Caspian Whitepaper

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Whitepaper Version 1.1 11 May 2018

Legal Disclaimer This whitepaper and other documents published in association with this whitepaper relate to the CSP token project. These documents may be amended or replaced at any time, without noti cation of any changes or access to any additional information. Recipients are noti ed as follows: ● This whitepaper contains forward-looking statements that are based on the beliefs of Caspian, Ltd. ("Caspian"), as well as certain assumptions made by and information available to Caspian. The Caspian project as envisaged in this whitepaper is under development and is being constantly updated, including but not limited to key governance and technical features. The CSP token (as described in this whitepaper) involves and relates to the development and use of experimental platforms (software) and technologies that may not come to fruition or achieve the objectives speci ed in this whitepaper. When the CSP platform is completed, it may differ from the platform set out in this whitepaper. ● Eligible purchasers: eligibility to participate in the Caspian project is not guaranteed and is likely to be subject to restrictions. ● Regulatory status not assured in all jurisdictions: Caspian intends to operate in full compliance with applicable laws and regulations and obtain the necessary licences and approvals in key markets. This means that the development and roll-out of all the features of the CSP token and Caspian project described in this whitepaper are not guaranteed. Regulatory licences and/or approvals may be required in certain jurisdictions in which relevant activities may take place. It is not possible to guarantee, and no person makes any assurances, that any such licences or approvals will be obtained within a particular timeframe or at all. This means that the Caspian platform and other features of the proposed CSP token may not be available in certain markets, or at all. This could require restructuring of that ecosystem and/or its unavailability in all or certain respects. In addition, the development of the platform is intended to be implemented in stages. During certain stages of development, the platform may rely on relationships with certain licensed third party entities (such as exchanges). If these entities are no longer properly licensed in the relevant jurisdiction, this will impact on the ability of the Caspian platform to engage with that party or its services / functions. ● No offer of regulated products or services: the CSP token is not intended to constitute a security or any other regulated product or service in any jurisdiction. This whitepaper does not constitute a prospectus nor offer document of any sort and is not intended to constitute an offer or solicitation of securities or any other investment or other product or service in any jurisdiction. Any offer or agreement in relation to any sale and purchase, of CSP tokens is to be governed solely by a separate document setting out the terms and conditions ( Ts&Cs ) of such agreement. In the event of any inconsistencies between the Ts&Cs and this whitepaper, the former shall prevail. ● No advice: this whitepaper does not constitute advice to purchase any CSP tokens nor should it be relied upon in connection with any contract or purchasing decision. ● No representations: no representations or warranties have been made to the recipient or its advisers as to the accuracy or completeness of the information, statements, opinions or matters (express or implied) arising out of, contained in or derived from this whitepaper or any omission from this document or of any other written or oral information or opinions provided now or in the future to any interested party or their advisers. No representation or warranty is given as to the achievement or reasonableness of any plans, future projections or prospects and nothing in this document is or should be relied upon as a promise or representation as to the future. To the fullest extent possible, all liability for any loss or damage of whatsoever kind (whether foreseeable or not) which may arise from any person acting on any information and opinions contained in this whitepaper or any information which is made available in connection with any further enquiries, notwithstanding any negligence, default or lack of care, is disclaimed. ● Risk warning: the purchase of CSP tokens carries with it signi cant risks. Potential purchasers should assess the nature of, and their own appetite for, relevant risks independently and consult their advisers before making a decision to purchase any CSP tokens. ● Translations: this whitepaper and related materials are issued in English. Any translation is for reference purposes only and is not certi ed by any person. If there is any inconsistency between a translation and the English version of this whitepaper, the English version prevails. ● Restricted transmission: this whitepaper must not be taken or transmitted to any jurisdiction where distribution or dissemination of this whitepaper is prohibited or restricted. ● No third party af liation or endorsements: references in this whitepaper to speci c companies and platforms are for illustrative purposes only. Other than Caspian, Tora and Kenetic, the use of any company and/or platform names and trademarks does not imply any af liation with, or endorsement by, any of those parties. 1

Abstract The digital asset space has seen explosive growth over the past year, with average daily exchange-trading volume across all crypto assets surpassing 18 billion USD equivalent and total estimated market cap for blockchain instruments exceeding 325 billion USD equivalent as of April 2018.1 Over 200 crypto-focused hedge funds have been formed as of February 2018, while traditional trading houses continue to express interest in increasing their exposure to blockchain assets.2 But crypto investors continue to lack a number of crucial tools that will be necessary for the space to achieve its potential. Key among these are professional-grade trade execution, compliance, position and risk management, and reporting functionality. The large number of digital asset exchanges helps drive the growth of the market while simultaneously exacerbating its challenges. Currently, crypto investors are forced to choose among many exchanges when executing various trades. Often, portfolios develop positions on multiple trading platforms with varying user interfaces and functionality. Executing orders across these various exchanges is often dif cult. Position and risk management are likewise made more challenging by the diversity of platforms that must often be used to trade for a single portfolio. Because it is dif cult to harmonize the outputs of different platforms, meeting reporting and compliance requirements can present signi cant obstacles for crypto investors as well. Caspian is a joint venture between Tora Trading Services Limited (and its af liates, Tora ), a global leading cloud-based front-to-back technology provider to buy side institutions; and Kenetic Trading Systems Limited (together with its af liates, Kenetic ), a leading blockchain and cryptocurrency investment rm. It provides institutional and experienced investors with a full-stack crypto trading and risk management platform. It equips digital assets investors with a comprehensive Order and Execution Management System (OEMS), Position Management System (PMS), and Risk Management System (RMS), backed by experienced support team. The platform, which has the potential to drive further participation in crypto-trading, provides sophisticated connectivity and interoperability across various digital asset exchanges. On the back end, it offers uni ed compliance and reporting functionality that enables users to analyze all of their trades in one place, regardless of which exchange they take place on. 1 (17 April 2018) Coinmarketcap.com <https://coinmarketcap.com/currencies/volume/24-hour/> 2 Maya Keidan, Jemima Kelly, Number of crypto hedge funds surges amid bitcoin volatility (15 February 2018) Reuters <https://www.reuters.com/article/uk-hedgefunds-bitcoin/number-of-crypto-hedge-funds-surges-amid-bitcoin-volatility-id USKCN1FZ189> 2

