Zipper Whitepaper

Monday, August 12, 2019
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WHITE PAPER Zipper is a next-generation blockchain ecosystem that provides secure, efficient and low-cost financial services. Zipper aims for financial compliance and interconnection! Copyright by ZipperFoundation 2019

Z I P P E R W H I T E PA P E R ABSTRACT 06 CHAPTER Ⅰ Analysis of pain points in the existing financial industry 09 CHAPTER Ⅱ Design principles 11 CHAPTER Ⅲ Distributed ledger Technology 13 1.System Hierarchy 13 2.Consensus mechanism 14 2.1 Operation mode 16 2.2 Status machine 16 2.3 Consensus process 17 3.Smart Contract 18 3.1 Contract Calling and Execution 18 3.2 Scalability 19 3.3 Standard Library 19 3.4 Multiple Virtual Machine Support 20 4.Data Storage Model 21 4.1 Index Storage 22 4.2 Merkel tree storage model 22 CHAPTER Ⅳ Distributed trust framework 26 1. DIDs Protocol 26 1.1 Identity declaration 26 1.2 Identity declaration document 26 1.3 Anonymous identity 29

Z I P P E R W H I T E PA P E R 2. Identity authentication 32 2.1 Distributed Authentication Service Model 32 2.2 Identity Authentication Protocol Description 32 3.Decentralized Trusted Prophet Service 36 CHAPTER Ⅴ Distributed digital asset transaction and clearing and settlement ecosystem 39 1.Ecological architecture 39 2.Clearing Model and Basic Agreement 40 3.Clearing process 42 CHAPTER Ⅵ Zipper extension module 44 1.Parallel computing, multi-chain operation 44 2.ZipperNet Switching Network 45 3.Secure multi-party computing 46 3.1 Off-chain general MPC protocol 47 3.2 Fair Secret Reconstruction Agreement 48 4.Distributed Control Management 50 4.1 Asset Mapping and Control Management 50 4.2 Implementation of Distributed Control Management 51 5.Blockchain Network Operation and Maintenance Components 53 CHAPTER Ⅶ Derivative scenarios 55 1.Analysis of derivative application scenario pain points and related solutions 56

Z I P P E R W H I T E PA P E R CHAPTER Ⅷ Ecological construction 59 1.Practicality of ZIP tokens 59 1.1 Media Currency 59 1.2 Prevent Evil 60 1.3 Transaction Fee Model 60 2.Ecological Incentive 62 2.1 Consensus Node Supernode 62 2.2 Economic Node Xnode 63 2.3 Gateway Node 64 CHAPTER Ⅸ Governance 66 1.Consensus Committee and Community Committee 66 CHAPTER Ⅹ Summary 69 CHAPTER Ⅺ Roadmap 71 CHAPTER Ⅻ Disclaimer 73 CHAPTER XIII Reference 75

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Z I P P E R W H I T E PA P E R ABSTRACT Abstract The financial industry is essential to the operation of modern society. Scientific and technological changes have rapidly transformed the global economy and society. However, these changes have also highlighted the shortcomings of the traditional financial system: The cost of financing and circulation is high, the business structure is cumbersome and complex, and regulatory pressure is increasing. Providing safe, efficient, and low-cost, cross-border, cross-asset transaction, and clearing services are difficult problems to solve in the global financial industry. The natural characteristics of blockchain technology are highly compatible with the previously mentioned goals. Since its start, blockchain has rapidly moved from the edge to the mainstream. Blockchain-based finance has become an unstoppable trend and blockchain has become the core technology in financial system innovation. At the same time, we also notice that at this stage, financial institutions such as banks have adopted a cautious attitude towards the application of blockchain technology. These institutions are concerned about issues such as safety, compliance, legitimacy, technical standardisation, etc. However, an increasing number of financial institutions have begun completing large numbers of digital asset transactions via blockchain. Digital finance represented by digital assets should not be isolated from the traditional financial system. Using blockchain technology for asset trading and association of blockchain technology with the global traditional financial network, while keeping busi- nesses legal and compliant is becoming the norm. The Zipper project came into being as a part of this major trend and is designed to create a compliant, efficient, cross-chain, and interoperable blockchain financial solution for global financial institu- tions. Based on this background, we will develop the Zipper blockchain distributed account- ing network for financial services. Our network will provide the necessary blockchain application services to build a new-generation of financial blockchain infrastructure. Zipper provides secure, efficient and low-cost services for various payment service providers, gateways, and financial institutions.

Z I P P E R W H I T E PA P E R ABSTRACT The high performance and features of the Zipper blockchain network will endue the financial industry with new possibilities and opportunities to achieve financial business and industrial upgrades. Using Zipper, anyone and any business entity can conduct cross-border fund collections and payments, B2B business, supply chain finance, loyalty programs, asset management, trad- ings and other financial transactions. In all these things Zipper will provide a decentralised system that is cheaper and faster than traditional methods. Zipper's high-performance distrib- uted accounting network and built-in decentralised exchange (DEX), while protecting the privacy of users and data, will allow fast transactions between centralised fiat currency and decentralised crypto currencies. Moreover, while not requiring any trusted gateways, the decentralised transactions between different blockchains can be performed directly.


Z I P P E R W H I T E PA P E R CHAPTER Ⅰ Analysis of pain points in the existing financial industry 1 Cross-border finance As the frequency of trade between China and other countries increases, in the context of centralised application and processes in the traditional financial system, many intermediate parties are needed to carry out cross-border settlement and cross-border remittance between financial institutions. This process often has a long arrival time and high cost, which makes it difficult for cross-border finance to meet the current market demand. 2 Digital assets With the continuous development of blockchain technology and related businesses, various digital assets have been generated. However, differ- ent blockchain systems are not interoperable, they are independent from each other, so information and data interaction cannot be performed. These problems limit the circulation and use of digital assets, it also affects the development of digital assets. 3 Asset management At present, third-party intermediaries are mainly used to manage assets such as stocks, funds, bonds and notes. This leads to complex asset management processes, high transaction costs, and increases the risk of transaction certificate tampering and fraud. 4 User identity authentication Since user data between financial institutions cannot be interworked, user identity is repeatedly authenticated by different organisations, which not only increases the cost, but also causes unified identity infor- mation and records, and brings the problem of user identity leakage. 09


Z I P P E R W H I T E PA P E R CHAPTER Ⅱ Design principles Zipper is a blockchain infrastructure which is used to build an ecosystem of cryp- tographic financial applications. It is a global blockchain open source community proj- ect. Zipper is designed in two layers: Layer1 and Layer2. Layer1 is the basic chain of Zipper. Above Layer1 is Layer2, which is a functional implementation of the ZipperNet switching network. This layered design achieves logical isolation for the plug-in fea- ture. It proposes systematic and streamlined trust ecological construction methods to solid- ify the future of encryption finance. The underlying architecture design and modular- ization are carried out from multiple dimensions such as business adaptability, perfor- mance, security, policy, technical feasibility, operation and maintenance, governance, and cost. This is done in accordance with the requirements of the special business of financial institutions, the current state of technology, laws and regulations etc. The launch of Zipper will effectively reduce the development and use costs of financial ser- vices, and will promote the process of blockchain financial applications. 11


Z I P P E R W H I T E PA P E R CHAPTER Ⅲ Distributed ledger Technology 1 System Hierarchy The blockchain system is usually a six-layer architecture model, from the bottom up the layers are data, network, consensus, incentive, contract, and application. Although many blockchain systems do not completely preserve this six-layer struc- ture, data, network, and consensus are indispensable elements for building all block- chain systems. Because the design structure is relatively simple, the aforementioned blockchain system mostly adopts a holistic design method, that is, the single program realizes all the functions of each layer of the blockchain. For example, P2P connec- tions, transaction data processing, and broadcasting, consensus achievement, specif- ic application function implementation, and so on. However, nowadays, due to the continuous development and renewal of blockchain technology, we can easily find that the design of single coupling has a lot of irrationalities code reusability is low which makes code management difficult. In order to solve this problem, Zipper will adopt Tendermint to decouple the different functional modules of each layer of the blockchain. This will separate the consensus mechanism, P2P, and other parts with different functions from the single blockchain application status details. Using Tender- mint will also allow Zipper to meet the needs of various upper-layer distributed finan- cial applications in the future. Layer 6 Application layer Blockchain Application layer Layer 5 Contract layer script algorithm Smart contract 13

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ Layer 4 Incentive layer Issue mechanism Distribution mechanism Layer 3 Consensus layer Consensus algorithms, such as... etc Layer 2 Network layer P2P networking Data Verification Mechanism Data dissemination mechanism Layer 1 Data Layer Block data Chain structure Asymmetric encryption Time stamp Hierarchical Architecture of Blockchain System Tendermint consists of two main components, the blockchain consensus engine and a general application interface. The consensus engine is called Tendermint Core, which is used to ensure that the same transaction is recorded in the same order on different nodes. The general application interface is also referred to as the Application Blockchain Interface (ABCI), it allows transactions to be processed in any program- ming language. Tendermint's hierarchical execution logic interacts with the application layer through the ABCI interface for the Tendermint Core. Therefore, developers only 2 Consensus mechanism Tendermint provides a high performance, highly consistent, and secure BFT consensus engine. Strict fork accountability ensures that the behavior of a perpetrator is controlled. 14

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ In terms of blockchain consensus certainty, Tendermint achieves absolute determination. Any block that gets 2/3 or more of pre-voting and pre-submission will be finally determined and this process will continue indefinitely. When 1/3 of verifiers or more do not respond, the network will stop running. Therefore, Tendermint prefers consistency rather than usability, CAP theorem states that in the case of network partitioning, can only take one of consistency and availability in a distributed system. A system with consistency will stop running and will interrupt incorrect transactions, but a system with availability continues to run even if the incorrect transaction passes. In Zipper’s early financial ecosystem, we will be more focused on maintaining the con- sistency of the system. Tendermint consensus algorithm can effectively guarantee the correctness and robustness of the system. As an increasing number of decentralized financial applications launch on the Zipper platform, the status of system availability will be upgraded simultaneously. Therefore, the application of the penalty rules of rights and interests proof in the Tendermint consensus is the optimization of the Zipper ecosystem. Consistency Favoring network partition msg msg Availability Favoring network partition msg msg Impossible Triangle under CAP Theorem 15

