketplace as of the time of original publication of this paper, many operational tasks such as smart contract audits, customer
442 | support, marketplace expansion, security audits, legal support, expansion of development
443 | personnel, public relations, and the scaling of architecture. These are all expensive
444 | initiatives that will immediately begin implementation as soon as the token sale concludes.
445 | Proof seeks to align itself with the token holders by keeping half of the tokens and having
446 | half of the rewards go to the company as a primary source of revenue. This is also a
447 | mechanism for decentralizing even Proof’s revenue model.
448 |
449 | ## 5.1 Fiat-Crypto Seeding
450 |
451 | One of the most important uses of the ICO funds will be in seeding the Fiat-Crypto
452 | Contract’s ether buffer. In order for this utility token to work, it must be backed by a large
453 | pool of capital which allows for the creation of the C-USD and C-EURO while also creating
454 | the stabilization necessary for the system to work at all. The contracts Proof Deploy during
455 | implementation are not confined to The Proof Dashboard and will be available to any
456 | platforms who wish to use it as long as they acquiesce to Proof Token holders receiving a
457 | small portion of their transactions. This seeding of the Fiat-Contract Marketplace also lends
458 | actual value to the initial issuances of the Crypto-USD and Crypto-Euro meaning that almost
459 | immediately, they will be ready for use on platforms beyond Proof.
460 |
461 | ## 5.2 Ethereum Blockchain Scaling
462 |
463 | Although Ethereum purports to support 15 transactions per second, the addition of a Turing
464 | complete virtual machine complicates this number
465 | [5]
466 | . A developer must consider added
467 | compute time and arbitrary function call patterns when programming a smart contract
468 | which, in the past, has caused mass network disruption. A dramatic example of this occurred
469 | during the Bancor ICO when over 10,885 buyers simultaneously attempted to purchase the
470 | Bancor token
471 | [6]
472 | . Bancor structured their ICO to accept transactions on a probabilistic basis
473 | rather than basing it on gas prices. Although more egalitarian, the ICO, in effect, caused a
474 | DDOS on the Ethereum network as users threw as many transactions at the contract as
475 | possible to boost their likelihood of purchasing. Although block times stayed level at around
476 | 16 seconds per block, wait times for transactions actually getting in blocks grew from the
477 | usual max of a few minutes to purported transaction times across the entire network ranging
478 | from 30 minutes to over an hour per transaction. It would be easy to blame the ICO’s
479 | themselves for this issue, however, with the rise of popular but compute heavy decentralized
480 | applications such as Etheroll
481 | [7]
482 | , Augur
483 | [8]
484 | , Oracalize
485 | [9]
486 | , and Proof itself, this kind of network
487 | congestion must be viewed, not as an anomaly, but as the new normal. This is especially
488 | important since Ethereum’s self stated raison d’etre is to be a platform for decentralized
489 | applications.
490 |
491 | Currently, the scaling and speed solutions proposed by The Ethereum foundation have
492 | included a sharding solution promising thousands of transactions per second and a move
493 | over to pluggable proof of stake with the foundation creating their own protocol dubbed,
494 | ‘Casper’
495 | [10]
496 | . These changes will include another hard fork of the Ethereum chain and will
497 | bring along with them a high likelihood of mass disruption across the entire Ethereum
498 | application space. Since the timelines for these initiatives are highly ambiguous, there exists
499 | a need to accelerate these essential technologies.
500 |
501 | In the spirit of Proof’s collection of developer ease-of-life tools, and since the continued
502 | existence and health of The Ethereum blockchain and community is paramount to the
503 | success of Proof, 15% of funds gained will be used for developer outreach, code bounties,
504 | and educational initiatives meant to enrich the Ethereum ecosystem. Because the core of any blockchain are the developers who work on it and the innovations that arise from their
505 | labor, Proof will establish a fund for expediting progress towards Metropolis and Serenity.
506 |
507 | Proof seeks to take a leadership role in helping the application space prepare for dramatic
508 | changes to the core protocol such as the aforementioned move to Serenity which
509 | encompasses the introduction of sharding addressing scalability, Casper Proof of Stake, and
510 | runtime changes to the EVM amongst many others. On the protocol and architecture levels,
511 | the initiatives Proof creates will also be aimed at incentivizing talented individuals to get
512 | involved with the public repositories of projects such as the Ethereum Core
513 | [11]
514 | , Ethermint
515 | [12]
516 | ,
517 | and Raiden
518 | [13].
519 |
520 | Likewise, Proof will look into expanding the fund to assist with application developers and
521 | projects working on nascent projects with Bitcoin. Since Bitcoin
522 | [14] continues to be a
523 | ‘transaction-only’ system, the number of ‘application level’ projects is low.
524 |
525 | ## 6. Conclusion
526 |
527 | If government-issued fiat can be reliably pegged to decentralized mediums of exchange,
528 | people who wish to store value outside the purview of governmental regulators may opt to
529 | participate in pegged monetary markets. If property investments, company equity,
530 | securitized debt and other instruments can be traded outside of government regulated
531 | exchanges free from third-party confiscation, people who seek to avoid centralized
532 | interference into their holdings, might opt to participate in AMP exchanges. Additionally,
533 | financial gains could no longer be subject to the volatility of today’s cryptocurrencies or
534 | suspension of access to financial accounts. This would essentially be financial sovereignty to
535 | establish and finance rogue nations with financial yields coming from different markets
536 | around the world, without the fear of confiscation. Capital would have the ability to be
537 | freely transportable regardless of restrictions on intermediaries.