Contents Legal Disclaimer 1 Abstract 2 Contents 3 Problem: Current Market Challenges 4 Unreliable Trade Execution 4 Lack of Security 5 Lack of Reporting and Compliance 5 Solution: An Institutional Grade Crypto Trading Platform 7 Team Overview 8 Key Features and Benefits 10 Execution 10 Position & Risk Management 11 Compliance and Reporting 12 Technical Summary 14 Architecture 14 Performance 15 Scalability 15 Reliability 15 Security 16 Support 16 Ongoing development and adaptability 16 Audit 17 Modularity and Third-Party Integration 17 Business Plan and Growth Strategy 18 Provisional 12-Month Roadmap 19 Token Ecosystem 20 Token Model Overview and Objectives 20 Commission Discount Function 21 User to User Utility Accelerating Third-Party Development 22 Governance Nodes 24 Contact Caspian 25 3

Problem: Current Market Challenges The digital asset space has grown exponentially since Bitcoin launched in It is therefore reasonable to expect 2009. As of April 2018, average daily trading fragmentation of both tokens and exchanges volume across all digital asset exchanges to be a persistent feature of blockchain exceeded 18 billion USD equivalent, with markets in the near to medium term. total estimated market cap for blockchain instruments surpassing 325 billion USD Unreliable Trade Execution equivalent.3 Market analysts expect that number to grow to 10 trillion USD equivalent Executing trades in the crypto market by 2033.4 While the size of the crypto space currently poses a number of challenges, of remains small compared to traditional asset varying complexity, to investors. At a basic classes, the growth in this sector is level, the current fragmentation of digital unparalleled. asset exchanges, coupled with relatively low trading volumes compared to traditional More than 200 exchanges are currently markets, often creates problems around active.5 Of these, ve exceed 1 billion USD liquidity and slippage. Even comparatively equivalent in daily trading volume, and 19 small order sizes have the potential to have more than 100 million USD equivalent consume available liquidity, causing daily trading volume.6 It would be almost signi cant slippage from the current market impossible to attempt to list all of the tokens price. This can lead to high trading costs for that have been issued to date. The top 16 market participants. coins alone each have market caps of over 1 billion USD equivalent, and among those, Because most existing digital asset four coins see a daily volume of more than a exchanges began as small ventures and billion USD equivalent7. have grown organically as the market has surged, they often cannot handle large order 3 (17 April 2018) Coinmarketcap.com volumes. As a result, exchanges often suffer <https://coinmarketcap.com/currencies/volume/24-hour /> from high latency. In the case of 4 Evelyn Chang, One stock analyst's $10 trillion bull case institutional traders in particular, this has for cryptocurrencies (4 January 2018) CNBC <https://www.cnbc.com/2018/01/03/one-stock-analysts-1 the potential to undermine investment 0-trillion-bull-case-for-cryptocurrencies.html> strategies if it causes delays in executing 5 (17 April 2018) Coinmarketcap.com trades. <https://coinmarketcap.com/exchanges/volume/24-hou r/all/>. 6 (17 April 2018) Coinmarketcap.com <https://coinmarketcap.com/exchanges/volume/24-hou Additionally, because of the grassroots r/all/> origins of most incumbent exchanges, 7 (17 April 2018) Coinmarketcap.com <https://coinmarketcap.com/currencies/volume/24-hour outages often occur as a result of the /> 4

stresses of high trading volumes. There have been numerous cases of users being locked out of exchanges, in some cases for days, Lack of Security due to technical dif culties.8 In many cases, All digital asset traders are aware of the exchanges lack adequate customer support, security risks that currently exist in which can increase frustration on the part of purchasing digital assets. Exchanges are traders. vulnerable to hackers, a risk that has been born out in a series of thefts resulting in the Beyond periodic performance failures, loss of over 4 billion USD equivalent since trading, particularly across both traditional 2011.9 Existing exchanges lack many of the and digital asset venues, presents a number customer protections offered by trading of other dif culties. Regulated exchanges platforms in traditional markets. These now list instruments such as crypto futures, include effective customer support and risk and we expect this trend to accelerate as management capabilities. publicly-traded companies increase their exposure to crypto and additional Risk management is a crucial element of derivatives arise. This requires purchasers trading in any asset class, and it, takes on to have the ability to access both traditional added dimensions for the digital asset and digital asset exchanges and to uidly space. These include the counterparty risk exchange at for digital assets and that is present when transacting on any vice-versa. Many of these products are also individual exchange. Traders must make highly regulated and may not be available contingencies to mitigate the likelihood that lawfully. an exchange will suddenly fail, taking investor funds with it. Market participants The ability to rebalance portfolios presents must also account for liquidity risk. The another challenge for investors trading fragmentation of the market leads to across disparate exchanges. Traditionally, situations in which there is insuf cient rebalancing is a tool used by investors to liquidity on a given exchange to fully exit a ensure that trades are made that maintain position. certain allocation targets across a portfolio that is constantly uctuating. In the digital asset space, the fragmentation of exchanges Lack of Reporting and makes this dif cult, because no platform Compliance currently exists that can monitor capital All fund managers recognize the need for deployments for a single portfolio strong compliance procedures. Crypto funds transacting on multiple exchanges. are no exception, but the fragmentation that exists among the various exchanges can make satisfying these needs dif cult. The aggregated information required is simply 8 Olga Kharif, Biggest Crypto Exchanges Hit by Delays 9 With Demand Surging (30 November 2017) Bloomberg Steve Stecklow, Chaos and hackers stalk investors on https://www.bloomberg.com/news/articles/2017-11-29/bi cryptocurrency exchanges (29 September 2017) Reuters ggest-u-s-crypto-exchange-hit-by-delays-as-demand-su (https://www.reuters.com/investigates/special-report/bi rges) tcoin-exchanges-risks/) 5