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ 2.1 Operation mode The Operation model of the Tendermint consensus is similar to the circular voting mechanism. There are two main roles involved in the consensus process: Validator: Proposer: A node in the network that can Tendermint uses a definitive non- participate in voting in the consen- blocking polling selection algo- sus process. Different verifiers rithm to select a proposer from the may have different voting power validators. The algorithm selects during the voting process. the proposer according to the proportion of the voting weight of the validators. The higher the voti- ng weight, the higher the frequen- cy of the validator selected as the proposer. 2.2 Status machine The blockchain based on the Tendermint consensus is to determine the next block through a round-based mechanism. Each Round consists of three processes: pro- pose, prevote, precommit. Ideally, the block generation status on the chain is as follows: NewHeight (Propose Prevote Precommit) Commit NewHeight ... Block Generation States under Tendermint Consensus Mechanism New Height indicates the latest block height, that is, the block height is increased after the block is accepted by the whole network. And Propose -> Pre-vote -> Pre-commit is one round, and the state of (Propose -> Prevote -> Pre-commit) means that submit- ting a block at a certain block height successfully may require multiple rounds. It means that one round may not be enough for one block to successfully submit in. 16

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ 2.3 Consensus process Assuming that the current blockchain is at a certain block height, in order to determine the next block, the system will enter the following consensus process. New Height Propose Invalid block or Valid block not received in time commit New Round Prevote Nil Prevote Block +2/3 no +2/3 precommit precommit Wait for for block for block prevotes from no +2/3 +2/3 prevote for Precommit block Wait for Nil +2/3 precommits prevote for from +2/3 Precommit block Block Tendermint Consensus Process 1 Propose 2 Prevote At this stage, the proposer selected by the At this stage, for the block proposed by the system proposes a transaction block as the proposer, if the validator verifies it as a valid next block on the chain and broadcasts the block, the validator will prevote it; on the proposal. contrary, if it is an invalid block or the valida- tor does not receive the proposed block in time, validator’s prevote is Nil. 3 Precommit At this stage, if the validator receives more 4 Decision than 2/3 of prevote of the block, the validator At4 this stage, each node needs to make a will pre-commit the block; otherwise, the decision. If the node receives more than 2/3 pre-commit is Nil. of the pre-commit, then the node enters the commit phase; otherwise, the node proceeds to the next round's proposed phase. 17

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ 3 Smart Contract Ethereum EVM defines a smart contract virtual machine that is simple, deterministic, lightweight, secure, capable of calculating contract operating costs, and can be run on Ethereum nodes in a public chain network. The existence of EVM allows developers to freely develop various decentralized applications. In the open source world, healthy communities and ecosystems have always been the key to the success of open source software. The ecological development of EVM has been valued and sought after by developers and enthusiasts. Many tools and frameworks have been created in this ecosystem, such as Truffle, Remix and web3.js. These tools reduce the devel- opment difficulty and cost of decentralized applications, so that acceptance is advanced and a virtuous circle is formed. Therefore, Zipper's virtual machine will pro- vide compatibility with EVM. 3.1 Contract Calling and Execution In Ethereum, the bottom layer supports the calling and execution of contracts through the EVM module. When the calling is made, the code is obtained according to the con- tract address. After the environment is generated, it will be loaded into the EVM to run. Usually the development process of smart contracts is to write logic code with solidity, then compile the metadata through the compiler, and finally publish it to the Ethereum network. hello.sol bytecode EVM Development Flow Diagram of Smart Contract 18

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ However, the way that Ethereum's smart contracts are implemented makes EVM code and node code highly coupled. Zipper will complete code decoupling by support- ing contract execution through a protocol model. Zipper's smart contract engine can be based on the docker container. When a node deploys a smart contract, it will con- nect to the docker of the node host in a socket. It will also dynamically generate a docker container that can execute a smart contract language, which means that you can implement your own smart contract execution engine such as JVM, through inter- faces. 3.2 Scalability In the Ethereum agreement, a transaction or message may affect the status of multi- ple accounts. For example, through a message calling, a contract calling transaction may be invoked to change the status of multiple contract accounts at the same time. These status changes either happen at the same time or none of them happens. Therefore, the transaction in Ethereum is a rigid transaction that satisfies the charac- teristics of ACID (Atomicity, Consistency, Isolation, Durability), which is an important reason for the lack of scalability of Ethereum. Based on the considerations of scalability and performance, Zipper will adopt a final consistency strategy that satisfies BASE (Basically Available, Soft state, Eventual consistency) semantics. Specifically, we designed Zipper as an Event-Driven Archi- tecture (EDA). Every smart contract is treated as an independent service, and mes- sages can be communicated between the contracts without sharing any state. Therefore, we need to disable the semantics of synchronous function callings across contracts in Zipper EVM, allowing only message communication between contracts. The affected EVM instructions are mainly CALL and STATICCALL. In the Zipper EVM, these two instructions are neither executed immediately nor return the result of the calling, it only generates a request transaction to be written to the ledger. Therefore, this instruction no longer has the semantics of function callings in Zipper, instead, a message is sent to an account. 3.3 Standard Library 19

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ Developers who develop smart contracts on Ethereum often suffer from Solidity's lack of standard libraries. For example, complex verification work must be performed out- side the chain. One of the important reasons is that Solidity does not provide float- ing-point arithmetic function, especially the n-th root of the floating-point number. In EVM, DELEGATECALL instruction can call a pre-deployed contract to implement library functions. Ethereum also provides several Precompiled Contracts, mainly Hash operations. But these features are too simple to meet complex application needs. Therefore, we will provide a series of standard libraries, such as: string pro- cessing, floating-point arithmetic, basic mathematical operations, containers, sorting, and so on. Considering performance, these standard libraries will be implemented as native extensions, with most of the computation built into Zipper local code. The method call is only done in the EVM code with the DELEGATECALL instruction. Standard libraries can be extended as needed, but because the state machine model of the entire system is deterministic, it still does not provide features like random num- bers. 3.4 Multiple Virtual Machine Support In order to support developers of multiple programming languages to seamlessly access the Zipper financial ecosystem, Besides EVM, Zipper has independently developed ZVM which supports multiple programming languages. The ZVM has a highly cohesive, low-coupling design architecture that meet the design ideas of the theoretical “unlimited scalability” (scale up & scale off) and parallelised smart contract systems. ZVM has the following advantages: ● Lightweight execution environment: in general, for the sake of security, smart contracts must run in isolated sandbox exe- cution environments. Every time a smart contract is called, it must start a new virtual machine or a new container, which not only consumes a lot of resources, but also limits the running efficiency. ZVM's smart contract system virtualizes containers. It has a fast startup time and high execution efficiency when solving the fragile isolation of the container. ZVM also will operate with high efficiency when a large number of con- tract threads are started and created (E.g. above 1000). 20

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ ● Pluggable execution environment architecture: ZVM's default execution environment does not provide persistent storage, so the default contract is a stateless function similar to microservices, which can be pro- cessed directly and concurrently. Only when the storage state is required, pluggable persistent storage modules are available. Such a virtual machine has only one CPU and stack by default and provides RAM or other storage space only when needed, which significantly reduces resource consumption. ● Explicit calling relationship: This differentiates ZVM from Ethereum dynamic calling,only the function of static call- ing is provided by ZVM, so that the calling relationship of the program can be clarified before running. Once the calling path is clear, the state data that the contract may modify is also clear. Based on these explicit calling paths, real-time dynamic fragmen- tation can be used to improve the parallelism of contract execution. ● Contract code that can be stored outside the chain: The hash value is stored in the routing table (DHT) through the chain, and the contract code can be stored outside the chain to realize the scalability of the storage space. ● Low coupling design: ZVM guarantees low coupling between the contract language, execution environment and blockchain, and improves the versatility of the smart contract system. ● Contract language: It is more friendly to developers than EVM, easy to use, and can be ported with Solidi- ty. 4 Data Storage Model From a design philosophy point of view, the current blockchain and database adopt two different strategies to support general services. For traditional databases, the design philosophy is “business and data separation”, which means that the database is only responsible for data storage. By providing a flexible query language, applica- tions can directly access the database for addition,deletion, modification and query. Basically all business logic is defined by the application. 21

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ However, for blockchain, it uses tightly coupled storage to deliver the business logic. In the blockchain, especially in the design philosophy of the public chain, due to untrustworthy nature of each storage node and application, most of the business logic needs to be highly customized on the protocol layer. A blockchain node not only needs to parse and encapsulate the protocol layer, but also be responsible for localizing the data to the disk and storage. Thus, although the blockchain can be viewed as a multi-live database at a high level, considering from a concrete implementation perspective, each blockchain node can't be simply regarded as a multi-living alternative to a traditional database. Instead, it is regarded as a set of applications that contain protocol parsing and some business logic. Zipper is committed to being a universal platform for financial encryption ecosystem. It is necessary to meet the need to store multiple types of data, so the log format and storage must be returned to the versatility of the database. The current ledger model works well for inter-account settlement, but it cannot be extended to a common busi- ness platform. Zipper will adopt two methods to optimize the storage model during the design and development process. The first method is to use the traditional account table and the flowchart mechanism to embody UTXO in a way of statement. The account snapshot is also saved periodically to avoid having to redo every transaction each time the database is rebuilt. The second method is to use the log combined with the user data storage mode to universally meet the general business needs. 4.1 Index Storage Few blockchain projects now support custom indexing of user data. However, the cur- rent blockchain project structure has no reason to prove the loss of the ability to build a generic index on it, this includes B-tree indexing, bitmap indexing, full-text search. Therefore, Zipper will make up for the lack of indexing mechanism on the blockchain. 4.2 Merkel tree storage model SPV (Simple Payment Verification) verification technology by constructing Merkel proof, ensures that the client only needs to synchronize the header information of the block. 22

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ The aim of verifying transaction information is easily done, which greatly saves stor- age space and reduces the burden on end users and network transmission. In the Zipper network, the client needs to obtain information about its own account, identity information, etc. So, the design of the ledger needs to support the structure of the Merkel certificate. (1) Merkel hash tree In the process of data synchronization, it is necessary to verify that the data of the other node is added based on its own data. The Consistency of constructing Merkel can prove that this is the goal. For the Merkel tree MTH(D[n]) composed of the Merkel tree MTH(D[0:n]) and the first m leaf nodes of the tree, the consistency proves to con- struct a node list, which proves that the first m leaf nodes of the two trees are the same. The following algorithm can construct a consistent proof of the unique minimum number of nodes. Given an ordered list of n inputs D[n] = (d0, d1, ..., dn−1), for m + 1 inputs d(m): 0 ≤ m < n, which corresponds The Merkel audit path PATH (m, D[n]) is defined as follows: PATH(d,{d0})={} PATH(m,D[0:k]+MTH(D[k:n])) m<k PATH(m,D[n])= PATH(m-k,D[k:n]+MTH(D[0:k])) m k Where + indicates two lists before and after the connection. The following image is an example of a Merkel consistency t k l g h i j a b c d e f PROOF(3,D[7])is proved to be[c,d,g,l] Proof of Merkel consistency 23

