Jibrel Network Whitepaper

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JIBREL NETWORK MAY 2017 SECOND DRAFT ​YAZAN BARGHUTHI VICTOR MEZRIN [email protected] [email protected] ABSTRACT the jibrel network aims to facilitate the digitization, listing and trading of traditional assets such as currencies, bonds and other financial instruments, on the blockchain. The Jibrel Decentralized Autonomous Organization (Jibrel DAO) will allow platform users to deposit cash, money market instruments or create their own Crypto Depository Receipts (CryDRs) and benefit from on-chain / off-chain arbitrage. Decentralized organizations and funds that are overexposed in digital currencies can hedge their positions and protect their funding with stable assets. Furthermore, jibrel will provide developers with a complete platform to build tools and applications for transacting, investing and hedging, through leveraging traditional asset-backed tokens. In addition, jibrel will enable instant, near-zero fee, global payments and remittances in the form of fiat to fiat transactions that can be undertaken through peer to peer, business to business or consumer to merchant channels. This white paper outlines the core components comprising jibrel, how they interact, and aims to demonstrate how the network can be built-out efficiently using existing infrastructure. 1.INTRODUCTION Moreover, traditional individual and institutional investors, who could facilitate the quick movement of Since their introduction with Bitcoin in 2009[1], traditional assets off-chain are deterred from blockchains have unlocked tremendous value. With this participating due to the fundamental incompatibilities new technology, we can verify and commit transactions that exist - most notably, a lack of transparency and in an immutable decentralized ledger, or implemented extreme market volatility[2]. more broadly, achieve decentralized consensus. Finally, decentralized organizations, who raise funding This incredible innovation is currently transforming our through crowd sales, as well as decentralized funds and world by eroding the need for trusted intermediaries, crypto-investors, who are overexposed in digital assets settlement / clearing offices, and middle-man service and cryptocurrencies, have limited options to diversify providers across a wide range of industries and sectors. into traditional holdings. That being said, due to limited adoption at an The risks are compounded further by the fact that digital institutional level, most of the crypto-economy's value currencies play a multifaceted role, they are used to remains siloed by use-case or geography. In addition, reward miners for facilitating transactions; as a means widespread systemic risk exists due to the bottlenecks of transferring value; as a speculative investment tool; imposed by these siloes in the form of challenges and and most recently, to crowdfund and run decentralized limitations in converting between traditional assets and organizations and applications (e.g. decentralized digital assets. computing[3], decentralized storage[4]). Given the disconnect between the traditional economy In traditional finance, different instruments are used for and the cryptoeconomy, the same challenges plaguing these functions and are regulated accordingly. This helps the former still persist in the latter. Users wishing to manage systemic risk. Until decentralized regulatory transfer traditional currency between one another still consensus protocols are fully built-out, the face the time delays and fees imposed by relying on a cryptoeconomy faces security and fraud risk, in the form combination of cryptocurrency exchanges, traditional of unregulated exchanges; market risks, resulting from financial institutions, as well as payment processors. extremely volatile currencies that are used beyond their architectured purpose; and systemic risks arising from

crowd-funds stored in volatile digital currencies and 3.3 Tethered Tokens subsequently locked into smart contracts1. Tethered tokens will be required to create traditional asset-backed tokens. For every traditional asset held a This paper analyzes the limitations and challenges of the tethered token is minted. Upon the underlying asset current environment and proposes an approach that being sold, the token is destroyed. . leverages existing infrastructure to provide a solution for all stakeholders. 3.4 Guarantor In order to ensure tethered tokens hold their respective 2. TRADITIONAL ASSET-BACKED TOKENS value, a guarantor is needed. The guarantor will hold traditional assets and issue their respective tethered The core stakeholders in the jibrel ecosystem are; tokens, as well as redeem and destroy tokens in return non-investment users, who seek to benefit from the value for the release / transfer of ownership of the underlying unlocked by cryptocurrencies and blockchain technology, traditional asset. such as low remittance fees and instant transfers; traditional investors, who seek to benefit from the high returns of the emerging cryptoeconomy; and 3.5 Application Layer, Libraries & Templates decentralized organizations / funds and crypto-investors, Once tethered tokens are established, an array of who seek to diversify their crypto-holdings with stable applications that leverages their capabilities can be low-yield assets, on-chain, as to remain transparent to developed, including payment processors, remittance crowd-funders. wallets and trading platforms. To facilitate rapid application development, a dedicated application layer The needs of all stakeholders could be successfully met with user-friendly libraries and code templates will be by bringing the stability of traditional financial required. instruments to the blockchain. This can be accomplished by minting tethered tokens with one-to-one backing of the underlying traditional asset they represent. Using 3.6 Ownership Transfers such a method, tethered tokens can be used to denote a Once a tethered token is issued, the underlying asset can currency[5] or even a commodity[6]. be easily traded similar to any cryptocurrency. The high-level process is outlined below: By developing a ‘guarantor’ that houses traditional assets and issues tokens representing ownership of the 1. User sends FIAT to guarantor underlying assets, one can enable a wide-range of 2. Guarantor returns jFIAT currencies, commodities, money market instruments and 3. User pays merchant in jFIAT other financial tools, to be openly traded on-chain. 