not available. This leaves market outlook. Current exchange fragmentation participants in dif cult circumstances in can make this dif cult. which they must contrive individual solutions to this problem. In some cases, In addition to regulatory and reporting this can mean maintaining a spreadsheet to requirements, investors need to be able to keep track of a trader s or fund s various monitor their positions on an investments, or developing their own up-to-the-minute basis. Currently, they can reference lists to determine current pricing only achieve this by watching each platform or other necessary metrics. This obviously simultaneously. There currently is no creates signi cant risk of error. consolidated system for monitoring positions across different exchanges. Institutional entities are also required to keep extensive audit records for both As many funds are also sold through internal and regulatory purposes. The regulated entities and/or regulated details are often granular to the level of themselves, the quality and security of individual traders, triggers to pre-trade custody, as well as other prudential limits, and order amendments. These standards such as nancial crime outputs are not available on most crypto compliance are particularly important. exchanges, and as a result, funds must build proprietary systems at signi cant expense An opportunity clearly exists to provide in order to monitor and log all activity. investors with the tools to address the Institutional investors must also provide crypto market s current shortcomings. As regular reports to other investors and the space grows and institutional players stakeholders regarding exposures, liquidity increase their exposure to crypto risk, portfolio returns, value at risk, instruments, the demand for such tools will summary of performance, and future grow stronger. 6

Solution: An Institutional Grade Crypto Trading Platform Caspian is an ecosystem designed to solve Tora is a leading supplier of asset the problems facing crypto investors using a management technology, including an single, user-friendly interface. It achieves OEMS that averages monthly notional equity this by providing sophisticated connectivity volume exceeding US$100 billion and is and interoperability across various digital currently responsible for 17% of Japanese asset exchanges. Caspian is expected to institutional equity trading volume. The drive further growth in digital asset company, with connectivity to over 150 participation on the part of institutional and equities and derivatives exchanges, as well experienced investors. Caspian equips as clients in North America, Asia, Europe investors with a comprehensive OEMS, PMS and Australia, is ideally positioned to launch and RMS, backed by comprehensive Caspian, which will be the rst large-scale customer support. Its features include institutional infrastructure speci cally professional-grade execution, position aimed at traditional asset management management, and reporting capabilities. rms, and market makers. Caspian is not designed to disrupt the With over six decades of collective current digital asset space or to compete experience building and managing with existing exchanges. Its purpose is to technology and trading systems, Caspian s support purchasing of digital asset senior management team is uniquely instruments in a reliable manner to a large positioned to build a strong, exible, secure number of entrants, helping to bring platform capable of attracting participation liquidity, volume, and dynamism to the on the part of major traders and market sector. makers. Caspian currently connects to over 10 major digital asset exchanges. The Caspian is a joint venture between two rms, platform plans to add up to forty additional Tora and Kenetic, each of which have trading venues by Q3 2018. Additional successful track records in asset details can be found in the roadmap section management and cryptocurrency investing. of this document. 7

Team Overview Caspian s senior management team brings decades of combined experience in nance and technology. Members of the Caspian team have held senior roles at well-known investment rms and technology companies, and several were early adopters of blockchain technology. In their respective roles at Tora and Kenetic, they have proven their ability to work effectively together building nancial and trading solutions that have achieved major success. Michael Lerch, Chairman hedge funds and bulge bracket investment Founder and CIO of Evolution Capital banks. Gerrit holds a B.S. in Computer Management and founder of Tora. Prior to Science from Stanford University. founding Evolution and Tora, Mike worked in a number of senior management and Paul Catuna, CFO trading positions at bulge bracket Tora CFO for the past 10 years. Prior to that, investment backs. Mike holds a B.A. in Paul held senior nancial positions at Politics from Princeton University. WAGIC, Intertop, and Isonics. Paul spent the rst 9 years of his career in public Robert Dykes, CEO & Co-founder accounting, last serving as Senior Manager Tora CEO for the past 14 years. Prior to that, at Deloitte. Paul holds a B.S. in Business – Robert spent 11 years in the enterprise Accounting from California State University, software and high-tech industry in Europe, Fresno and is a certi ed public accountant. North America, and Asia at such companies as WebPartner and Audiosoft. Robert holds a Jehan Chu, Chief Strategy Of cer B.A. in Economics from Princeton Co-founder and Managing Partner at University. Kenetic. A former front-end developer with over 10 years experience in web and David Wills, COO & Co-founder enterprise application development. Jehan Kenetic COO since inception. Prior to that, founded the Ethereum HK community David spent 10 years as Managing Director (2014), and co-founded the Bitcoin and Head of Asia Trading at Och-Ziff Capital Association of Hong Kong (2014). Jehan and was the former chairperson of HKeX holds a B.A. from Johns Hopkins University. Hedge Fund market council. David holds a B.A. in Psychology and B.Comm. in Finance & Economics from the University of Sydney. Gerrit van Wingerden, CTO & Co-founder Managing Director at Tora for the past 12 years. Prior to that, Gerrit managed the development of high volume trading applications and analytical tools for various 8

