Abstract: As a powerful second generation blockchain project, Argentas helps to build new open global financial system. The Argentas ecosystem will be formed around its core protocol and HydraNet blockchain, network interfaces and bridge entities, and an eventual decentralized application economy. The application development architecture will be designed to enable in particular financial services dapps on a global scale and may ultimately scale to millions of transactions per second.
We have aimed at making this white paper comprehensible and easy enough to read for anyone interested, without including any complex mathematical formulas or the like applied in the consensus algorithm, pathfinding algorithm, the cryptography protecting private key signatures or the like. The purpose of this white paper is to give an understanding on the planned key functionality of the key three dimensions of the project in ways that can be easily understood, differing from some of the excessively mathematically oriented technical white papers that may not be comprehensible for an average reader. This reflects our more hands-on, practical business-oriented approach to actually create software and services that enable true migration and generation of real-life value-added, not only proofs of formulas that may not eventually work in real life in a value-adding manner.
PLEASE NOTE: THE CRYPTOGRAPHIC NATIVE DIGITAL ASSET OR CURRENCY REFERRED TO IN THIS WHITE PAPER REFERS TO CRYPTOGRAPHIC TOKENS / DIGITAL ASSETS ON A NEW BLOCKCHAIN THAT WILL ADOPT THE ARGENTAS-DEVELOPED PROTOCOL. THEY DO NOT REFER TO THE XLM COMPATIBLE TOKENS BEING DISTRIBUTED ON THE STELLAR BLOCKCHAIN IN CONNECTION WITH THE AXU TOKEN DISTRIBUTION. THE "HYDRA" AND "HYDRANET" NAMES ARE PROJECT NAMES AND MAY CHANGE; THE NATIVE DIGITAL ASSET OF THE BLOCKCHAIN WILL BE NAMED ACCORDINGLY AND IN DUE COURSE.
Copyright © 2018 Argentas
Without permission, anyone may use, reproduce or distribute any material in this white paper for non-commercial and educational use (i.e., other than for a fee or for commercial purposes) provided that the original source and the applicable copyright notice are cited.
DISCLAIMER: This Argentas Technical White Paper v1.0.0 (Draft) is for information purposes only. The Argentas Project does not guarantee the accuracy of or the conclusions reached in this white paper, and this white paper is provided "as is". It is subject to changes and additions as the project evolves. Argentas does not make and expressly disclaims all representations and warranties, express, implied, statutory or otherwise, whatsoever, including, but not limited to: (i) warranties of merchantability, fitness for a particular purpose, suitability, usage, title or non-infringement; (ii) that the contents of this white paper are free from error; and (iii) that such contents will not infringe third-party rights. Argentas and its affiliates, if any, shall have no liability for damages of any kind arising out of the use, reference to, or reliance on this white paper or any of the content contained herein, even if advised of the possibility of such damages. In no event will Argentas or its affiliates, if any, be liable to any person or entity for any damages, losses, liabilities, costs or expenses of any kind, whether direct or indirect, consequential, compensatory, incidental, actual, exemplary, punitive or special for the use of, reference to, or reliance on this white paper or any of the content contained herein, including, without limitation, any loss of business, revenues, profits, data, use, goodwill or other intangible losses.
We are definitely on the brink of a fascinating new financial era that is about to completely transform our conception of money, payments and banking that has fundamentally remained the same for the past several hundred years.
Financial infrastructure is currently a disorganized myriad of closed systems – therefore, there is no real 'global financial infrastructure', nor any 'global financial system', but a collection of separate systems that do not talk to each other. Differences, incompatibility and lack of direct communication between these systems mean that transaction costs are high and money and other assets of value move slowly across political and geographic boundaries – still, this is the reality today even in 2018 despite of technological advances otherwise attained. This friction caused by the dominating legacy systems, and gaps in standards, design and communication between those closed systems has curtailed the growth of financial services and left billions of people financially underserved: it may be that even one third or 2-2.5 billion out of the world's population of 7.6 billion do not even have proper access to financial services. The challenge to build a new global financial system ultimately accessible to everyone is vast indeed – but what is fascinating is that it is now doable given the latest technological advances.
To solve these problems, the world needs a global new financial infrastructure that both supports the kind of organic growth and innovation we have seen from the Internet, and, at the same time, ensures the integrity of financial transactions. Historically, rather high barriers to entry have been relied upon to ensure such integrity. Generally, established financial institutions are trusted, but such institutions are also heavily regulated. This kind of exclusivity and high barriers to access conflict with the objective of organic growth. To achieve growth, new, innovative participants are necessary, and such new participants often possess only very limited financial and computing resources. We need to create a new worldwide financial system, a network and platform that is open to anyone, so that new actors and organizations can join and extend financial access to all people and communities worldwide.
Second generation cryptocurrencies and blockchain-based distributed ledger technologies have the potential solve this problem, and to make the money, payments and any transfer of value more secure, self-governed and accessible. However, to this day, no consensus-backed currency or blockchain infrastructure has been able to appeal to the overall market and reach mainstream adoption. This white paper describes a new protocol-driven blockchain network and an ecosystem to be built around it – eventually including a native digital asset, or cryptocurrency – capable of meeting the needs of a vast number of users, businesses and individuals alike for a true global use.