4. Merchant redeems jFIAT 5. Guarantor sends FIAT to merchant account With a guarantor backing the tethered token, with the 3. SYSTEM ARCHITECTURE promise to redeem for the underlying asset at a future point in time, the token can stay in the system and be The following section outlines the key components of the used for on-chain and off-chain payments. jibrel network and what is required to facilitate putting traditional assets on-chain. 3.7 Fees & Charges 3.1 Public Blockchain Transferring ownership of both digital and traditional While reliance on another blockchain imposes a long-list assets have associated fees and charges that will need to of new challenges and limitations, a public and secure be accounted. blockchain is required for early versions of jibrel, until full cross-chain communication is feasible. 3.8 Oversight / Regulation 3.2 Cryptocurrency Exchanges Any on-chain transaction representing an off-chain Cryptocurrency exchanges provided end-users with fiat transfer of ownership or value must satisfy international accounts in their local currency and digital wallets to and local regulation and must be managed accordingly. hold cryptocurrencies. User can buy, trade or transmit digital currency, easily converting between crypto and Regulatory protocols / governance tools should be put in fiat currencies. place to ensure proper governance and oversight. All transactions must satisfy KYC / AML regulations. 1 Projects are at risk of not materializing if their funding is reduced due to market downswings, potentially leading to insolvency

4. JIBREL NETWORK IMPLEMENTATION 4.3 Jibrel DAO The Jibrel DAO will receive / hold traditional assets on This section outlines how each component will be behalf of their owners and issue their respective CryDRs. implemented in the jibrel network. Uponsends it to the owner’s wallet. Upon redemption of a token, the token is destroyed and the underlying asset 4.1 Ethereum Blockchain is transferred to the token holder. The selected blockchain must decouple mining rewards and the underlying transactions between the While the Jibrel DAO aims to be fully decentralized, participants of the system. For this reason, Ethereum is until full on-chain integration of traditional financial well suited to form the foundation of jibrel’s underlying institutions, large components of the system will need to architecture. Mining rewards will be in the form of be off-chain. Off-chain activity will require the input and Ethereum ‘gas’, while any tethered token will not be part oversight of local and international regulators. of the mining process[7]. For this reason, stakeholder interaction must be While jibrel is also suited to be built on Bitcoin’s properly managed to ensure full regulatory compliance Omniprotocol, that approach is beyond the scope of this without sacrificing transparency and reliability. This paper. will be achieved through ​asset portals​, dedicated entities operating with full compliance in their respective geographies​. 4.2 Crypto Depository Receipts (CryDR) CryDRs are tethered tokens that represent ownership of an underlying traditional asset held by jibrel. In this 4.4 Asset Portals paper, they are denoted as jAsset (e.g. jUSD, jEUR, Asset portals are used to undertake the necessary legal jGBP). On release, jibrel will support six fiat currencies and financial steps to convert traditional assets into and two money market instruments, with plans to add on-chain digital assets. additional financial instruments in the future. Fiat portals will be simple cryptocurrency exchanges. 4.2.1 Currencies / Fiat Strategic partnerships can be formed with existing The first iteration of the jibrel network aims to support exchanges while a dedicated jibrel exchange network USD, EUR, GBP, RUB, CNY, AED with additional with sufficient geographic reach can be built-out. In currency support gradually added as strategic exchange addition, by housing a portion of jibrel’s fiat reserves in partners are integrated. existing exchanges, transfer times and fees are significantly reduced whilst simultaneously providing 4.2.2 Money Market Instruments exchanges with much needed liquidity. Stable low-yield assets are jibrel’s core offering, crypto-investors will be able to purchase tokens tethered Non-fiat portals will require off-chain presence to to US Treasury Bills and Zero-Coupon Certificates of undertake the necessary due diligence and take Deposits. For the first iteration of the jibrel network, all ownership of non-fiat deposits. money market instruments will incorporate an automatic rollover or ​accrual mechanism. Meaning, fiat In most geographies, asset portals will require brokerage received from matured investments, will be and money transmitter licenses. In cases involving automatically redeployed in similar assets. Similarly, heavily regulated jurisdictions or more nuanced financial dividend or interest will be accrued until the underlying assets, full regulator involvement and oversight might asset matures or is sold. In future versions, money be required. market instruments will be configurable. As regulation evolves, asset portals will be able to 4.2.3 Other Financial Instruments decentralize and become community driven. In the future, as traditional financial institutions are Institutional investors and other financial institutions integrated into the jibrel platform, full support of other will be able to list their own traditional assets on-chain, financial instruments can be rolled out, including listed using the jibrel platform. and private equity. 4.2.4 Smart Compliance 4.5 Jibrel Network Token​ (JNT) Since CryDRs are fully programmable they can be While non-fiat portals will charge ​offline fees in fiat embedded with regulation. Fiat currencies will be currencies, the Jibrel DAO’s on-chain fees and unrestricted, however the purchase and resale of other commissions will be levied in the form of Jibrel Network assets will need to be restricted by class and geography Tokens (JNT). to be fully compliant. This logic is embedded in each CryDR.