Beyond its experienced management team, Caspian is supported by the resources of both partners in the joint venture, Tora and Kenetic. Between Tora s leading OEMS global trading platform and Kenetic s industry-leading expertise in blockchain, the Caspian full-stack digital asset management solution is backed by a full team of over 150 people. 9

Key Features and Bene ts This section outlines the Caspian model as For each speci c exchange, OEMS currently envisaged and designed, but is enables access to all order types, asset subject to modi cation types, and ticket sizes supported by a given exchange. Caspian effectively aggregates prices, ● APIs allowing traders to stage and send bid/ask information, orders, positions, orders and slices; obtain order, accounts, and executions from multiple execution, and position information; crypto exchanges and other sources, and receive pricing information, presenting the information on a single exposure breakdowns, and other platform. It allows users to act on this transaction information. In the future, information by sending orders to exchanges the API will be enhanced to allow access individually or using a Smart Order Router to margin information, additional Smart based on existing Tora technology. Order Router (SOR) control, and other metrics. The bene ts of the Caspian platform can be ● Ability to view prices, bid/ask, and organized into three overarching categories depths for each exchange to the corresponding to the current needs of the smallest available ticket size. crypto-trading space: Execution, Position ● Ability to stage, send, and amend orders Management, and Compliance. Further in multiple ways, including single-click enhancement plans are described in the orders sent directly from the price roadmap section of this document.10 depth; user-de ned order shortcuts; and order staging and slicing. ● Choice of whether and how to use Execution Caspian s SOR. OEMS: Caspian provides a uni ed control ● Ability to stage order intentions as center optimized for fast trading, which will parent orders, slicing them as child serve as the main hub for portfolio orders that can be sent to different managers and traders. It is based upon exchanges separately or via Caspian s technology built by Tora to serve its large SOR. This can be used to optimize client base, and has been enhanced to cater slippage and liquidity consumption at to the speci c needs of the crypto space. each exchange. This single interface provides the following: ● Messaging functionality for each ● Access to selected major digital asset order-related action, communicating exchanges through a single interface. any potential compliance breach. ● Ability to view and manage margin 10 across multiple exchanges. Unless speci ed otherwise, all features described here are available in the system as it is now, e.g. from day one. 10

● Ability to view the progress of each exchange venues using Caspian s smart order or order slice. Users can receive order routing logic. Traders can control the alerts about slippage or time-to- ll, behavior of a trading algorithm by applying allowing them to take action depending set parameters, and can monitor its on market conditions. performance throughout the lifecycle of the ● Position information for each crypto order. At the same time, more sophisticated pair or instrument, enabling traders to traders can also closely monitor all orders quickly react to market conditions using that the algorithm engines slice to the Caspian liquidation features. market. They can manually override order ● Ability to utilize work ows across parameters in order to ne-tune the multiple distinct users and user roles. A behavior of a given algorithm. single organization can assign different roles to its members, e.g., portfolio User-built strategies: In addition to the managers, traders, compliance of cers. prede ned complex strategies offered in ● Audit report generation for all activity in Caspian s algorithm suites, end users will the OEMS. have the ability to de ne their own strategies for managing orders using a As part of its 12-month roadmap, Caspian simple rule-based language. For example, a also plans to add pre-trade Transaction Cost user could create an order that executes if Analysis (TCA) checks to identify which the price of an asset increases by 10% or exchanges will be the most apt to execute more in an hour. orders that need to get lled. Alerts: Caspian offers a built-in mechanism Smart Order Router (SOR): This module allowing clients to con gure alerts, which enables users to view all exchanges as a can appear as pop-ups or be delivered as single pool of liquidity. The Smart Order emails. Clients have the freedom to de ne Router sends an order with a given objective the conditions under which such alerts are - for example, sell ETH and buy BTC within a triggered, combining indicators, order certain price limit - to multiple exchanges at parameters, position data, and market data. once in order to achieve quick execution This logic is built on top of a proprietary even in the case of large orders. The SOR coding language similar to Excel functions. algorithm is smart enough to prioritize exchanges based on criteria including price, Position & Risk Management liquidity, and commission so that the best outcome can be achieved with as little PMS and RMS: Caspian s PMS and RMS slippage as possible. together allow users to monitor their positions, P&Ls, and exposures and to Algorithms: Caspian builds upon Tora s maintain detailed records of each. They sit algorithm framework and Kenetic s trading downstream from the OEMS, which sends expertise to provide institutional-grade them all execution and order information. algorithms from day one. Each order can be While the OEMS is designed to be light and assigned to a particular algorithm, which nimble for fast trading, the PMS and RMS can then route slices across multiple record and track every piece of data in 11

