As the final day of its ITO advances, the Blocknet unveils a wide variety of accountability and trust-related measures, and publishes rules pertaining to the close of the ITO.
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The Blocknet – an “internet of blockchains” – is a decentralised application platform built upon a revolution in cryptographic technology; a true peer-to-peer protocol between nodes on different blockchains. With the end of its ITO approaching, the Blocknet launches its open source Github repo, and unveils its plans for the decentralised ownership and structured spending of funds.
Trust and accountability are foremost in the minds of the public when it comes to projects funded with an ITO (“initial token offering”). For any party to collect payment first and deliver the goods later, it is imperative to reduce the risk of non-delivery as far as possible. In the case of the Blocknet, assuring investors of its credibility could scarcely be more pressing as, in the hours following the explosive launch of its ITO, it was subjected to a massive smear campaign that temporarily halted BLOCK sales.
The Blocknet now makes available its accountability measures regarding the safeguarding and regulated spending of funds. This complements its Proof of Developer (Coins Source), its appointment of Coin Representatives, and its initial commits to the open source XBridge code repo.
The function and purpose of the Blocknet
The Blocknet’s core technology is the XBridge protocol, which will establish a hybrid mesh/DHT network between nodes of different cryptocurrencies, harnessing the resources of their wallet services and communities. For the first time, altcoins with niche communities will be able to access an exponentially larger potential user base comprised of the communities of every participating cryptocurrency. Also for the first time, cutting-edge technologies will be served not only to the particular community using a coin, but to any and all users of any participating coin, providing a marketplace of a scale significant enough for services to generate viable income for nodes.
To bring coins’ services to market, an application platform and decentralised marketplace will be developed and, like all Blocknet technology, served from Blocknet-enabled nodes.
The remuneration opportunities the Blocknet offers, and its hugely increased marketplace of users, serves as an incentive for developers to build new blockchain/resource based applications while using the underlying blockchain ledger for fees and payments. The ultimate effect envisioned is a full circle eco-system that can engage numerous vertical B2B and B2C markets worldwide.
Structured escrow of funds
In order for the Blocknet’s funds to be responsibly spent:
They will be held in a multisig address to prevent any single party controlling them
Spending further will be authorised by an impartial third party auditor
All spending will be transparently presented
Avenues will be open to allow relevant requests or concerns by the public to be represented
There are six distinct functions in a structured escrow service – executive, auditor, recipient, payment platform, representative, and represented party.
Formal structures in the Foundation
To serve these functions, Blocknet Foundation members can either be Coin Representatives or Board Members.
Liaise with the Foundation on behalf of their coin
Liaise with the CoinGateway on behalf of their coin
Serve as a point of contact for their coin’s community to voice Blocknet-related concerns and requests
Submit proposals for funding to the board
Are accountable to the Coin Representatives and function to mediate requests and make decisions upon these requests
Are accountable to the public and are required to publish records of all decisions made
Review and approve proposals for funding
Submit their decisions to a third party auditor service (CoinGateway) for authorisation
Cannot spend funds without a majority vote in agreement to spend funds
Cannot spend funds without the third party auditor’s authorisation to spend funds
The third party auditor:
Reviews the Board’s decisions to spend funds
Is notified of concerns or complaints from Coin Representatives
Withholds spending authorisation in the event of complaints or concerns
Cannot spend funds without the Board’s majority vote to spend funds
To implement the above, the following arrangement is proposed, consisting of two multisig transactions in sequence:
A raw m-of-n multisig transaction is set up between the Board members such that:
For a total of n Board members, m is equal to n/2 plus 1% of n, the resulting number rounded up to the nearest integer.
In English: a majority vote of more than 50% is required for the spending of funds to be approved by the board.
The output address of transaction (1) is an input address of a second multisig transaction with the following specification:
Between the Board’s output address, the third party auditor, and Bitgo (the payment platform).
Both the third party auditor and the Board’s valid output is required in order to spend funds.
In the event that any one of the three parties to the multisig transaction (the third party auditor, the board, or Bitgo) lose either their reputation or the ability to spend funds, the remaining two retain the ability to recover the funds. In such an event, a new multisig transaction of identical structure will be set up, with the failed party being replaced by a new entity.
This ability to create new multisig transactions will also be utilised in the event of a new Board Member replacing an outgoing one.
The Blocknet’s funding is held at the second multisig address.
The Board will meet on a weekly/monthly basis to review proposals; meeting times will be published in advance.
A public review period of 3 days between the Board’s vote and the auditor’s authorisation is required in order for the auditor to consider and concerns or complaints supplied by coin representatives.
Before the Blocknet Foundation is formed, representatives from participating coins’ teams will serve as points of contact for the public, and will guide the formation of the foundation.
Paul: BitSwift (Bitcointalk)
Nick: Pizpie (Bitcointalk)
Kurt: APEXcoin_team (Bitcointalk)
Art: LibrexCoinDev (Bitcointalk)
Arlyn: Synechist (Bitcointalk)
PR Contact: email@example.com
Josh Lambert: johnnyXcash (Bitcointalk)
Foundation Board Members
The Blocknet Foundation’s board will be formed before the end of the ITO period. This is of course necessary before funds can be transferred from exchanges, since a multisig address must be created using the addresses of every Board Member. Updates on the Foundation and its rules will be posted to wiki.blocknet.co.
In addition, the Blocknet’s development timeline will be converted into a budgetary plan so that the spending of funds is known in advance, can be discussed publicly, and so that consensus can be reached that funds are spent appropriately.