538 |
539 | The notion of this freedom of capital, especially across borders, would raise many security
540 | concerns among centralized institutions around the world. Even with court demands and
541 | regulatory actions imposed to limit access to web-based services that leverage this enabling
542 | technology, the uncontrollable properties of smart contracts leveraging blockchain
543 | technology could render cease and desist orders unenforceable.
544 |
545 | AMP processes also transform how investors assess risk, with the goal of removing the
546 | necessity of oversight by today’s traditional rating agencies and regulators to help
547 | determine the validity or health of investment opportunities. Furthermore, AMP markets
548 | promote global competition for investment opportunities, avoiding protectionist policies
549 | and accelerating the ability of local communities to garner favorable terms in financing
550 | initiatives geared toward their own growth and sustainability.
551 |
552 | To realize a world of financial markets with blockchain technology as a backbone, the
553 | underlying technology must be able to scale to meet the demands of market participants. As
554 | AMP markets grow and the adoption of crypto-fiat gains traction, though this may take time,
555 | real-world use cases this early is essential to tackle the question of scalability. Lower
556 | barriers to entry, active platforms, automated verification, more fiat and
557 | cryptocurrency-pegged tokens, and a further decentralization of all these aspects are laying
558 | the foundations for the next iteration of financial interactions previously described. Proof
559 | seeks to help create the tools, collaborate, cultivate development communities to tackle
560 | these challenges, and focus on furthering the proliferation of more infrastructure and
561 | application layer offerings for blockchain technology to promote transparency and
562 | decentralization enabling the freedom of capital flows.
563 |
564 | ## References
565 |
566 |
567 | 1. Proof : Proofsuite.com
568 |
569 | 2. https://en.wikipedia.org/wiki/Initial_coin_offering
570 |
571 | 3. The Proof Dashboard : beta.proofdashboard.com
572 |
573 | 4. Tether: Uncredited, Tether Whitepaper
574 | https://bravenewcoin.com/assets/Whitepapers/Tether-White-Paper.pdf
575 |
576 | 5. Ethereum; Wood, Gavin; Ethereum: A Secure Decentralized Transaction Ledger; EIP-150
577 | Revision.
578 |
579 | 6. Bancor: https://github.com/bancorprotocol
580 |
581 | 7. Etheroll: https://etheroll.com/
582 |
583 | 8. Augur: https://augur.net/
584 |
585 | 9. Oraclize: http://www.oraclize.it/
586 |
587 | 10. Proof-of-Stake: https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ
588 |
589 | 11. Ethereum: https://github.com/ethereum/wiki/wiki/White-Paper
590 |
591 | 12. Ethermint: https://github.com/tendermint/ethermint
592 |
593 | 13. Raiden: https://github.com/raiden-network/raiden
594 |
595 | 14. Bitcoin: https://bitcoin.org/bitcoin.pdf
596 |
597 |
598 | ## Disclaimer
599 |
600 | The purpose of this whitepaper is to present AMP – a crowdfunded cryptocurrency initiative – to potential community members who join the Proof Community in connection with AMP and Proof Token deployment and other activities. The information set forth below should not be considered exhaustive and does not imply any elements of a contractual relationship. Its sole purpose is to provide relevant and reasonable information to potential token holders in order for them to determine whether to undertake a thorough analysis of the company with the intent of participating in AMP initiatives.
601 |
602 | Nothing in this whitepaper shall be deemed to constitute a prospectus of any sort of a solicitation for investment, nor does it, in any way, pertain to an offering or a solicitation to buy any securities in any jurisdiction. The document is not composed in accordance with, and is not subject to, laws or regulations of any jurisdiction which are designed to protect investors.
603 |
604 | Certain statements, estimates, and financial information contained within this whitepaper constitute forward-looking, or pro-forma statements, and information. Such statements or information involve known and unknown risks and uncertainties which may cause actual events or results to differ materially from the estimates or the results implied or expressed in such forward-looking statements.
605 |
606 | Nothing published by, or republished from, Proof, any of its team members, any of its community meembers, or any of its subsidiaries should be interpreted as investment advice. Information is provided for educational and informative purposes only. Proof is in no way providing trading or investment advice. Please consult with your appropriate licensed professional before making any financial transactions, including any investments related to ideas or opinions expressed, past, present, or future by the aforementioned entities and any future entities that may operate under the parent entities. Proof does not intend to express financial, legal, tax, or any other advice and any conclusions drawn from statements made by, or on, Proof shall not be deemed to constitute advice in any jurisdiction.
607 |
608 | ##Jurisdiction and Participation Restrictions
609 |
610 | Nothing in this whitepaper constitutes an offer to sell or a solicitation of an offer to buy a security in any jurisdiction in which it is unlawful to make such an offer or solicitation. All notices on Proof AMP webites, including token applications and marketplaces, include notices of restrictions for the participation by US-citizens and residents of the US.
611 |
612 | Neither the Swiss FINMA nor the United States Securities and Exchange Commission, The Securities and Commodities Authority of the United Arab Emirates, nor any other foreign regulatory authority is involved in the review, certification or endorsement of the research or development of AMP.
613 |
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