Z I P P E R W H I T E PA P E R CHAPTER Ⅲ (2) Merkel-Patricia Tree In some scenarios of the Zipper network, we need to prove the final result of a certain entity immediately after multiple transactions are generated, such as proving the iden- tity status of an entity. When using Merkel certification, it needs to prove each histori- cal transaction one by one. Merkle Patricia Tree (MPT) greatly improves efficiency. MPT is a combination of Patricia tree and Merkel tree, including the mapping of key values. It provides a cryptographic-based, self-checking tamper-resistant data struc- ture which makes it deterministic, efficient, and secure: Deterministic Efficient Security When looking up data, When the data changes, When an attacker creates a the same key value will the new tree root can be huge number of transactions find the same result and quickly computed without maliciously, such as initiating have the same root hash. recalculating the whole a DOS attack and attempting tree. The time complexity to manipulate the depth of of inserting, searching the tree, the defined depth of and deleting data is the tree will make the attack under control in 。 impossible. 24


Z I P P E R W H I T E PA P E R CHAPTER Ⅳ Distributed trust framework 1.DIDs Protocol Blockchain achieves efficient authentication mechanism of digital identity. Users who access the blockchain system to bear a special role identity will be reviewed and iden- tified by a unique public-private key pair or CA certificate, identity document, etc. This mechanism makes the identities of all those who conduct regulatory business on the chain recognizable and non-repudiable. Combining KYC and AML policy in the finance industry and relying on the result of customer due diligence, biometric technol- ogy, and customer credit data, customer’s identity themselves and can be assigned a unique identification on the blockchain. If necessary, information desensitization pro- cess or cryptographic algorithm would be implemented to protect the privacy of KYC information, which guarantees that customers have an accurate and legitimate identity on the chain and that their sensitive information is not leaked. Meanwhile, regulators can obtain sufficient information for control. Therefore, Zipper network will customize a decentralized identity mechanism to manage an entity’s identity in the network. Entity can register their identity, request and send certifications, manage their private key and data safely in Zipper network. It will also be compliant with the recent EU General Data Protection Regulations (GDPR) [2] and modern safety standards. 1.1 Identity declaration Identity declaration is used to prove certain attributes of entities. The declaration is formatted in JSON-LD, and the digital signature is added in accordance with the LD-Signature specification. It can be stored and transferred as a data unit and verified by any entity. Verifiable declarations mainly include metadata, declaration content and signature. In which, the declaration content can be arbitrary data. 1.2 Identity declaration document The design of Zipper’s authentication protocol is referred to W3C Credentials Com- munity Group regarding Decentralized Identifiers and Identity Credentials [3]. 26

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ The design of Zipper’s authentication protocol is referred to W3C Credentials Com- munity Group regarding Decentralized Identifiers and Identity Credentials [3]. Identity is identified by a distributed identifier (DID) and points to a DID document. Root record of the decentralized identifier is composed of the combination of DID and its associat- ed DID documents. DID generation methods that Zipper currently supports as follows: Zipper-did = "did:Zipper:"Zipper-specific-idstring Zipper-specific-idstring = network":"address network = "mainnet"/"bandari"/"sky"/"water" address = 40*HEXDIG The identity declaration document must be a single JSON object, whose format is specified in JSON-LD. JSON-LD is a specification for mapping JSON data to the RDF semantic web defined by [JSON-LD]. For example, an individual's basic identity decla- ration document is as follows: 1.{ 2. "@context": "", 3. "@id": "did:Zipper:mainnet:d278018404b0889326f1799beecf8724b61d691e", 4. "@type": "Person", 5. "name": "Bob", 6. "email": "[email protected]", 7. "born": "1990-01-01", 8. "credential": [{ 9. "@graph": { 10. "@context": "", 11. "@id": "", 12. "@type": ["Credential", "PassportCredential"], 13. "name": "Passport", 14. "issuer": "", 15. "issued": "2010-01-01", 16. "claim": { 17. "@id": "did:ebfeb1f712ebc6f1c276e12ec21", 18. "name": "Alice Bobman", 19. "birthDate": "1985-12-14", 20. "gender": "female", 21. "nationality": { 22. "name": "United States" 23. }, 24. "address": { 25. "@type": "PostalAddress", 26. "addressStreet": "372 Sumter Lane", 27. "addressLocality": "Blackrock", 28. "addressRegion": "Nevada", 29. "postalCode": "237842", 30. "addressCountry": "US" 27

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ 31. }, 32. "passport": { 33. "@type": "Passport", 34. "name": "United States Passport", 35. "documentId": "123-45-6789", 36. "issuer": "", 37. "issued": "2010-01-07T01:02:03Z", 38. "expires": "2020-01-07T01:02:03Z" 39. } 40. }, 41. "signature": { 42. "@type": "LinkedDataSignature2018", 43. "creator": "", 44. "signature": "3780eyfh3q0fhhfiq3q9f8ahsidfhf29rhaish" 45. } 46. } 47. }], 48. "signature": { 49. "@type": "EcdsaKoblitzSignature2016", 50. "created": "2018-10-23T05:50:16Z", 51. "creator": "ecdsa-koblitz-pubkey:020d79074ef137d4f338c2e6bef2a49c618109ec- cf1cd01ccc3286634789baef4b", 52. "signatureValue": "..." 53. } 54.} ● Credential is a collection of digital certificates issued by third parties to verify digi- tal identity. See ● Identity declaration document can attach Linked Data Signatures to ensure the correctness and integrity of the document. See tures. The identity declaration document implements the SHA256 hash value as the file name, and the public key is encrypted before being stored on IPFS. The mapping relation between DID and identity declaration documents is stored on the Zipper blockchain. If an individual or organization conducts identity authentication and de- claration, it firstly creates identity and submits relevant data to complete identity authentication on Zipper. After authenticating an identity successfully, it obtains digi- tal certificate. Digital certificates are stored in identity declaration documents and can be used for identity certification in the future. 28

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ 1.3 Anonymous identity Privacy information protection of entities (individuals and institutions) has been increasingly emphasized, while entities (individuals and institutions) are particularly sensitive to the relevant information in financial activities, and the demand for privacy protection has become stronger. In order to conform to financial supervision and pro- tect entity privacy more effectively, Zipper introduces the concept of user virtual identi- ty. Every entity can have a virtual identity in the system, which is one-to-one relation- ship with the declared real identity. It is impossible to get the real information of the entity using virtual identity without permission. The arbitration authority in Zipper system is trustworthy. Authentication of the real identity of entities is required to create virtual identities, Key Generation Center (KGC) will also issue private keys to the corresponding virtual identity of users. For example, when a user borrows encrypted currency from a lender node (the lender becomes a node in Zipper network), they need to provide the institution with a legitimate signature of their virtual identity. After the institution verifies, it is assumed that the user has com- pleted the trusted authentication declaration in the arbitration institution, the user's loan will then be granted in an instant. The protocol for this scenario is described in detail as follows: ① Registration. Firstly, user submits the real identity to the arbitration institution, and arbitration institu- tion verifies and stores it in the database. Then, the user applies to the arbitration insti- tution for a private key based on the identity signature (the arbitration institution cannot know the user's virtual identity information) and receives a corresponding private key for the virtual identity. Finally, the user selects the random number k and requests the arbitration institution to sign blindly. The arbitration institution generates a blind signature , records the intermediate results of the blind signatures and the real identity of the user, and returns to the user as identity license. ② Apply for a loan. Users submit to the lender and the amount of the loan w. After the lender verifies the vali-dity of the signature, the lender issues the loan . 29

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ (1) Identity-based blind signature scheme Zipper adopts IBBS signature scheme[4] to achieve anonymity. IBBS is generated by blinding the identity signature scheme IBECDSA. The detailed description of the scheme is given below: ● IBECDSA signature scheme 1) Initialization. KGC generates a security curve elliptic E whose exchange group prime order is a big prime number of n and base point p. KGC selects random number as the master-key. Finally, KGC publishes {E, n, P, aP, H(o)}, where aP represents the dot product opera- tion of elliptic curve and the safe hash function (SHA). 2) Key extraction. ① KGC selects random number, given to user. ② User selects random number, computes , give to KGC, where represents the x and y coordinates of the points on the elliptic curve. ③ Given t to user. ④ Computes , and get private key: 3) Signature. The signer generates random number , computes z = kP, s = ex + k, . Finally, sends {m, e, s, r} to the verifier (m is a message to be signed). 4) Signature verification. The verifier calculates to get . Then computes and , where is identity of the signer. Finally, verifies to determine if the signature is legitimate. ● IBBS signature scheme 1) Initialization. KGC generates a security curve elliptic E whose exchange group prime order is a big prime number of n and base point p. KGC selects random number as the master-key. Finally, KGC publishes {E, n, P, aP, H(o)}. 30

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ 2) Key extraction. User submits ID to KGC and KGC computes x = aH(ID). Then select random number, computes , returns to user as private key, where . 3) Signature. ① The signer selects random number, computes z = kP, sends z to signature requester. ② The signer randomly generates. Computes and , return m back to the signer. ③ The signer computes to requester (x is private key) ④ The requester computes , sends {m, e, s, r} to the verifier (m is a mes- sage to be signed). 4) Signature verification. The verifier calculates to get . Then computes and , where is identity of the signer. Finally, verifies to determine if the signature is legitimate. (2)Security Analysis Based on IBBS Signature Scheme First, we need to prove that a legitimate blind signature {m, e, s, rP} inevitably is a legitimate IBECDSA signature. IBECDSA signature scheme Proof Therefore, as long as , the signature is valid. Second, it is proved that this signature scheme is not a forgery. Since it is not possible for KGC to know the user's private key, any IBBS signature must be a legitimate IBECDSA signature (which has been proved), so if the perpetrator forges the IBBS signature it is also able to forge the IBECDSA signature. However, IBECDSA is not forgeable, so the signature scheme has a non-forgery certificate. 31