perpetuity. This allows an investor to view of the trade is intended to be distributed to all of its positions and historical data at any different funds, portfolios, strategies or other time. Using these features, users can business units. The allocation engine maintain a complete book of records for a transparently handles all aspects of the given trading entity and can view the data in distribution of the outcome of a trade into real time or historically. In the future, corresponding business units, allowing the existing risk features from the Tora platform trader to focus on achieving the best will be ported to Caspian, including value at execution for the order. The allocation risk, shift scenarios, and stress test engine covers a wide range of use cases, scenarios. including: ● Static order allocation, which enables Reconciliations: Caspian s detailed, the allocation logic of an order to be user-friendly recordkeeping functions make de ned on a per-share, percentage, or it easy to perform reconciliations. In per-NAV basis. traditional nance, the presence of multiple ● Dynamic position-based allocation, counterparties, including brokers, which allocates trades in line with custodians, and fund administrators, rules applied to whole portfolios and requires reconciliation among all parties to business units. ensure that all transactions have been ● Ensuring a fair price distribution carried out as agreed. This is also true in the across business units. digital asset space, where the dif culty or impossibility of rolling back transactions means the ability to recognize and correct Compliance and Reporting errors is critical. Compliance Engine: The compliance engine is based on Tora s proprietary technology, Rebalancing: This function, currently being which offers extremely low latency and ported over to Caspian as part of the extensive functionality, as well as a robust company s short-term roadmap, applies to framework that allows Caspian to multiple scenarios. For example, when a implement new limits and compliance rules fund needs to invest or divest funds without quickly and ef ciently. The compliance altering the relative allocation of each asset engine provides multiple levels of within the vehicle, a separate order must be functionality to address user de ned limits created for each instrument. Alternatively, a and rules covering both pre-trade and fund may employ a strategy dictating a post-trade work ows. certain ideal level of exposure per currency ● Pre-trade limits, which include simple or per exchange. Inevitably, funds drift from limits as well as more complex those targets, and rebalancing can help portfolio or trading parameters such as generate orders that continually bring the exposure limits. These limits can delay fund back in line with its objectives. order execution until compliance checks are complete. They can be Allocation engine: The allocation engine triggered at various stages of a trade, allows trading through a single order and a including staging, sending, or single exchange account, even if the result amending an order. There are three 12

levels to the limits: warning limits, which users can use as a one-stop shop. which can be overridden by the user; This includes execution data, instrument approval limits, which require a information and instrument prices (both supervisor to approve the order before real-time and mark-to-market), margin and it can be sent to market; and absolute account information, and volumes and limits, which cannot be overridden. liquidity information. ● Post-trade compliance includes alerts, monitoring, and reporting. Alerts and Online Dashboards: Once Caspian integrates reports can be delivered to users via the Tora Reporting engine, it will be able to email or other mechanisms, either on a harness a number of associated schedule or as they occur. dashboarding functionalities. In particular, it will enable customizable web dashboards, Reporting Engine: From day one, Caspian enabling users to: will feature robust reporting capabilities, ● View web-based visualizations on an consisting of simple at le reports such ad-hoc basis, including exposure as trade les, snapshot reports, position breakdown graphs, margin reports, and data, audit reports, and compliance reports. order ll status. These options offer exibility in preparing ● Amend visualization in real time by graphical reports and other external-facing adding formula columns to tables or materials. changing chart types. ● Save their amended visualizations as As part of our roadmap, we are also working both a new report that can be on a solution that incorporates Tora s scheduled and sent as a le, and as a proprietary reporting engine to allow users new dashboard that can be viewed to design report templates including graphs, online. editable tables, and ltering. Users can then schedule and receive graphical reports directly in PDF, in Excel format, or in Powerpoint. Importation of Data: Caspian s various modules import the data provided by each exchange via its protocols and APIs, focusing the information into a single portal 13

Technical Summary Architecture Each aspect of the system is managed by a distinct service with a dedicated Caspian is a cloud-based platform, with communication channel, its own API, and a distributed services built around a built-in protocol for subscribing to its data. microservice architecture, and functionality On the back end, the services are either accessible via thin UIs and APIs. This con gured to run in dedicated processes, or creates signi cant exibility, allowing the several (usually related) services can be platform to accommodate solutions ranging bound together to run into a single process. from private clouds hosted in a client s The services can offer data through both a traditional datacenter to environments request/reply and a publish/subscribe supporting large numbers of clients hosted mechanism. on cloud computing platforms provided by established players in the space. 14

The backend services are linked by a high each client, according to relevant criteria speed, certi ed message delivery (regions, types of products traded etc). technology. This offers a range of ● Backend services are con gured to advantages: handle one or more such partitions, ● Decoupling of services that do not aiming to keep the load of each require mutual awareness of the instance below a set threshold, with components that act as their clients. setup closely monitored. If an upper ● Plug-and-play architecture enabling capacity limit is reached, the addition of new components to re-partitioning occurs and new handle new services. instances are automatically or ● Ability to set different communication manually launched (depending on priorities for various services. speci c client needs) to cover the new ● Scalability: the plug-and-play distribution. architecture makes it easy to add new service instances capable of handling Reliability greater loads or accommodating more Reliability is a key strategic priority for the clients. Tora system upon which Caspian was built, ● A built-in mechanism that guarantees leading to 99.99% uptime in the past ten no data is lost traveling between the years of operation. various components. ● High data throughput. This is achieved via a number of complementary functions: Performance ● Fault tolerance and high availability: all The system is designed to handle large critical Caspian services have built-in volumes of data while ensuring low latency redundancy and replication, ensuring a for messages on their way to and from the resilient architecture with no single exchanges. While Caspian was not initially point of failure. A standby instance is designed for high frequency trading, the always ready to seamlessly take over, capacity and latency numbers it can achieve avoiding any disruption in the event of nonetheless approximate the performance a problem. such a client would need. Speci cally, ● Load balancing: the services are Caspian is designed to handle up to 50,000 exposed via a load balancer, which orders and 400,000 executions per day per runs a routing algorithm to redirect any user, with a throughput of over 2,500 orders request to the least contended gateway per second. instance, which is most capable of handling the request at the time it is Scalability made. ● Business Continuity Plan/Disaster Caspian partitions data and communication Recovery (BCP/DR): for the channels into distinct spaces for each client. low-probability but high-severity risk These silos can be further re ned into of a major failure that could render the narrower categories based on the needs of primary site unreachable or unusable, 15