5.1.4 Helpers / Utils ​(Auxiliary Smart Contracts) 5. INFRASTRUCTURE We will also need to create several auxiliary smart contracts to enable auxiliary functions such as switching Critical data, such as user balances and transactions, between contracts running different versions and will be stored on the blockchain while all other data is enabling additional API features. hosted on development servers. Their detailed description is beyond the scope of this Several development environments, tools and document. frameworks have already been developed to enable the rapid development of decentralized applications[8]. Jibrel will need to develop similar developer components, 5.2 Off-chain Infrastructure tools and frameworks to enable the widespread adoption and distribution of CryDRs. In order to facilitate the widespread adoption of CryDRs as a transaction, investment and hedging tool, Infrastructure will be required across two main user-friendly libraries and code templates for application dimensions, on-chain APIs and off-chain APIs / Utils. developers will be released. 5.1 On-chain Infrastructure Only four key smart contracts will be required for the Figure 2.​ Jibrel DApp API Workflow network to operate effectively. 5.1.1 CryDR Smart Contracts Each asset registered with the Jibrel DAO will have a CryDR issued in the form of a smart contract. CryDR smart contracts will be ERC-20 compliant. Forwarding CryDRs between user accounts is similar to forwarding other ERC-20 tokens between wallets. 5.1.2 Jibrel DAO Smart Contract A dedicated Jibrel DAO smart contract will regulate the work of CryDR Smart Contracts. 5.1.3 Board of Directors Smart Contract (BODC) The Board of Directors smart contract (BODC) is the 5.2.1 Libraries & Templates only mechanism to interact / influence the Jibrel DAO We expect that developers will use existing libraries to Contract. interact with Ethereum Blockchain (for example, JS web3). We will release wrappers for this library and code BODC will be managed through a voting system, where samples that will simplify the interaction with the Jibrel members of the board can use their Ethereum accounts DAO and CryDR smart contracts. to vote on BODC actions. Storing and using private keys will be the responsibility of members. Ideally, the board 5.2.2 CryDR Explorers will be composed of crypto thought-leaders and financial Open-source explorers will be created, allowing users to services experts. view CryDR metadata and interact with the BODC as Figure 1.​ Crypto Depository Receipts - General Workflow well as manually verify ownership of the underlying asset by the Jibrel DAO. 5.2.3 Board of Director Tool-kit Tools will be created to interface the internal IT infrastructure of CryDR Ltd with Ethereum blockchain. In particular, for the organization of interaction of the members of the board of directors with BODC and for operative monitoring of the state of the system. 6. SMART REGULATION IMPLEMENTATION This section outlines the implementation of CryDRs, Smart Regulation and Compliance within the Jibrel Network

6.1 CryDR Architecture View: Interface for third-party contracts and web-apps Controller: Implements compliance and business logic, CryDRs themselves are smart contracts deployed to the orchestrates storage and view contracts Ethereum blockchain. To facilitate a robust and scalable system, CryDRs should satisfy multiple requirements: Figure 3.​ Tiered Architecture High Compatibility: Should employ an ERC20 interface to be compatible with existing token management tools Updatable Business Logic: Should be easily upgradable to keep up with evolving real-world rules and regulations Immutability: Should be immutable once deployed Migratable: Events and Storage should be stored separately Interactivity: CryDRs should be able to interact with each other 6.2 Existing Methodologies These technical requirements are difficult to achieve using the tools currently available within the Ethereum ecosystem. Upgradable smart contracts are challenging to implement, and while certain tools and methodologies exist, they each have their own limitations. Updating Compliance With this structure, we can easily deploy a new CryDR 6.2.1 EVM DELEGATECALL controller contract and configure view and storage The first potential approach leverages opcode contracts to use this new controller. `DELEGATECALL` in Ethereum Virtual Machine (EVM). Effectively, this allows us to easily update the underlying compliance and business-logic powering While this is a powerful tool to update business logic, it CryDRs, what we refer to as Smart Regulation. has several drawbacks. Specifically, once deployed, the storage structure of the original smart contract must be maintained throughout updates. For this reason, this approach can only be employed in simple upgradable contract implementations and cannot be used for Jibrel's use-case. Figure 4.