Registered public entities
The Blocknet Foundation will be registered as a legal entity in due course. This will bring it further accountability, and will ensure that the public have all the traditional legal and civil protections afforded them by society.
Furthermore, in order for participating coins to offer certain services (particularly those involving B2B contracts and/or money transmitter services), it is necessary for them to register as legal entities too.
BitSwift is the first to do so, having registered a software development company in Canada. Its Canadian Provincial Business License can be found here (business number to be issued when the registration is approved). This will be the first document uploaded to SwiftExist (a data ownership, timestamping, and document integrity service) once the service launches. Using SwiftExist as a productivity tool remunerates BitSwift nodes by destroying tiny amounts of currency, decreasing the money supply and thus increasing the value of each coin.
XC Inc will be formed early next year in order for XCurrency’s plethora of node-based services to be served to traditional businesses.
Development of the XBridge has begun
Blocknet developers ha
ve made the first few commits to the XBridge repo on GitHub, and the Blocknet interim wallet is available too (it is a regular PoS wallet that will be replaced by Blocknet technology once it launches). Development has commenced in advance of being funded as a gesture of goodwill. The Blocknet is an open source project and we encourage developers to get involved.
Proof of developer
CoinsSource has completed a proof-of-developer review for Dan Metcalf, the visionary behind the Blocknet and the architect of the XBridge protocol.
CoinsSource gave the Blocknet five out of seven stars, the remaining two being awarded following a successful completion of its ITO period, and once BLOCK has spent 30 days on an exchange.
Price and quantity
Ten million Blocknet tokens (“BLOCK”) will be created and no more will ever be made available.
The price per token will be 0.00025 BTC.
Tokens purchased using a participating coin will be sold at a 10% discount.
Tokens’ pricing against participating coins will be determined according to a recent average price of the coin in question against BTC. The exact algorithm used will not be disclosed to prevent exploitation by market participants.
Tokens will be available for purchase using any participating coin, or BTC.
Only CoinGateway will offer pairings for altcoins, with the exception of NHZ, which will be paired with BLOCK on Poloniex. The other exchanges will offer BTC:BLOCK pairings.
No more than 20% of the available tokens (2,000,000) will be purchasable using altcoins. The remaining 80% will be purchasable using BTC on Bittrex, Bter, and Poloniex.
Token supply per coin will initially be allocated based on market cap, and adjusted manually if demand necessitates it.
Coingateway will display the number of remaining tokens available on its website. The number of tokens available on other exchanges will be visible on their order books as a sell wall.
If an amount of less than 850 BTC (~$300,000) is raised, funds will be returned to investors.
Any unsold tokens will be publicly destroyed using proof-of-burn.
The Blocknet’s ITO will begin on 02:00 PDT, Oct 29th, and end at 23:59:59 PDT on November 5th.
Pairings between participating coins and Blocknet tokens (“BLOCK”) will only exist for the duration of the ITO.
BLOCK:BTC pairings will persist after the ITO. BLOCK may be traded against Bitcoin from the start of the ITO onwards.
Following the close of the ITO, if the minimum amount of funding is not raised, all funds will be returned to investors.
The manner in which funds will be returned depends upon where one purchased BLOCK.
Circumstances beyond Bittrex’s control led to some exchanges enabling open trading during the ITO while Bittrex users were prevented from doing so. To rectify this unfair situation, Bittrex will offer a 48 hour refund period even if the minimum amount of funds have been raised at the close of the ITO. Refunds will be available through a buy wall on the BLOCK:BTC pairing.
During this period, no BLOCK will be able to be withdrawn or deposited from Bittrex, and so the refund is only available to users who bought BLOCK on Bittrex.
Following the close of the 48 hour refund period, Bittrex will await figures from other exchanges. If the combined total of funds raised is 850 BTC or higher, then Bittrex will release the funds to the Blocknet multisig escrow address. It the total is lower than 850 BTC, then Bittrex will return all funds to investors by putting up a buy wall.
If, at the close of Bittrex’s 48 hour refund period, the total funds raised is lower than 850 BTC, then all BLOCK purchased through CoinGateway can be refunded in the currency the BLOCK was originally bought in.
To obtain a refund, BLOCK must be paid from the address that it was originally received on. This is in order to match the payment with your prior purchase in CoinGateway’s transaction history.
Refunds will be paid in the same currency that BLOCK was bought with, at the same price. If you return a smaller quantity of BLOCK than was originally purchased, you will receive an equivalently smaller amount in the altcoin you originally purchased with. If you return more BLOCK than was originally purchased, you will receive no more than the original amount you purchased. Do not send more BLOCK than you purchased.
Refunds will be paid to the same altcoin address that you used to pay for BLOCK. As such it is imperative to ensure that you are able to receive payments on this address before requesting a refund through CoinGateway. (For example, if you paid from an account at an exchange, it is unlikely that the sending address can also receive funds.)
Any unrefunded altcoins on CoinGateway will be sold at their ITO prices on exchanges, and the resulting BTC will then be sold for BLOCK at the ITO price on exchanges. In this way, any outstanding BLOCK will be collected in exchange for BTC.
Poloniex and Bter
If, after the c
lose of the 48 hour Bittrex refund period, the ITO does not meet its minimum amount, a buy wall will be placed on Poloniex and Bter at the ITO price and holders of BLOCK will have opportunity to sell it for BTC.