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ 2 Identity authentication 2.1 Distributed Authentication Service Model Authentication service is one of the most important methods to assure system securi- ty. But for the distributed system, because of its openness and autonomy, it is no longer fit for the traditional centralized authentication service mode. Blockchain natu- rally belongs to the distributed system. If they only depend on sole CA service organi- zation, there may be a single point of failure (SPOF), which affects the availability. Therefore, we need to put forward a CA-oriented abstract implementation layer on the platform architecture so that it can support multiple CA certificates. This Abstract Layer focuses on the compatibility, availability, standardization, and security of CA certificates. Through the encapsulation and interface of the multi-CA abstraction layer, any different CA institutions can provide a unified view of the credit endorsement for the identity of the nodes (financial institutions, merchants, etc.) in the blockchain. If necessary, an institution in the one chain can use certificates from multiple CA institu- tions at the same time. Forming a “multi-center” certification pattern that enhances the credit rating of the blockchain system, improves the institution experience and system availability. 2.2 Identity Authentication Protocol Description Zipper implements a distributed authentication service model based on elliptic curve digital signature and threshold key sharing to provide greater security for distributed systems. The algorithm used is based on the Shamir threshold key sharing scheme: a group of N members shares a SK by using a key polynomial . If is a k-1 o- rder polynomial, any K members of the group can pass the Lagrange interpolates the recovery SK and any combination of less than K members in the group cannot recover the information of the SK, that is, the K threshold key sharing. (1) Private Key Sharing and Signature Authentication During the operation of the system, there is a temporary key management center that uses the elliptic curve digital signature algorithm to compute the CA system signature and authenticated key pair SK and PK, which is the private SK, in the form of SK=(m), where SK=(m) is PK= (p, q, E, A, B) 32

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ Then complete the sharing of the key. The Temporary Management Center selects a k -1 order polynomial randomly for generating the shadow of the key, where the shared SK is f(0) = m. Each entity has a shadow of the system key. The SK of the system can be recovered through any K union of entity . Lagrange interpolation is expressed as (1) Where: (2) Each key shadow owner can calculate SK using Lagrange interpolation theorem, and SK can be calculated by as formula (1). In order to improve system security, the signature of the certificate held by each entity is not directly signed by m which is generated by k union entities, but by using a multi-signature protocol. That is: (3) (4) In the above equation, M represents the information to be authenticated, that is, the certificate information to be authenticated, and represents the information to be authenticated by each neighbor entity. In this scheme, each member provides a part of certificate instead of its , which substantially optimizes the security of the system. (2) K-bounded coalition offsetting For equation (1), a certain definite t can always be found, so that . however, there is no mathematical proof that the result of the multi-signature is equal to SK the result of the signature: 33

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ But for each , their values are somewhere in between 0 ~ q - 1, so that t the inequality is satisfied. can be found using the PK and the original information M, so K-bounded coalition offsetting algorithm is introduced to enable scalable multi-signature generation: Step: 1.Z = -kl*q*r mod q 2.j = 0, W =-- kl*q*r 3.while j ≤ K do 4. Y = ( Y + W ) mod q , W = ( W + Z ) mod q 5. if ver ( M , ( r , Y ) ) then 6. success , break the loop ; 7. end if 8.end while Verification: is the signature's validation function , where is the coor- dinates of the point A. In a P2P system, K is the number of neighbor nodes corre- sponding to an entity, so it is not so large. Therefore, the loop in the above algorithm can end after a certain reasonable number of times. (3) Identity Declaration Service and Life Cycle Management Essentially an identity declaration is also a certificate, which is an extension of a generic certificate. The certificate service system in distributed authentication system is similar to a public key infrastructure PKI-based system, including (identification) certificate management activities such as publishing, storing, displaying, updating and revoking. Note that in distributed authentication system, certificate authentication ser- vice is accomplished by the combination of distributed K entities. ● Certificate issuance: The way an entity gains trust in the entire system is to issue a valid certificate. The validity of the certificate is achieved by signing with SK. Generally, the issuance of cer- tificates can be divided into three phases: (1) System formation phase; (2) Self initial- ization phase; 34

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ ● Certificate storage: Certificates can be divided into public certificate and privacy certificate. The index of the public certificate can be stored in Zipper distributed ledger, and the content is stored in the IPFS network. The privacy certificate is usually stored in the client of the entity and managed by the entity itself. ● Certificate presentation: The certificate owners can decide to whom they disclose the declaration, and the cer- tificate owner can choose to present part of the certi-ficate content or merge partial content of multiple certificates without affecting the verification of the certificate pre- sented. ● Certificate verification: In Zipper network, there are many ways to verify certificates. The non-interactive veri- fication method is not required to interact with the issuer of the certificate, the issuer only needs to obtain the public key information from the distributed ledger of the Zipper network according to the DID of the certificate issuer, and then uses the public key to verify the digital signature in the declaration. After that the validity of the certifi- cate can be authenticated. ● Certificate revocation: When the certificate issued by the verification system to an entity fails, we should revoke the certificate in time and release the binding relationship between the certifi- cate and the entity. Zipper uses the certificate revocation strategy adopted by the distributed authentication service model, which is divided into explicit certificate revo- cation and implicit certificate revocation. ● Certificate Updating: Certificate is time-sensitive. Any certificate held by entity must be updated before they become invalid. The certificate is deterministic, and the entity must update the certifi- cate it holds if it has been modified. When an entity needs to update the certificate, other entities in the system will receive a request for certificate update. After receiving the request, the certificate is first verified for validity. The method is to verify in the light of PK and the system CRL linked list. After verification, decide whether to accept or reject the update request. 35

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ 3 Decentralized Trusted Prophet Service The predictor is a bridge between the blockchain world and the real world. It provides an authoritative, accurate, tamper-resistant, stable, and auditable data query inter- face. The problem of predictor trustworthiness is essentially the problem that each node agrees on the result of the same API call in an open Byzantine network environ- ment. It is very similar to the consensus problem that needs to be solved in the block- chain, that is, in each round of consensus, we hope to achieve random leader election in a way that no one can easily monopolize resources. As long as most of the partici- pants are honest and trustworthy, the blockchain will reach a consensus in a probabi- listic sense. Therefore, we can transform the decentralized trusted predictor into a c- onsensus mechanism under the chain. The specific form is to take some nodes in the network for leader election. In each round of the chain consensus, a predictor service working group is randomly selected from all the authentication nodes. Then, in the randomly selected predictor working group, at (threshold) signature scheme is adopt- ed. As long as the t nodes are honestly following the protocol, the selected predictor service working group can reach consensus under the chain. The key to the consensus mechanism under the chain is the generation of equitable and even random numbers. We define the current round as the Byzantine Fault Toler- ance (BFT) consensus in the i-th round of chain, the random number generated in the previous round ( round) and published on the chain. Each registered group has the same group size ; and for in the current round , there are registration groups . The specific links are detailed as follows: [6] 1) Group registration and reorganization: The newly registered node first enters the pending status. Once the pending pool accumulates enough pending nodes and waits for enough time, they will be randomly selected to form a new threshold group. In order to ensure that a large number of node registrations in a short period of time can still form a new working group with a majority of honest nodes in an unexpected scenario, we use the following solution: Randomly select k normally working groups to dismiss, form undetermined nodes with pending nodes, perform Fisher-Yates shuffling on them, form new work- ing group and register. In order to eliminate adaptive attacks of nodes, each group also defines a maturity period, such as a certain amount of days. The expired working group will no longer respond to new requests, and its members will be disabled con- verted into pending nodes. 36

Z I P P E R W H I T E PA P E R CHAPTER Ⅳ 2) Random group selection: The current round of random selection group will be: . 3) Through threshold signature to generate intra-group consensus: each member j on the chain handles the data requests of the predictor and obtains the correspond- ing result Dj. Each member j uses the group private key fragments to get signature fragments for signature. And broadcast their signature fragments to other members in the same group while waiting for the signature fragments of other members in the group. Threshold signature means that at least T honest nodes need to sign fragments of the same result D to form a legitimate set of signatures that can be verified on the chain. At the same time, any combination of signature frag- ments of any of t honest nodes can be combined into the same and deterministic group signature , but less than t members cannot be combined into a valid group signature. The comprehensive evaluation shows that BLS threshold signature scheme is a good candidate because of its characteristics: uniqueness, deterministic, non-interactive generation and shortness of signature length, etc. 4)The next round of randomness generation: Using the same threshold signature scheme as above, the member j of the Gi group uses its group private key fragment Gj to sign the previous round of random number ri-1 to obtain the signature fragment , and broadcast to the other nodes in the group. 组公钥 n t System Contract on the chain sign share1 Private key fragment 1 Group public key sign share2 Combination Group signature Private key fragment 2 sign share3 Private key fragment 3 Verification Information Private key fragment 4 Private key fragment n Consensus of Prophet Group 37


Z I P P E R W H I T E PA P E R CHAPTER Ⅴ Distributed digital asset transaction and clearing and settlement ecosystem When it comes to ensuring that data uniqueness and ownership cannot be tampered with, one of the advantages of the blockchain is in the sharing of information between multiple parties through cryptographic techniques such as digital signatures. Applica- tion scenarios such as cross-border payment, cross-border trade finance, and supply chain finance, which are coordinated among multiple independent financial institu- tions, have characteristics of “multi-party sharing”, “high-frequency repetition”, and “long transaction chain”. If the blockchain technology is applied in them, when used in these scenarios the costs of communication will be significantly reduced and trust in all parties will be increased, substantially improving system operation efficiency. Among all kinds of complex financial and payment businesses, the clearing and settle- ment of assets is the interweaving center of each business chain. From the central position Zipper will build an efficient distributed digital asset clearing and settlement ecosystem. We have carefully designed a multi-asset clearing and settlement bottom layer protocol, that will recast the infrastructure of digital asset trading through the decoupling of assets and transactions, and will empower token and authority to ensure the security and flexibility of the clearing ecosystem in many dimensions. This enables Zipper to serve the entire digital asset ecosystem, including the decentralized digital asset trading platform function, and makes a safer and more efficient distributed asset registration, clearing, and settlement business model possible. 1.Ecological architecture Zipper's distributed digital asset trading, clearing and settlement ecosystem take opti- mizing and improving the upstream and downstream industrial structure. This covers the whole value service process from identity authentication, asset registration to asset clearing and settlement. In terms of technical architecture, we have layered trading, clearing, and trusteeship. This “multi-center” hierarchical ecological architec- ture is used to solve the limitations of the blockchain protocol itself, and to guarantee that the distributed network can interact with external information securely and credi- bly. 39