Caspian will offer a backup cloud. This ● Integration with an isolated exchange disaster recovery environment will API signing service, which securely constantly be updated to mirror the stores the end user s exchange API state of the active cloud, and will be keys and handles the message signing ready to take over if activated, avoiding without exposing the keys in the vault. any disruption to end users. ● Connections to exchanges or ● Tools and processes: no matter how third-party systems are always much effort is put into the proper encrypted when supported by the design, implementation, and quality exchange, regardless of whether the control, we acknowledge that there is messaging is handled via FIX, REST or no perfect software and there is always any other proprietary protocol. a chance something may go wrong. To handle such unforeseen issues, Support Caspian has built-in safety nets and Any solution is only as strong as the support control mechanisms. Various health around it. On this front, the digital asset check jobs and sanity tasks are run space has been historically weak. Caspian automatically on a regular basis. will leverage the resources of Tora and Noti cations are then sent to the Kenetic to offer a professional, multilingual production support team, which will product support team based on an initial preemptively take the necessary Service Level Agreement. All issues are corrective measures. sorted according to their Service Impact Level, with anything that affects trading Security activity assigned the highest urgency. Tora Security is paramount. In order to ensure the has an excellent track record working with privacy and integrity of all data owing demanding clients in the traditional nance through the Caspian ecosystem, the world, resolving or providing workarounds following features are in place: to critical issues within minutes in most ● Connectivity between the client cases. Caspian s support team is skilled and application and the cloud is created by experienced at using enterprise software to a private leased line or by encrypted provide a level of support unparalleled in the connections over the internet, digital asset space. Senior developers are ● The client app access can be limited to rotated among support teams so that both only from a set of concrete whitelisted level 1 and level 2 Support issues can be IPs. handled intraday with no delays. ● Secure user sign-in is enforced through strong password complexity Ongoing development and requirements and two-factor adaptability authentication. ● Access to the back end is restricted to a An advantage and a challenge to the crypto limited number of authorized space is the rapid pace of change. Any administrative and support users. solution must be able to quickly adapt to new tradable products, new exchanges, new 16

digital assets, and new technologies. In while providing suf cient information for many cases, this requires actual any regulatory audit. development, making a skilled, exible, and adaptable development team even more critical. By leveraging Tora s development Modularity and Third-Party team of over 150 people, Caspian offers this Integration exibility. The team employs the Agile While the Caspian solution is designed to be methodology, with short, ef cient 2-week a one-stop, turn-key solution for the digital development cycles ( sprints ), allowing asset space, any of its modules can easily be Caspian to swiftly and ef ciently adapt to connected or integrated with other any changes. third-party systems and solutions, including digital asset exchanges, risk management Audit systems, and proprietary portfolio Having systems that are auditable is a must management systems. Caspian plans to for institutional clients. Every action in the offer a variety of such integrations, allowing Caspian system is timestamped and clients to choose the individual components recorded, providing a detailed audit trail, that are appropriate to their current where any information like the time, the work ow and to have Caspian connect to user and the nature of the change can be other systems as necessary. consulted at a later juncture, enabling the clients to track any change back to its origin 17

Business Plan and Growth Strategy Caspian is currently operational and reach out to traditional asset managers connected to over ten exchanges. We expect looking to move into crypto asset to add up to forty exchanges to the classes, as well as existing crypto ecosystem by the end of Q3 2018. funds. Caspian is well placed to reach these groups at an early stage and drive We plan to grow the business and roll out their adoption of the platform. additional features and functionality over ● Expansion into crypto communities, the following 12 months, as outlined below: including organizing trading ● Partnerships with existing exchanges competitions, setting up bounty to speed client acquisition and programs and other community facilitate introduction to high volume programs. traders. ● Outreach aimed at developer ● Customer outreach through service communities, including organizing providers such as fund administrators. hackathons. Caspian plans to connect with various ● Outreach to relevant industry bodies, service providers that work with new including Financial Information and existing asset managers eXchange (FIX) and the Alternative evaluating the crypto space. We expect Investment Management Association these relationships to be a major (AIMA). source of new clients looking for an ● Promotion of Caspian through events, institutional-grade trading platform. trade shows, conferences and ● Build on the existing relationships of meet-ups. both Kenetic and Tora to identify and ● Online marketing strategy focused on institutional and experienced traders. 18