​ Controller Updates 6.2.2 Smart Contract Pruning Another potential solution is the pruning of the contract and deploying another new contract to the same address, preserving Events and State. While this would be an ideal solution for the Jibrel Network, it has yet to be implemented in EVM. 6.3 Jibrel Network Approach In building Jibrel, we leverage a more tedious but holistic solution - we deconstruct the whole system into multiple sophisticated smart contracts that interact with one another, but can provide seamless upgrades and updates. While more complex to implement, it provides a powerful backend for Jibrel DApps. By facilitating a process that allows for business logic to be updated, the Jibrel Network ensures tokens can 6.3.1 CryDR 3-Layer System remain fully compliant by evolving with changes in CryDRs are deconstructed into their critical components: real-world regulation. Storage - Houses all the data Upgrading Interfaces Smart contracts have inherited limitations, primarily, Using this architecture, we can also upgrade token they are only able to access on-chain data, with calls to interfaces seamlessly, such as providing additional third-party services prohibited by design. support for new token standards (e.g. ERC223) In order to access off-chain data, the data must first be pushed onto the blockchain in form of transactions. Figure 5.​ View Upgrades Put simply, all compliance measures must be implemented on-chain via smart contracts. In order to implement KYC/AML measures we need to implement two solutions: Data storage: To store user data on-chain Rule Implementation: Apply KYC / AML rules on each transaction Many projects address the first task. Such as Civic, and uPort. However, these solutions are built to be adaptive and versatile, as a result, these solutions are only able to store generic user information that does not sufficiently meet the need of institutional grade KYC / AML processes. For this reason, Jibrel will build out a dedicated When conducting such upgrades, CryDR storage remains compliance API that will liaise with both a dedicated unchanged / unaffected. Jibrel KYC / AML module as well as third-party solutions available today. Since Views act as a tiered layer ahead of the controller, all Events remain intact during updates. A well implemented controller will trigger all connected views, so clients can receive all events. Figure 6.​ Trigger Events Figure 7.​ Jibrel Compliance API 6.3.2 Smart Regulation Architecture Implementing KYC/AML measures require strict and 6.3.3 Role of Jibrel Network Token (JNT) detailed account permissioning controls. A key business requirement of the Jibrel Network is that all CryDRs must remain tethered to an underlying asset. In order to achieve this, off-chain assets must first be

securitized, which is why a virtual exchange currency is In the short to medium term, off-chain activities will be required. Both to transact with the network, as well as needed to undertake the necessary legal and financial facilitate the payment off-chain fees. due diligence to convert physical assets to digital assets. In addition, the BOD members will be needed to oversee An existing currency (e.g. BTC, ETH) is not suitable as the Jibrel DAO to ensure full transparency and the price movements of these currencies are unrelated to regulatory compliance. utility in the Jibrel Network. This disconnect imposes market and credit risk. In addition, if the Jibrel Network In the longer-term, it is expected that regulation will aims to provide a dedicated chain in the future, a evolve to facilitate on-chain verification of asset dedicated token will be required to facilitate a seamless ownership, enabling jibrel to become a decentralized migration process. autonomous organization. CryDRs themselves are unsuitable for this solution, as 7.1 Self-service Portals they must remain tethered to real-world assets, Once the technological limitations such as on-chain leveraging them as part of payment causes another computational capability and the feasibility of disconnect to emerge, unbalancing the system. implementing complex zero-knowledge proofs2[9]; as well as the regulatory hurdles of obtaining the relevant Jibrel Network Token (JNT) will act as the ‘fuel’ or ‘gas’ licensing, are overcome, jibrel could operate self-service of the network. JNT will provide universal access to all portals (i.e. traditional exchange platforms hosted features provided by the Jibrel Network and the relevant on-chain, communicating with the jibrel network). Jibrel DApps. The build-out of these portals is critical to jibrel JNT ensures all CryDRs remain tethered to their achieving full decentralization. respective underlying assets at all times, adding an additional layer of compliance. 