Z I P P E R W H I T E PA P E R CHAPTER Ⅴ The clearing center on the chain improves the credibility of the value transfer process of digital assets through secure and trustworthy mechanism of the blockchain itself, and the standardization-based clearing agreement can effectively support the open clearing ecology. In addition, based on the clearing market, we also subdivided the specific needs of identity authentication, registration mapping, exchange payment, and wealth management in the field of digital assets.Together with the identity authen- tication center, the registration and settlement center, it provides an infrastructure that is fully compatible with the existing transaction model, and supports clear- ing-as-a-Service solutions for future business development. In order to build a healthy trading ecosystem, Zipper will also expand the financial clearing scenario through stable and auditable smart contracts. In the clearing layer, the financial derivatives such as de-centralized digital assets, digital asset options, futures, and so on are added, this allows the open clearing system containing unlimited self-evolution space. Identity authen- Asset clear- Registration se- tication center ing center ttlement center Identity authe- Clearing Settlement ntication Exchange Exchange Service Center-API/SDK Application- Infrastructu- Risk manage- Security se- User service Data service Asset service service reservice ment service rvice Distributed clearing ecosystem architecture 2.Clearing Model and Basic Agreement At present, users' digital assets are mainly managed and accounted for by digital asset wallets or trading platforms with different types and functional characteristics. Each tool completes the clearing and settlement of assets separately. 40

Z I P P E R W H I T E PA P E R CHAPTER Ⅴ At present, users' digital assets are mainly managed and accounted for by digital asset wallets or trading platforms with different types and functional characteristics. Each tool completes the clearing and settlement of assets separately. Decentralized public chain nodes or centralized operations entities are the responsible for informa- tion transparency and asset security. Cross-platform digital asset clearing, and settle- ment is also limited by business model and technical difficulties. Zipper solves the asset trust problem of centralized transactions through distributed clearing, combining the advantages of centralized and decentralized transactions respectively. It also pro- vides a complete set of systems and asset security in the digital asset trading industry for digital asset trading platforms and investors, which also give consideration to fair- ness, compliance and efficiency. Identity authentication Registration settlement Asset clearing center center center Identity registration Clearing as a Service Asset Registration All Certificate authority Issuance of digital asset Cross-chain settlement Platform authentication Centralized clearing Delegation registration Trading platform Identity authentication Credit of enterprise clearing Account clearing user Certificate Management Individual credit clearing Identity Service Certificate Management Institution Identity authentication Distributed liquidation model A unified business agreement is the basis for implementing a business paradigm such as clearing as a service. Zipper regulates the settlement of the saved business infor- mation domain and format, the business status generated in the business process, the triggering method and condition of the business status change, and the update information involved in the ledger by agreement. Since each participant signed a busi- ness agreement based on smart contract with the identity account, its implementation process was supported by the blockchain system endorsement objectively. This includes the agreement which is executed consistently on each node, that is, approved by the business entity. The implementation process of the agreement is accurately recorded, and the final result cannot be tampered with, that is, the busi- ness facts being executed are not deniable. 41

Z I P P E R W H I T E PA P E R CHAPTER Ⅴ Protocol specification Identity registration Account registration Account binding Trusteeship mapping Classification settlement Actuals business Derivatives business Margin business Trusteeship settlement Credit clearing Basic Agreements on Ecology 3.Clearing process The essence of Zipper distributed clearing ecology is to implement the layered system after the separation of transaction data and digital assets. Within architecture hierar- chy and data segmentation, the trading platform becomes a professional trading ser- vice organization. All digital assets are registered by the custodian institution, and the transaction settlement is guaranteed by the decentralized clearing chain. The basic business process of managed clearing is as follows: Client Trading Platform Distributed Clearing Ecosystem Register Registration of clearing Account creation account Identity authentication Identity registration Digital Asset Registration Asset mapping Sub-account creation Binding Platform Account Sub-account registration Asset transfer Asset transfer Register Clearing account Platform Trading Release Trusteeship of Assets Settlement account Distributed clearing process In order to ensure business continuity on the trading platform, the distributed clearing process can be divided into transaction-oriented trusteeship clearing and service-ori- ented credit liquidation, in which: ● Trusteeship clearing is the main accounting method of distributed liquidation. ● Credit clearing is an important form of clearing for future payment and exchange. ● Credit clearing is not limited to the asset registration process, and there are certain requirements for the process of transaction risk management, credit rating and plat- form margin. 42

001000100011011010101010110101010 Z I P P E R W H I T E PA P E R CHAPTER Ⅵ ZIPPER EXTENSION MODULE

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ Zipper extension module 1.Parallel computing, multi-chain operation Because of the different economic conditions and supporting facilities on the open net- work, there is a large difference between the hardware configuration and network con- ditions of each node. In order to minimize the use threshold of the blockchain network and guarantee a high degree of decentralization, the architectural design of the public chain usually has to be executed with reference to the minimum standard node config- uration and deployment environment. Therefore, the design space is significantly limit- ed. According to the CAP theorem, in a distributed system, usability and consistency cannot be achieved. Due to the high degree of decentralization of technology and gov- ernance, the public chain often lacks efficient and rapid coordination and intervention in emergencies, which inevitably causes losses. In order to circumvent this design blind spot, many public chains are designed with usability first, for which the guaran- tee of consistency, in the case of network partitioning, is sacrificed. For the purpose of avoiding this blind spot, many public chains prioritize usability and sacrifice the guar- antee of consistency in network partitioning. Apart from this, as the number of users of blockchain applications increases, the design of blockchains must meet the demand to support increasing transaction processing and transactional storage. Hence our system needs to be highly scalable while maintaining a high level of security. Scalabili- ty is the key to the success of blockchain applications, this is one of the most promi- nent technical difficulties in existing blockchain technology. It reflects that no matter how many nodes in the blockchain network, the processing power of the entire net- work is only equivalent to the processing power of a single node. There are only two options improving the processing power of the entire single-chain network: ● Abandon global transaction verification with security assurance. ● Scale up the processing power of a single node, using a powerful and expensive dedicated server. Thus, in order to apply to mass service scenarios, Zipper not only seeks to break through the dilemma under the single-chain architecture, but also by adopting the par- allel multi-chain design. The basic idea is that there are many groups in a blockchain network, each group is a complete blockchain network with independent software modules and hardware resources. It can independently complete the consensus between nodes and have independent data storage. 44

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ According to customizable router rules, all institutions and users involved in the block- chain network, as well as all types of transactions in the blockchain, can be brought into their respective groups. Each group has a clear division of labor, dealing with only certain specific transactions.When the number of institutions or users and the volume or type of transactions increases, Zipper can solve the problem of scalability by adding packets quickly, setting them in router strategy and assigning new traffic to new pack- ets. Parallel multi-chain architecture is similar to database sub-table or Internet ser- vice sub-SET model. Theoretically, as long as sufficient resources are invested, there will be no upper limit on the number of users and the amount of transactions that the system can handle. The entire blockchain network can have enough flexibility. 2.ZipperNet Switching Network In the exploration of the application of blockchain to traditional services, Zipper adopt- ed a different design approach from Fabric. Fabric is a general blockchain design framework, and its application model is MVC-B mode. MVC is the "model-view-con- troller" design pattern in software design. B is blockchain logic, including chain code (e.g. smart contract) and transaction, this means the controller is strengthened with chain code and the model is strengthened with transaction. A guiding ideology is formed to directly integrate the blockchain into the original software design. In terms of architecture, fabric has designed three components: member management ser- vices, blockchain services, and chain code services. This framework tries to com- pletely change the original industry with blockchain. We know that the financial system is extremely complicated. If you follow the Fabric design idea and try to build an integral business system with it, project failure is likely. Therefore, Zipper proposes a way to return to the integration of blockchain system and original business system, that is, through ZipperNet. Business between financial institutions will have flexible interoperability. ZipperNet is a switching processing network that implements message communica- tion and transaction settlement across multiple blockchain networks, and between different financial institutions. ZipperNet is essentially a message communication pro- tocol based on blockchain network that can realize the abundant business support of financial assets on the blockchain to financial institutions, and connect traditional finance and blockchain at the application level through ZipperNet. ZipperNet will focus on the following features: 45

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ ● Based on blockchain network, support real-time message communication between banks and point-to-point. ● Provide a standardized interface for interaction between off-chain system and block- chain. ● The blockchain system can actively invoke the service interface of the off-chain sys- tem.Technical features of ZipperNet: ● In a point-to-point blockchain network topology, planning the node communication path to ensure that the message is reachable. ●Quickly perceive node anomalies in the blockchain network and automatically switch path and resend messages. ●Encryption technology is used during communication to ensure communication layer privacy. 3.Secure multi-party computing In the financial technology business, technologies based on blockchain and big data are used to decentralize data links, confirmation, and authorization for financial credit and anti-fraud, so that demand for data generated value becomes more and more intense. Privacy data protection, especially financial data, is often reflected in secret sharing, confidential voting, and confidential data mining. Most of them use Secure Multiparty Computing (MPC) to solve such problems. In the process of using MPC to solve the problem of collaborative computing protection between a group of untrusted participants, how to ensure the fairness of secure MPC has become a key point and a difficult problem. In response to this problem, Zipper uses blockchain-based fair and secure multi-party computation protocol (BFSMPC)[7] to break through and optimize. BFSMPC builds a penalty mechanism based on smart contracts to achieve fairness. At the beginning of the agreement, all participants are required to pay a deposit to the smart contract, otherwise the agreement is terminated. BFSMPC consists mainly of two phases. In the first phase, an unfair universal MPC protocol based on the Genna- ro scheme is implemented under the participant chain. This protocol applies a verifi- able secret sharing (VSS) scheme, and secrets are shared in a t-order random poly- nomial, and finally n participants get their respective secret shares. In the second phase, the participants implement a fair secret reconstruction agree- ment. This phase requires multiple rounds of interaction with the smart contract, and the participants first announce their secret shares to other participants. 46