Provisional 12-Month Roadmap The table below shows Caspian s expected development roadmap for the next 12 months. Initially, the team intends to focus on core functionality and exchange connectivity. Once these milestones are achieved, emphasis will be placed on implementing more complex functions and user interfaces. This roadmap is subject to change based on market conditions, token-based governance, legal/regulatory considerations and customer feedback. Q2 2018 ● 20 Supported Exchanges ● FIX API Access ● Basic Algos ● Basic SOR Q3 2018 ● SOR enhancements ● Algo enhancements ● 10-20 Additional exchanges Q4 2018 ● Pre-trade exchange-based TCA ● Limits: ○ identify overall market impact when using SOR ○ work across exchanges ● Latency: proximity to exchanges for algos ● Rebalancing ● Graphical reporting and visualizations ● REST API Access Q1 2019 ● xNew algos ● Liquidity Risk ● Value at Risk ● Stress Testing ● Sensitivity Shifts ● Margin: API Access 19

Token Ecosystem Token Model Overview and User-to-User Utility: The CSP rewards Objectives developers who offer their apps for free. The Caspian token (CSP) is an ERC-20 Caspian will incentivize third-party compliant token to be issued on the development on the platform though grants, Ethereum blockchain. The CSP token model bounties, and a rewards engine. This will has been designed to serve several principal allow the (vetted) emergence of new features objectives. In the broadest sense, the goal is on the platform, complementing the base to link Caspian s best-in-class functionality features with a richer and more attractive with a token that incentivizes platform use functionality. and the development of unique third-party tools and features. Speci cally, the token is Token provides utility but is not necessary: intended to create a rich, participatory The token is designed to enhance the user ecosystem where platform users also experience and enrich the Caspian become community members with an active community. It is not designed to be interest in the platform. This is necessary to enjoy the base feature set of the accomplished by giving the token platform. Even without the token, clients user-to-platform utility (discount and can use all core features discussed in the governance) and user-to-user/developer preceding sections. That said, using the CSP utility. Broadly speaking, the token is not token will open access to unique bene ts required to access the platform but can be that should be compelling to a wide range of used to enhance one s experience of it users, and the multiple sources of utility through an intentional variety of means and allows different users to nd value in the to get a variety of bene ts. The hope is that token in different ways. users unfamiliar with token utility will be incentivized to take steps toward using the Token Staking”: Many of the bene ts for token in gradually more complex ways. token holders will involve sending tokens to a staking contract. This is designed User-to-Platform Utility: The Commission primarily as a means of accounting for the Discount Programs (guaranteed and token balances of active users. Tokens sent dynamic) and the Discount Payment to the contract cannot be used for transfer or Function will provide fundamental value to trading. However, users will retain the the token by allowing token holders to earn ability to withdraw tokens from the staking and potentially combine different discounts smart contract at any time at their own that can offset platform fees. . The discretion. As used in this section, the term Governance Node framework will also staking means sending tokens to the enable members of the token community to staking contract, from which token balances contribute to platform direction. will be read. When a user stakes tokens in 20

the address, Caspian will track that user s staked tokens are considered to be at full total staking balance and the times at which weight . that balance has changed. It will use that to ensure bene ts are appropriately calculated Guaranteed Discount as outlined below. The guaranteed discount function establishes a mechanism where users can An individual staked token can only be access a set discount that increases over allocated to one of the bene t mechanisms, time. though a user can stake different tokens for different bene ts. For purposes of The discount accruing to tokens staked determining the Governance Council, all of a towards this option increases at the rate of user s staked tokens are counted. one percentage point per week, up to a cap of 25%. The value of tokens staked must be greater than 1% of a client s weekly average Commission Discount Function of daily trade volumes in order to qualify. The staking threshold is established each The commission discount program has week based on the previous week s trading three forms. The rst offers token stakers a and token price data. The user must guaranteed discount that increases in a maintain an average balance above this predictable manner over time up to 25%, as threshold in order to accrue another point of long as the tokens remain staked. The discount. second allows users paying in CSP tokens to receive an additional discount of up to 25% Establishing a minimum staking threshold of their fees. .. The third is a potential based on a combination of an individual dynamic discount, with further details to be client s own notional trading volume and the published in due course.. at equivalent value of the token represents an effort to make the discount accessible to In order to count towards a discount, tokens a range of clients, from moderate users to must have been staked for one week, the most active. The system is also a exible counted as seven consecutive 24-hour and responsive one, where clients will be periods, as of the daily calculation hour. able to adjust their staked token amounts Tokens begin to accrue bene ts beginning relative to both their own activity on the on the eighth day after they have been platform and uctuations in the token price. staked. If the eighth day falls midweek, token holders will accrue a partial discount To illustrate this, imagine a client with for that week, with a full discount applied to average daily trading volume of US$1 million the following week, assuming the tokens throughout week 4 (assuming the client has remain staked. For purposes of the already ful lled all staking requirements up guaranteed discount, staked tokens to week 4 and is currently at a 4% discount). designated towards the discounting bene ts During week 4, the CSP average token price gain weight each week they are fully staked, was $0.50. For week 5 the same client would up to a maximum of 25 weeks. At that point, need to maintain a staked token balance of 20,000 tokens--the at equivalent of $10,000 21