This new network, and eventually ecosystem, will be created on the blockchain-based protocol designed to host a new generation native cryptocurrency facilitating virtually free and real-time global payments and, subsequently, other decentralized, primarily financial services oriented applications beyond money and payments. The launch of this HydraNet blockchain network will complete the cycle we started in another context 10 years ago, back in 2008, to revolutionize global payments with our instant payment concept that was run in a real bank ecosystem.
Years ago, when we started the work to solve the problem of global payments, we started with a closed ledger approach within the banking environment, but understood after the emergence of a number of blockchain networks operating distributed, decentralized open ledgers that the future of money and global payments inevitably lies there, not in the closed ledger based traditional systems, which by definition prevents a truly open, global payments system from taking place. At that time, we viewed a bank as a core asset in the setup to operate global payments, as it traditionally has been the case, when correspondent banking and SWIFT messaging was required to move currency in and out of any payments system, but in this evolved future view, we regard a bank rather as a peripheral asset, a bridge entity, to the open decentralised network that now is the core of the new emerging ecosystem. Literally, powered by the accessible blockchain, the user can become his or her own bank, and banks, as we know them today, will eventually disappear and morph into blockchain network interfaces. This Darwinian evolution of banks and bank accounts disappearing and something more powerful emerging instead is fascinating indeed.
Argentas is about transforming global payments and banking through leveraging of the open, distributed ledger model operated by the decentralised blockchain architecture, and developing a new ecosystem of decentralized financial applications beyond payments and banking.
There is no current standard cryptocurrency neither used for the regular exchange of value in the daily lives of ordinary people nor for business and financial transactions. To solve the problem of payments and help to facilitate a new open global financial system, blockchain ecosystem needsa decentralized counterpart to everyday money — a true mainstream cryptocurrency eventually adopted by individuals, businesses and institutions alike, accepted by all either making or receiving payments. The current state of blockchain technology is inefficient and too complicated to appeal to the mass consumer and everyday business to serve for this purpose – the same goes for many other novelties. As a result, no cryptocurrency or decentralized platform has gone truly mainstream, and centralized traditional payments solutions so far continue to dominate the market instead of the new decentralized ones.
Argentas will create the Hydra Network (HydraNet), a fast and inherently scalable, open and decentralized blockchain architecture supported by ancillary services (both native network interfaces and non-native bridge entities providing connection between the network and any other actor or user). The Hydra Network can eventually be also regarded as a decentralized supercomputer and value transfer system (of fiat currencies, cryptocurrencies, gold and other assets of value) as well as a global dapp platform. By combining minimum transaction time and cost with maximum security, HydraNet can equally become a VISA/Mastercard and SWIFT alternative, replacing them for the new decentralized economy in ways that will also provide financial system access to vast numbers of underbanked people.
Given the fast evolving market for cryptocurrencies and the emerging, nascent cryptoeconomy, new innovations, possible emergence of new regulations or changing application of existing ones, changes in market circumstances, competitive positioning, resources available and so on, the visions, plans, goals and objectives presented in this white paper, and their sequence of execution, may change accordingly as they are constantly adapted to find the best solutions possible at any given moment to fulfil the mission and vision presented – the mission and vision always remain; the tools to achieve them evolve.
Exchanging and transferring value should be as easy as exchanging information. It can be seen that finally, second generation blockchain technology offers the ideal foundation to make this a reality. To achieve a winning solution in terms of the technology to be developed and its application, the following parameters have to be achieved:
- Speed and scalability. If e.g. Visa alone runs 50-60 thousand transactions per second, while the leading cryptocurrency networks bitcoin and ethereum only process 7 and 15 transactions per second, respectively, and may require confirmation times of 60 and 2 minutes, respectively, there is a long way to achieve capacity that is enough to run a global payments network in real time, which would need to have multiples of Visa transaction volume as the total capacity worldwide i.e. run potentially into millions of transactions per second. Among some other networks, ripple claims to be able to do 1,500 transactions per second and to potentially scale up to the level of Visa, but that has never been run in real-life conditions. Thus there is no current solution for any truly global payments processing volume capacity which would be a million or more transactions per second. Reaching sufficient global capacity requires either a different architecture on the level of the first, or native layer, or a smart application of a type of lightning network as a secondary layer containing payment channels, but research, development and practical use will lead to the best solution to this challenge.
- Low or no transaction cost. In addition to being slow, the largest current networks have high transaction costs that also relate to network congestion and under-capacity to process many enough transactions in a period of time. In many countries, clients have got used to free basic domestic payments, even if the costs are often hidden in fixed monthly service fees or similar. This means that payments should be virtually free to users, to reach widespread adoption.
- Irreversibility (low confirmation time). While e.g. retail card payment users have got used to payment confirmation times that can be virtually instant, bitcoin payment can take an hour to get confirmed (6 blocks of ca. 10 minutes of mining for each) and a couple of minutes for ethereum, no user would like to keep waiting until such confirmation times lapse. This would need to be virtually instant i.e. of low latency.