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ After the other participants verify, the verification result is fed back to the smart con- tract, and the smart contract determines the malicious party. Eventually, the malicious deposit will be split equally for the honest party. In the last phase, the honest party can recover the secret as long as it collects correct shares, and if the recovery fails, they will be compensated. 3.1 Off-chain general MPC protocol In general, there are three main methods for constructing a generic secure MPC pro- tocol: A construction method based on Yao chaotic circuit, a construction method based on secret sharing, and a construction method based on homomorphic encryp- tion. In terms of privacy protection, the universal security MPC protocol based on secret sharing often has better performance and can be easily extended to cloud-as- sisted secure computing, which makes the MPC protocol more practical. Many common MPC protocols are based on semi-honest models. Although some scholars have proposed to use the compiler to convert the secure MPC protocol under the semi-honest model to the secure MPC protocol under the malicious model, in the output stage, the malicious party will terminate the protocol early after receiving the output. Honesty may not get the final output, so fairness is never guaranteed. To ensure fairness, BFSMPC builds a fair secret reconstruction protocol in the under- lying generic MPC protocol output phase. The secret sharing scheme is used in "Proc of the 23rd ACM Conference on Computer and Communications Security", and the commitment scheme is constructed using a one-way hash function. However, it can only guarantee that the share has not been tampered with, but cannot guarantee the correctness of the share. So during secret recovery, the participant cannot distinguish whether the recovery result is correct. To solve this problem, BFSMPC's underlying Universal Security MPC protocol combines the Gennaro VSS solution with the Peder- sen homomorphic commitment strategy to verify the correctness of the shares. The general MPC expresses the function y=f(x1,x2,…,xn) to be calculated into a directed graph composed of addition and multiplication, then implements arbitrary calculation by executing a corresponding addition protocol and multiplication protocol. The gener- al process of the protocol includes three stages: 47

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ Input phase Compute phase Recover secret Output phase Implementation process of MPC protocol based on VSS The first phase is the input phase, and each participant uses the VSS scheme to share their secret input among all participants. The second phase is the calculation phase, where participants perform the corresponding addition and multiplication pro- tocols. Inputs are secret shares, and these shares are verifiable. The calculation phase outputs the secret share required to reconstruct y, and each protocol participant Pi gets the share yi. The third stage is the output stage, where participants announce their share yi and jointly restore y. 3.2 Fair Secret Reconstruction Agreement After executing the off-chain general MPC protocol, all participants get their own shares and need to disclose their share to recover the secret. However, after a mali- cious participant obtains the secret share of others and successfully restores the secret, the agreement is terminated early without publicly disclosing its own share, which may result in some participants not getting the final result and undermining the fairness of the MPC. 48

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ Therefore, it is necessary to implement a fair secret reconstruction agreement, detect and punish malicious participants, and compensate the honest participants. Because of the existence of the punishment mechanism, rational participants will choose not to do evil. Using the penalty mechanism to build a fair MPC protocol solves the deposit storage problem. BFSMPC is based on smart contracts and there are two types of accounts in the agreement: external accounts and contract accounts. The external account is controlled by the user's personal private key, and the contract account is controlled by the contract code and is not controlled by anyone. It can be used as a trusted party to store the deposit. In BFSMPC, all participants send the deposit to the contract account, which is uniformly kept by the smart contract. The number of deposits paid is only one round, and the total deposit amount is O(N). BFSMPC includes the local protocol ConLocal and the smart contract ConContract. ConContract is written by a participant Pi. After all the participants agree on the con- tract content, Pi publishes it to the blockchain network and writes it to the blockchain after being verified by the miners. For ConLocal and ConContract, ConLocal is exe- cuted by the participants, specifying the calculations of the participants and the data sent to ConContract. ConContract is executed by the blockchain node. It is responsi- ble for keeping deposits and judging the behavior of participants during the secret reconstruction phase. Because in the blockchain network, the implementation results for smart contracts need to be agreed on. Therefore, in order to improve efficiency, the participants first verify the correctness of their respective shares. If the verification does not pass, then the participants pass their share to ConContract for verification. For the behavior of early termination of the agreement, ConContract uses the timeout to determine. If the party does not send a message to ConContract within the speci- fied time, it is considered a malicious party. BFSMPC enters the pre-preparation phase before execution. Participants agree on the number of deposits and other public parameters, generate public and private keys, and broadcast public information. It is assumed that the participants can use the secret communication channel and the broadcast channel, and the entire protocol operates in the synchronous network. The execution flow of BFSMPC is as follows. 49

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ Release con contract Computational side node Mining Reward Computational Computational Send commitment side node side node Verification result Perform calculation Request Verification Result Response Mutual verification, Attempt to recover Send the secret share password Attempt to Request the correct share recover password Request Share Response Computational side node Return of deposit and compensation BFSMPC execution process 4.Distributed Control Management 4.1 Asset Mapping and Control Management Distributed Control Rights Management (DCRM) [8] refers to the process of transfer- ring the control of digital assets in the hands of individuals or organizations to a decen- tralized blockchain. The key is distributed, which guarantees that no individual can access the complete private key. This means that there is no single point to obtain control of digital assets in the state of distributed control management. We call the process of generating the corresponding digitized asset accounting symbol on Zipper with the managed object, cryptoasset mapping. Tokens can be freely interacted with other mapped assets through mapping. The operations that implement and release distributed control are called Lock-in and Lock-out. Lock-in (Cryptoasset Lock-in) is the process of implementing distributed control management and asset mapping for all digital assets managed by keys. 50

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ Lock-out (Cryptoasset Lock-out) is a reverse operation of Lock-in. It consists of two parts: un-distributed control and un-algorithm mapping. After the lock-out is complet- ed, the control of the digital assets is returned to the owner, and the management of the overall storage and centralization of the keys is restored. Distributed management of digital assets has increased the security, liquidity and cryptographic financial appli- cation functions of existing digital assets, thereby further enhancing the value of digital assets. 4.2 Implementation of Distributed Control Management Distributed control management includes two basic steps for digital assets Lock-in and Lock-out. In the process of implementing Lock-in, distributed control management completes asset mapping through atomic transaction. For Lock-out, the same is true for de-distributing control and disarming assets. Whether it is Lock-in or Lock-out, the core is how to achieve the safe and secure transfer of the original control of digital assets to a decentralized system, and to securely store and use private keys. In the implementation of Lock-in and Lock-out, by running the corresponding basic smart contract on Zipper, the target digital asset is handed over to the address that is generated by a distributed key generation algorithm, which achieves the transfer of control to decentralized management. After the distributed control transfer is complet- ed, the smart contract updates the status of the user's account on the Zipper to embody Lock-in or Lock-out. In fact, the billing process is issued by Zipper to the user account or to reclaim the tokens of the same number of digital assets. This completes the mapping of the digital assets to the Zipper or demapping of them. The mapping is transparent to the digital asset holder. Only the key for users to store their own digital assets uses key fragmentation and distributed storage, which is more secure than the original. And their digital assets can be more easily involved in various financial ser- vices. (1) Lock-in implementation process The user initiates a Lock-in request to the Zipper by calling the relevant program inter- face. Take Bitcoin as an example, the specific implementation steps are as follows: 1) Initiate a Lock-in request. User A initiates 10 BTCs Lock-in requests to Zipper by calling the Lock-in program interface. 51

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ 2) Initialize the private key. The request operation triggers a smart contract on the Zipper on Lock-in, which organizes the initialization of the private key. This process completes key fragmentation and distributed custody of the fragmentation key. The initialization of the private key lays the foundation for the storage and use of this key in the future. 3) Hand over control to distributed management. Initialization of an address is com- pleted and generated on the bitcoin chain. User A initiates a transfer to that address. The user initiates the transfer operation to broadcast this Lock-in on Zipper via the interface. The Zipper node checks for the completion of the transfer. After receiving the transaction broadcast, the node on the Zipper chain queries the third-party inter- face to see if the transaction is confirmed on the Bitcoin main chain. The consensus result shows that the 10 BTCs successfully transfer to the address generated by Lock-in, which is regarded as the successful transfer of the distributed control man- agement. 4) Digital asset mapping. After confirming the successful transfer of control, the smart contract completes the status update of User A's account on Zipper. The Lock-in record is packaged by the node into the Zipper's block. At this point, user A's 10 BTC Lock-in requests are completed. (2) Lock-out implementation process Similarly, the user's Lock-out request is also initiated by calling the relevant program interface. Taking Bitcoin as an example, the specific implementation process is as follows: 1) Initiate a Lock-out request. User A initiates a transaction that transfers funds to 10 BTCs to the extra-chain bitcoin address, which is considered to be a user-initiated Lock-out request. 2) Check, lock, and generate transactions. The transaction triggers a smart contract on Zipper's Lock-out. The contract first checks the assets status of user A on Zipper. When the transfer conditions are met, the user's 10 BTCs status in the Zipper account is locked and a band is generated. A transfer transaction with a destination address and a user signature. 52

Z I P P E R W H I T E PA P E R CHAPTER Ⅵ 3) Threshold signature. The nodes on the Zipper chain receive the transaction instructions and begin to calculate and match according to the saved key fragments. The successfully matched nodes will sign and broadcast the results. Each node then collects the signature at the same time. When the transaction signature reaches the threshold, the transaction is sent by the node to the Bitcoin main chain, and the trans- action of 10 BTCs is transferred to the address specified by User A. 4) Release management of distributed control. The node on the Zipper will check whether the transaction is confirmed on the Bitcoin main chain through the interface corresponding to Bitcoin. When the consensus reaches the result of the transaction confirmation, User A's 10 BTCs will be released from the distributed control manage- ment. 5) Release digital assets and destroy them. The smart contract synchronizes the status of the user's account on the Zipper and subtracts the locked 10 BTC mappings to complete the release and destruction of the mapping. At the same time, the Lock-out record is packaged into the Zipper's block. At this point, the user has com- pleted the Lock-out request. 5.Blockchain Network Operation and Maintenance Components A blockchain network is an ecological governance network, so it needs a technical solution with a complete network governance mechanism, and it needs to avoid dam- aging the ecosystem caused by unknown errors due to blockchain technology at an early stage. For a long-term stable sustainable ecosystem, it is necessary to set some special role functions to combine with the distributed governance structure in the eco- system’s community. In the case of consensus outside the chain, the blockchain has emergency handling capabilities to solve unexpected situations such as malicious damage, software bugs, and hard forks. This will enable the operation and mainte- nance to be expressed in the process of blockchain ecology and community autono- my, that is, the ecological self-healing ability through parametric design. 53