7.2 On-chain Digital Identity / KYC / AML While many on-chain digital identity and KYC solutions exist today, they are limited in functionality. More advanced identification solutions will be required to achieve self-service portals. 7.3 Board of Directors DAO Once operations have reached steady state, the Board of Directors can be dissolved and replaced with a autonomous regulatory entity, charged with overseeing the operations of the Jibrel DAO. 8. USE-CASES Traditional asset-backed tokens that are easily Figure 8.​ Jibrel Network Token Interaction exchangeable provides a wide range of use-cases 8.1 Traditional / Digital Asset Exchange By allowing traditional assets and digital assets to be freely traded between one another, a platform is inherently developed that facilitates low-risk, high returns for institutional investors through the wholesale of traditional investment instruments to investors and entities seeking stable digital assets. 8.1.1 Investment Platform An investment bank can deposit money market instruments or commodities into the Jibrel DAO and then sell those products (CryDRs) to decentralized organizations and funds at a premium, benefiting from on-chain / off-chain arbitrage​. 8.1.2 Hedging Tokens Decentralized Autonomous Organizations and funds can purchase money market CryDRs and store them 7. FULLY DECENTRALIZED OPERATIONS 2 While significant work has been undertaken to improve the efficiency of probabilistically checkable proofs, they still remain highly impractical

on-chain, with full transparency, reassuring investors 8.2.2 Universal Wallet that their funding is safe. Decentralized Autonomous Currency agnostic wallets can be created that allow Funds can choose from a wide range of traditional assets users to freely convert between currencies and make to complement their digital portfolios and protect against transfers to anyone, anywhere in any currency, without cryptoeconomy downturns. the exorbitant fees usually associated with such transactions. 8.2 Global Transfers By providing asset-backed tokens, the platform is able to 8.3 Cross-border Payments provide tokens that possess all the desirable qualities of Similarly, jibrel can enable cross-border payments. both, traditional assets - in particular, stability and global adoption, and digital assets - immutability, ease of transfer and reliability. 8.3.1 Currency API With the underlying tokens, jibrel can provide a With these tokens, payment gateways, remittance currency API that allows users to convert freely between channels and other money transfer use-cases can be currencies. implemented. 8.3.2 Merchant API 8.2.1 Remittances Jibrel can provide merchants with a simple easy to use Jibrel can enable remittances by enabling fiat to fiat payment gateway that can accept payments in any transfers that use crypto-infrastructure to execute currency and pay-out in the local currency. Without transactions. Users can add funds and transfer them to incurring exchange or transfer fees. anyone in the world, leveraging the low fees provided by digital currencies while still maintaining the stability, Once the network is established, merchants will be able security and safety of traditional currencies. to set-up currency agnostic payment gateways using jibrel’s user-friendly libraries and API.

9. REFERENCES [1] Nakamoto, Satoshi, ​Bitcoin: A peer-to-peer electronic cash system​, 2008 - URL - {https://bitcoin.org/bitcoin.pdf} [2] Brennan and Lunn, Credit Suisse Equity Reports - ​Blockchain - The trust disruptor: Shared ledger technology and the impact on stocks​, 2016 - URL {http://www.the-blockchain.com/docs/Credit-Suisse-Blockchain-Trust-Disrupter.pdf} [3] Golem, ​The Golem Project: Crowdfunding White Paper​, ​2016 - URL {http://golemproject.net/doc/DraftGolemProjectWhitepaper.pdf} [4] Wilkinson, Shawn, ​Storj Project: A Peer-to-Peer Cloud Storage Network​, 2014 - URL {https://storj.io/storj.pdf} [5] Tether Ltd, ​Tether: Fiat currencies on the Bitcoin blockchain​, 2016 - URL {https://tether.to/wp-content/uploads/2016/06/TetherWhitePaper.pdf} [6] Eufemio, Chng and Djie, ​D​igix: The Gold Standard in Crypto​Assets​, 2016 - URL {https://dgx.io/whitepaper.pdf} [7] Buterin, Vitalik, ​Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform​, 2013 - URL {http://ethereum.org/ethereum.html} [8] Solidity, ​Solidity: A contract-oriented, high-level language for the Ethereum Virtual Machine​, Release 0.4.10 Documentation - URL {http://solidity.readthedocs.io/en/v0.4.10/} [9] Ben-Sasson, Chiesa, Garman, Green, Miers, Troma and Virza, ​Zerocash: Decentralized Anonymous Payments from Bitcoin​, 2014 - URL {http://zerocash-project.org/media/pdf/zerocash-extended-20140518.pdf}