in tokens or $1,000,000 x 1% at $.5 per A user who stakes tokens as part of the token--in order to gain an additional guaranteed discount and pays fees in CSP discount point towards the 25% ceiling would receive a maximum 50% discount under the Guaranteed Discount program. If platform fees. the client did maintain an average token balance of 20,000, the client would enjoy a Dynamic Discount 5% discount. Should week 5 close with the Caspian intends to develop a dynamic client s average staked token balance below discount program that has the potential to the necessary threshold (for example, in a offer a greater discount to those staking situation where the client s trading volume tokens. Further details will be released in had increased during week 4, requiring an due course. increase in staked tokens for week 5) the client would have a grace period of 72 hours User to User Utility Accelerating to remedy the de ciency in order to Third-Party Development continue to accumulate discount points during the new week. The CSP token will play a critical role in incentivizing third-party development and A client who fails to top up a de cient integration on top of the Caspian platform. staking minimum beyond the 72 hour grace Possibilities include advanced charting period suffers no penalty and simply does libraries, user interface modi cations, not accrue an additional discount point for external trading signal feeds, or stress tests the new week. During a second week of for trading strategies. unremedied de ciency, the client s discount is diminished by 1% relative to the prior Third-party developers will have two week. In effect, the hypothetical client options when offering an application or reverts to their week 3 discount level. A service on the platform: client that does not address a de cient token ● Selling usage of the app or service: In staking balance after the second week will order to use an app or service, users see their staking discount reset to the initial pay a developer-determined 1% discount. subscription fee. Caspian will retain a portion of this subscription fee as Caspian reserves the right to modify the platform host. In order to offer an app staking threshold or temporarily suspend for sale, developers must stake* tokens staking minimums in extreme as a deterrent against offering poor circumstances, including in response to apps or service. sudden market drops that raise effective *This staking mechanism may be a token staking thresholds. different mechanism to the other staking described in this paper. Further details Discount Payment Function will be published in due course. Caspian will offer to users who pay fees in ● Offering the app to token stakers: CSP a maximum 25% discount that stacks Instead of offering apps in exchange with other discounts. for subscription fees, developers can make them accessible to users who 22

stake tokens to use them. Developers or in return for a number of tokens speci ed who offer their apps in this way specify by the developer to be staked. Of course, the monthly staking requirement and application developers always remain free to become eligible for tokens. decide the fee or staking amount (if any) to Applications offered in this way are access their app. called free apps because users aren t required to pay--only to stake tokens. Whilst ultimately at an application Examples include third-party charting developer s discretion, staking can provide a or fundamental analysis services with way for developers to test features and an access fee set at 10 staked tokens gauge interest, recognizing that a user is per month per user, or whatever more likely to stake a token to use an app, amount the developer deems since that token will eventually be returned, appropriate. than to pay for it. Instead of spending a valuable asset, they are simply setting it Free Apps to Token Stakers aside while they use the app and providing In order to view the free apps, users must payment in the form of an opportunity cost. stake at least one CSP. Beyond that, each app s token staking price indicates its The purpose of Caspian s discretionary precise staking requirement. Users can only rewards approach is to incentivize access as many free apps as their total developers to consider allowing users to test staking balance will support. If a user has their apps for free (or on a staked basis), ten total staked CSPs for purposes of rather than immediately requiring a fee from applications, s/he can only activate a users. This can help users access innovative number of apps whose cumulative staking apps and test their quality, before deciding price is ten tokens. This is designed to whether to pay for them (if and when they discourage bloatware while still supporting are offered on a paid basis). open application development: users aren t spending tokens, but are rather determining This is a key element of Caspian s vision to where to allocate scarce resources. This build a true community of quality platform should prevent the adoption of frivolous members, users, and developers. Further apps designed to be downloaded by many details will be released in due course. users. Tokens staked for app access are not eligible for a guaranteed or dynamic Additional Development Bounties discount. This is a variation on the Caspian s CSP token will play several freemium model. additional roles in supporting third-party development: Ecosystem Development Incentives From time to time, Caspian will consider ● Development Bounties: A rewards providing rewards to application developers mechanism slowly releases offering their apps to Caspian platform Caspian-held tokens into bounty pools users. These rewards are based on a variety to incentivize developers to build out of factors at Caspian s discretion, but are key infrastructure, integration, and premised on an app being provided for free plug-ins. Distribution is determined by 23

Caspian in collaboration with the This governing group functions as a council Governance Nodes. Caspian may with which Caspian can regularly consult, choose to fund speci c development particularly as it relates to Caspian s integrations by establishing bounties evolution into a platform for third-party for developers to target speci c tools or development. The group will help de ne the functionalities. bounty pools and participate in the ● Community Bounties: Users will have allocation of development grants. the opportunity to vote for new features or apps they would like the see on the In exchange for their input, Governance platform. Bounties for winning Nodes receive an additional 5% discount on features or plug-ins maybe awardable. trading fees above that offered as a result of token staking. Ultimately, the nature of the app-platform will depend heavily on Caspian s user base, Governance Nodes guide a minimum of 25% and Caspian will be informed by its of Caspian s development resources for community council of top token stakers to integration of new exchanges and new help decide where to prioritize its resources. tokens, as well as the addition of new Caspian will allow users to vote on new base-level features to be developed by the features that have bounties attached. These Caspian team. Each quarter, Caspian will are expected to spur development, with consult with its current Governance Nodes Caspian reserving the right to unilaterally to set priorities for the quarter. This establish bounties for use at the Company s ultimately will include milestones and discretion. development targets, which Caspian will communicate to these Nodes. Governance Nodes Caspian has the right to transfer governance Caspian will implement a governance activities on platform and potentially onto a function that enables key members of the blockchain. community to provide input on overall platform development. The top 15 token stakers globally will serve as Governance Nodes and help guide the development of the platform. Tokens must have been staked for at least six weeks to be eligible for entry into this group. Membership is determined quarterly. Token stakers can choose to opt out of governance and transfer their status to the next staker. 24

Contact Caspian To request further information, please use the following outreach channel: Email: [email protected] Caspian, Ltd. Registered Of ce, Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands 25