Z I P P E R W H I T E PA P E R CHAPTER Ⅶ Derivative scenarios Traditional intermediary business refers to the business where commercial banks charge fees, by performing collection, payment, and other entrusted matters on behalf of customers. By relying on business, technology, institutions, reputation and other advantages, without using their own funds, banks act on behalf of clients to undertake collection, payment, other entrusted matters, and also provide various financial ser- vices. In all these matters banks charge fees for their services. The risks of traditional intermediate business: • High degree of freedom: Intermediate business can be carried out both on the floor and over-the-counter. Then the transaction can be concluded with the consent of both parties. Compared with asset and liability business, intermediary business is less affected by national financial regulations. Because most intermediate business does not need to prepare funds, a bank's self-operated intermediary business is likely to be too large, which brings cer- tain operational risks. • Poor transparency: Most of intermediary business will not be reflected in liability, and will not be reflected in financial statements. Shareholders, creditors and regulatory authorities are unable to evaluate their operating results through the business scope of a bank, and the decline in transparency has prevented the formation of effective supervision. • Risk dispersion: due to the involvement of credit, finance and accounting, funds, etc. in intermediary business, risk control and clear responsibilities are difficult. Through Zipper public chain, bank-related intermediary business can be carried out directly on the chain, and has the following advantages: • Consensus algorithms to solve trust problems; • Enhances transaction transparency and improves transaction efficiency; • Smart contracts to prevent risks, and reduce cooperation costs; • Improves the settlement efficiency of assets. 55

Z I P P E R W H I T E PA P E R CHAPTER Ⅶ Cross-border collection and payment Reduce transaction rates and achieves fast arrival of cross-border collection, cross-border transfer, and other services. Transaction clearing and Supply chain finance settlement Consensus algorithm solves the trust problem; smart contract prevents contract performance Improves the efficiency of transaction clearing risks; trust can be effectively transmitted along and settlement processing among merchants, a supply chain; reduces cooperation costs and acquiring institutions, and financial platforms improve contract performance efficiency Trade finance Insurance Improves the transparency of trade finance Restructuring the credit system to achieve true transactions; and strengthens the entire differential pricing; Optimising processes to effectively reduce channel costs; Applying process of risk management. smart contracts to improve claims efficiency Other financial derivatives Various financial derivatives such as futures, options, wealth management, points, and cloud computing investments. Derivative Scenario Applications 1.Analysis of derivative application scenario pain points and related solutions Derivative Solution Application Pain Points (Advantage) Scenario Traditional cross-border payment and Zipper's distributed ecosystem makes collection business involves multiple parties. parallel information transactions possible. The information transmission between the Without the participation of intermediaries, Cross-border remittance institutions and banks, and among information transactions are more efficient and collection and the intermediary banks needs to be confirmed cost-effective. Moreover, the information on payment step by step. Not only is it very time consum- blockchain can achieve a high level of ing, but it is also easy to lose information in the transparent supervision and risk control. As a process. result risk is reduced. In the traditional clearing and Different financial institutions carry out settlement sector, different institutions have business through Zipper Eco-Network and different basic business structures and Zip Token. Every successful transaction Transaction clearing procedures, plus many links require manual handling. As a result, the business and settlement can be done instantly. The media of transaction itself has asset value and settlement cost is high and fault tolerance is low. and does not require additional accounting, enterprise transfer and other manual processing links. 56

Z I P P E R W H I T E PA P E R CHAPTER Ⅶ Derivative Solution Application Pain Points (Advantage) Scenario The process of trade financing Zipper Eco-Network simplifies the involves the transfer and approval of financing process, so that all the financing information among importers, correspon- documents can be quickly approved. With dent banks, and exporters. The process is the de-intermediary features, the cumbersome, situations such as exporter implementation of contract operations is Trade financing invoice frauds and multiple repetitive replaced by smart contracts. This reduces financings are commonly seen. The the risk of falsification of certificates. With cumbersome review process reduces the information on chain, the location and efficiency of payment and increases the ownership of goods can be effectively delivery time of goods. traced, which increases convenience and efficiency. Supply chain finance can help small Utilizes the non-tamperable and and medium-sized enterprises solve decentralised features of Zipper basic financing problems. However, while there is chain; utilizes the consensus algorithm to great potential for development in this solve the trust problem for financing Supply chain finance sector, there are also many problems: institutions; utilizes the smart contract for enterprises cannot prove their ability to automatic execution to reduce the risk repay, it is difficult to verify true and effective during execution; information on the transactions, and the effective control of blockchain can be checked in real time to performance risk is hard to achieve. improve performance efficiency. In the current insurance industry, By utilising the Zipper Eco-network in based on individual circumstances of the the insurance product design process, a insured, the method of differential pricing is more complete trust system, can be difficult to achieve, the channel fees are established. Smart contracts will process Insurance high, and there is a delay in claims. This insurance contract signings and claims, as leads to poor customer experience and a result, the entire system and process makes it difficult for the insurance industry to efficiency will be improved. Differential transform. pricing and reduced expenditure can be achieved. In terms of asset management, the Through Zipper Eco-network, asset system mainly relies on third-party interme- transactions can be more open and diaries to carry out entrusted management transparent, transaction process can be of assets such as stocks, funds, bonds, and simplified, and the risk of performance can Other financial notes. Asset management processes are be reduced. complex; transaction costs are usually very derivatives high. There is also the risk of falsification and fraud of transaction certificates. 57


Z I P P E R W H I T E PA P E R CHAPTER Ⅷ Ecological construction 1.Practicality of ZIP tokens The purpose of ZIP is to meet three major network functions - media currency, securi- ty, and ecological incentives. The total amount of ZIP is limited and will be gradually destroyed by mechanisms. 1.1 Media Currency In the Zipper network, if two counterparties do not have a common currency and cor- responding gateway combination, then ZIP can be used as media currency without the risk of adversary. For example, if Alice is using US dollars and Bob is using Euros, the Zipper network will automatically seek the cheapest exchange path for both users. If the Zipper network can't find a suitable EUR to USD market maker to complete the transaction, and as each gateway will support the transaction pair of ZIP and gateway assets by default, the system will convert the fiat currency into ZIP to reduce transac- tion barriers and facilitate matching. Of course, ZIP is not a single media currency, but using ZIP in the Zipper network increases business efficiency. ZIP is the only native currency in the Zipper network, as such it is the basis for all Zipper network behaviours. However, Zipper users are not required to hold or redeem ZIP in order to complete transactions, and only need to pay a onetime fee to open an account. Once an account is created, Zipper can be used in cross-border collection and payment for business, or as a currency exchange for businesses. For example, a merchant that accesses Zipper does not need to receive a ZIP; Both parties of the transaction can directly use or collect their required fiat currency or digital assets, etc. These measures all aim to simplify the process, reduce user’s learning cost, and greatly increase the adaptability of the implementation of blockchain technology in traditional scenarios. As Zipper grows and becomes more involved in various gateways operated by finan- cial institutions, and increases in popularity. ZIP will gradually become an important means of value transfer. 59

Z I P P E R W H I T E PA P E R CHAPTER Ⅷ 1.2 Prevent Evil The Zipper network is designed to provide users with convenient, highly efficient, and low-cost blockchain financial services that are almost free of charge. However, in order to deter malicious actors from creating large amounts of junk transactions with the intent of paralysing the network. In order to protect against the attacks of network junk traders, improve the network's own immunity, and improve the reliability of the network, ZIP will be used for account opening fees, transaction fees, etc. Before con- ducting business on the Zipper network each user needs to pay a small amount of ZIP to create an account. At present, the basic fee for opening an account is 1 ZIP. This requirement is negligible for normal use, but it can prevent attackers from creating a large number of fake accounts for the purpose of creating junk transactions in the net- work. When creating a Zipper account, the user will transfer the ZIP to their wallet for activation or pay by fiat currency through the gateway. In terms of transaction fees, for every transaction made in the Zipper network, the system will charge a minimum of 0.01 ZIP as the default fee. As the network becomes congested, the system will dynamically increase the threshold of the fee. Transaction costs are negligible for gen- eral users, but if there is a large network load due to an attempt to attack the network, the increase will result in huge costs for the attacker. The higher the transaction fee, the higher the priority of the network to handle that transaction. The purpose of block- chain setting the transaction fee is to prevent a large number of invalid junk transac- tions, which is an immune response performed by the network itself. The specific transaction fee model is described later. 1.3 Transaction Fee Model Business operation is based on the upper layer of the blockchain platform and is essentially a transaction operation after the abstraction of the blockchain bottom layer. The transaction fee model is designed to establish an intra-group behavioural model of a group formed by the Zipper network transaction broadcasters and consensus nodes. The transaction fee model design based on this behaviour model can be con- sidered mainly from availability (How long does it take to recover after a network failure and how long will it resume smooth operation after a network transaction blockage?) and economy (for network trade broadcasters, it is reflected in the eco- nomic applicability of the cost of a blockchain network transaction to the upper layer business operation represented by the transaction; 60

Z I P P E R W H I T E PA P E R CHAPTER Ⅷ For the consensus node, it is reflected that when a large number of network transac- tions occur, the hardware and network resource costs required to ensure the system still maintaining high performance can achieve break-even with the transaction pack- ing fee?), two dimensions. Therefore, in the gas model adopted by Zipper, the transaction fee charged by the abstract network transaction content calculation method can fully reflect the business operation complexity supported by the transaction. At the same time, the market attri- bute of gas Price adds dynamic adjustment properties to the business complexity in the time dimension. In short, for the user, if a transaction represents a high-priority business operation, when it encounters network congestion, payment of a relatively expensive transaction fee calculated based on the combination of two indicators, market attributes, and busi- ness complexity, will also be reasonable. In Zipper's entire gas model, "gas" is used as a unit for calculating the transaction fee. When a user initiates a transaction, in addition to deducting the transfer amount from the account, the usage fee of gasUsed * gasPrice is also paid. According to the content difference of each transaction, the transaction fee will be different. There are two main considerations in its calculation: calculation amount and storage amount. Transactions on the blockchain need to be re-executed by each consensus node as verification and occupy the hard disk space of each node, therefore, the more complex the business operations and the more capacity the transaction used, the higher the fees. However, with regard to gasPrice, it is determined by a dynamic market formed by the consensus nodes, but in order to prevent the consensus nodes from manipulating the price and leading to market regulation failure, we will supple- ment it by the way that “Agreement automatically determines the price”, so that this indirectly allows market regulated gasPrice to be placed in a reasonable unit price range. The concept that agreement determines the price is similar to the mining difficulty and is a mechanism that automatically determines the next status based on the previous status. It is built into the system protocol layer, and any node can check whether its numerical value is legal. Therefore, it is effective in deterring consensus nodes from manipulating the price. Because it can be known from the economic level analysis, the illegal high income will be denied by other nodes, and deliberately creating low returns is not good for oneself. 61

Z I P P E R W H I T E PA P E R CHAPTER Ⅷ Calculation model of agreement automatically determining the price: Two dimensions of transaction calculations: calculation amount and storage amount. Zipper will release the corresponding calculation unit price comparison table when launching the smart contract platform function. In the storage amount calculation dimension, we will adopt a pricing method that constrains the "global status", i.e. One Byte status storage space per each ZIP token at the bottom chain, and is designed as a lease mode. The detail of such a model will be reflected in the detailed module design documentation. 2. Ecological Incentive The block reward is designed to meet the needs of all users in the current and future Zipper ecosystem, i.e. to encourage consensus nodes to participate in maintaining the security of the entire network, and to grant the rights of platform use to all partici- pants in the Zipper ecosystem. In the Zipper system, 40% of total ZIP (40 billion ZIP) will be used as a reward pool. The ZIP reward pool will be divided into two parts as to reward nodes that contribute to the Zipper network. 40% of the reward pool (16 billion ZIP) is allocated for consen- sus node rewards, and the remaining 60% (24 billion ZIP) is allocated for economic node rewards. 2.1 Consensus Node Supernode In the entire Zipper system, it is jointly maintained by several consensus nodes. When they act as producers of blocks, the tasks are collecting transaction information pub- lished by users, taking turns to conduct sequencing, arbitrating double spending, and packaging of these transactions. When they do not produce blocks, they will carry out pre-voting and voting on proposal blocks, which provide final certainty for transactions issued by users. In each round, the block-producing node will get 32 ZIPs as a block reward. After every 100,000,000 block height, the block reward is attenuated to 80% of the previous stage. 62

Z I P P E R W H I T E PA P E R CHAPTER Ⅷ 2.2 Economic Node Xnode In order to promote the development of the Zipper ecosystem, we have given many benefits to all ZIP holders. In this, there will be extra benefits given to long-term value investors, which is intended to not only increase the stability of the Zipper project, but also to allow them to participate in the ecological construction of Zipper. The partici- pants will be pioneers in the creation and expansion of the community’s ecosystem. The total of all 24 billion ZIPs in the economic incentive pool will be distributed as incentives to Economic Nodes, the equal amount will be fully issued within 10 years. The Zipper system will support three levels of Economic Nodes, X0, X1, and X2 respectively. Applying to become a node, one only need to deposit a certain number of ZIPs. When the deposited ZIP lasts for more than 24 hours, one can participate in the ranking of next maturity period of each node (the preset node maturity period is 24 hours) before applying to unlock the deposited ZIP. When a node maturity period ends, the nodes are ranked according to the number of mortgaged ZIP at deadline, and the ranks of each Economic Node are determined. The mortgaged ZIP will be locked, at the same time, node rewards will start to generate. By the time of cutoff, the top 100 in the number of mortgaged ZIP will be determined to be X2 level Economic Nodes, and will equally share 25% of the economic reward pool for the day; By the time of cutoff, the top 101-400 in the number of mortgaged ZIP will be deter- mined to be X1 level Economic Nodes, and will equally share 35% of the economic reward pool for the day; By the time of cutoff, the top 401-1000 in the number of mortgaged ZIP will be deter- mined to be X0 level Economic Nodes, and will equally share 40% of the economic reward pool for the day; Finally, when Xnode proposes the unlocking application and releases the mortgage, the system will completely unlock after 1,296,000 blocks. At the same time, the ZIP during the application period does not participate in the ranking of node maturity period. 63

Z I P P E R W H I T E PA P E R CHAPTER Ⅷ 2.3 Gateway Node When banks or other licensed financial institutions want to become third-party super gateways, they are required to hold a certain number of ZIP to be eligible to apply. The final interpretation of the exact quantity is maintained by the Zipper Foundation. 64


Z I P P E R W H I T E PA P E R CHAPTER Ⅸ Governance As we all know, community organisations are the birthplace of blockchain technology. Whether it is the earliest bitcoin blockchain or a variety of public chains, it is run in as a community. This community is composed of many users who actively participate in and maintain the blockchain. Only when the entire network has reached a consensus, can the community modify the blockchain system, such as the blockchain accounting method. Because of the need to reach a thorough democratic consensus mechanism, the public chain usually does not have a final arbitrator. If the voting entrustment system is used alone, only the witness nodes will enjoy exclusive administrative and legisla- tive powers. In fact, this is a return to the classical mob system. We need a self-gov- erning committee similar to DAO with some adjustments. 1. Consensus Committee and Community Committee The Consensus Committee is an administrative organisation composed of blockchain consensus nodes that jointly maintain the entire Zipper system. In addition, the Con- sensus Committee has the right to perform blockchain updates, add new features, or urgently fix dangerous security vulnerabilities. The Community Committee consists of all economic nodes above X1 level, which can indirectly affect the governance of the entire blockchain. Unlike Consensus Commit- tee which is composed of consensus nodes, the Community Committee has the larg- est authority in the entire Zipper ecosystem, and it has the right to formulate conven- tions. Any community committee member can propose a Zipper Improvement Propos- al, which will be sent to the system-level smart contract in the form of a transaction. This smart contract will initiate a Community Committee vote on this proposal. Once the vote is passed (with 2/3 majority), after a period of delay, the proposal will be rec- ognised by the community and executed by the development team and the Consen- sus Nodes. The content of the proposal includes but is not limited to the following 66

Z I P P E R W H I T E PA P E R CHAPTER Ⅸ • Edit the content of the basic convention • Modify system parameters • Modify the protocol (such as updating the formula algorithm) • Add and upgrade system-level smart contracts • The Community Committee is supervised by all users, but it should be pointed out that the Community Committee may also breed evil members, and even form a “qua- si-collaborative organisation” to jointly propose, modify or pass proposals that are beneficial to them. We need to find a better way to circumvent this problem in the future. 67


Z I P P E R W H I T E PA P E R CHAPTER Ⅹ Summary Zipper aims to revolutionise the traditional financial industry with blockchain technolo- gy, and will provide wallet and decentralised transaction network for all fiat currencies and white label cryptocurrencies, making isolated islands of financial networks no longer a problem. At present, although there are already several blockchain develop- ment projects that connect with financial institutions, such as Ripple, R3, etc, there are still serious obstacles to these projects at the actual implementation level. The common problems they face include: incompatibility with financial regulations, as such they cannot be implemented in many countries; business logic does not match the clearing and settlement logic of current financial institutions, resulting in inability to connect with financial institutions; customer privacy protection mechanisms are imperfect; business data is not secure; severe centralisation; non-public chain net- work and so on. In order to solve the cross-chain problems between heterogeneous blockchains and reduce the operational costs of interconnection between different financial institutions, Zipper came into being, which will create complete, low-cost, fully compliant, highly efficient, and cross-chain interoperable blockchain financial solutions for global finan- cial scenarios. The aim is to link the traditional financial industry with blockchain finance to create a completely new-generation financial system, which is in line with the development of technology and the times. Due to its unique features, such as friendly access and support for heterogeneous interoperability, Zipper ecosystem con- struction will have the ability to grow rapidly and become an indispensable part of blockchain innovation in global the financial system. At present, the Zipper Foundation has received strategic support from many famous investment institutions globally and is strategically cooperating with many banks and non-bank financial institutions worldwide. Zipper, a next generation blockchain ecosystem aiming for financial compliance and interconnection! 69


Z I P P E R W H I T E PA P E R CHAPTER Ⅺ Roadmap Main chain update Capacity expansion, Main network goes (switching service) Publish white paper off-chain transaction online Gateway node plan operation Apr. Q3 Q4 Q2 2019 2019 2019 2020 Q2 Q3 Q1 Q2 2019 2019 2020 2020 Master node setup Decentralised wallet Main chain update Zipper Ecosystem Testing network Economic Node (identity system) Financial derivatives goes online goes online Roadmap 71


Z I P P E R W H I T E PA P E R CHAPTER Ⅻ Disclaimer This document is for the sole purpose of conveying information and does not consti- tute any investment advice, investment intention or relevant opinions on the sale and purchase of this project. Any conduct related to this white paper shall not be consid- ered a participation in the exchange, including a request for a copy of this white paper or a sharing of the white paper to others. The Zipper team will continue to make reasonable attempts to build a financial eco- system based on encryption technology, as much as possible to ensure that the infor- mation in this white paper is true and accurate. During the development process, the platform may be adjusted and updated, including Zipper public chain bottom layer protocol development, public chain ecological perimeter development, DApp develop- ment, and compliance document release. This document does not constitute or to be construed as an operational recommendation for any sale and purchase, nor is it a contract or commitment of any kind. The user with related intention needs to define the risk of the project. Once the investor participates in the investment, he or she understands and accepts the risk of the project, and is willing to personally bear all the corresponding results or consequences. The operation team does not bear any direct or indirect losses caused by participation in the project. 73


Z I P P E R W H I T E PA P E R CHAPTER XIII Reference [1]Ethereum White Paper[EB/OL]. [2]Wikipedia - Data Protection Directive[EB/OL]. [3]Drummond, R., Manu, S., Dave, L., Christopher, A., Ryan, G., Markus, S(2019). Decentralised Identifiers Data Model and Syntaxes for Decentralised Identifiers (DIDs). Draft Community Group Report 30 March 2019. [4]Zhao Yong; Liu Jiqiang; Han Wei. (2007). Application of identity-based blind signature in mobile electronic payment. Journal of Beijing Jiaotong University, 31(5), 82-86. [5]Liu Linqiang, Xu Qiaozhi, Song Rushun (2005); A Distributed Authentication Service Model for P2P Systems [J]; Computer Engineering; 31(21), 135-137. [6]DOS Network: A Decentralised Oracle Service boosting blockchain usability with off-chain data & verifiable computing power.[EB/OL]. [7]Huang Jianhua, Jiang Yahui, Li Zhongcheng. Building a fair and secure multiparty calculation using blockchain. [8]Fusion: Creating the Future of Modern Finance.[EB/OL]. [9]DAEX:A Distributed Digital Asset Clearing Ecosystem.[EB/OL]. [10]FISCO BCOS: Financial blockchain infrastructure and practice samples. [EB/OL]. FISCO%20BCOS%20Whitepaper.pdf. [11]Ontology White Paper.[EB/OL]. [12]Ripple White Paper.[EB/OL]. 75

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