- Decentralized control, transparency and flexible trust. No central authority must be dictating, whose approval is required for consensus, but anyone must be able to participate, guaranteeing access and inclusion to network services. Users must be able to choose any number of parties they see fit, which means that any user should be of equal importance.
- Safety and security. The security should not only rest on "normal" digital signatures and hash families but eventually on such ones that can be set to protect against hostile parties with even unimaginably vast computing power that may be in the future amplified by quantum computing. Eventually, even if we are not yet there, the security of the encrypted blockchain private key signatures must be quantum resistant.
- Easy, convenient and intuitive user interfaces. User interfaces of the services – the wallet, exchange and any network interface natively or through a non-native bridge entity such as a bank or broker - must be simple and easy to use, intuitively facilitating buy, sell, store and transfer of value and use of any available app. Complex user interfaces, or sometimes even no user interfaces but command prompts requiring specialized knowledge and expertise prevent mainstream adoption of such applications, where advanced technologies may be truly groundbreaking, but the user interfaces prevent from unlocking value.
- Vast, engaged user base and community. The network must eventually reach a vast user base for a widespread adoption and general use by various user segments from individual to business, from corporate to institutional. This means that it is not enough to position the software towards institutional and corporate users, but there must be direct individual end-user access as well. An interesting example from the previous generation are the social media giants, which offer free user interface and functionality to individual users, but charge businesses for their services to earn revenue. A similar logic is applicable, where businesses can dramatically lower their costs and achieve advantages in terms of savings of time and effort as well, and some value-adding services built into applications can generate revenue accordingly.
These are some of the key requirements for and characteristics of the Argentas-developed Hydra Network (HydraNet) that will be a fast, scalable, open and decentralized blockchain architecture supported by and interfacing with external network interfaces and bridges such as wallets, exchanges, banks and other service providers. Given the power of such a decentralised network, HydraNet can eventually be regarded as a decentralized supercomputer and a global value transfer system (fiat and digital currencies, physical and digital assets of value), and a global decentralized application development platform , particularly for global financial services of the new generation.
Because taking cryptocurrencies mainstream and solving the problem of global payments would not be possible only using the existing blockchain platforms,we have set out to find a novel solution to meet the requirements for global payments. This research and analysis has resulted in the overall design for the Hydra Network (HydraNet) — a fast and secure blockchain and network project that will enable virtually free, real-time and global payments and potentially bring access to finance, banking and payments in the most modern form to billions of still underbanked through a the reach of global decentralized financial applications including the HydraNet interfaces such as wallets. This will be a part of the process to create a truly open global financial system of the new era.
- Like bitcoin, the Hydra network (HydraNet) will be a decentralized and distributed ledger.
- Bitcoin is the native currency of the bitcoin blockchain, while the HydraNet will have its own native digital asset or currency as well.
- There will be no mining equivalent in the Hydra network; anyone will be able to run a 'Hydra Core' validator node, but validating transactions will not reward node operators with newly minted cryptocurrencies.
- While bitcoin uses proof of work as its consensus model, HydraNet will use a consensus model called the Hydra Protocol (HP) based on the variant of the so-called Byzantine Generals' Agreement.
- HP will not require much computational power, so it is much more environmentally friendly than bitcoin and other mining-intensive cryptocurrencies, and will have an eventual, anticipated maximum transaction throughput of tens of thousands of transactions per second, ultimately into millions of transactions on a fully-fledged global level.
- Median confirmation time for a Hydra network transaction will be targeted in a few seconds or less (which level has already been achieved in a number of existing projects), eventually aiming at sub-second and virtually real-time transaction validation and settlement.
- Although there will be a native digital asset or currency of the blockchain, the network will support many different kinds of assets, and anyone using the network will be able to issue a new asset (for the network to be able to fulfill its function as a global value transfer network). Assets backed by external currencies (i.e. fiat money or other cryptocurrencies) will be supported by the HydraNet's bridge entity system.
- The HydraNet will have, by definition, a built-in decentralized exchange, where assets can be exchanged, to fulfil the function as a global value transfer system, for different assets based on orders in the decentralized order book. Hydra transactions will be able to contain exchange transactions on the order book.
- Bridge entities will serve as entry and exit points for fiat currencies into the Hydra network. They will maintain both fiat currency accounts and HydraNet wallets for their users. If the user deposits money into their fiat currency account, the bridge entity will be expected to deposit an equivalent amount of the appropriate Hydra network asset to the user's Hydra wallet, and vice versa for withdrawals. Such bridge entities may be e.g. financial institutions like banks and payment firms.
In planning and designing the Hydra Protocol (the Protocol or HP), we have studied and learned from the protocols powering different types of cryptocurrencies having different sets of strength and weaknesses, and different targeted uses.
All blockchains created after bitcoin are often called 'altcoins'. All altcoins, in turn, initially are more or less clones of either bitcoin or any of the later altcoins, having been forked or otherwise cloned to be taken into a particular direction of development, to emphasize or enable certain functionality that bitcoin may have had less strong or not included in its own structure. So it can be said that all altcoins have been, in one way or the other, copies of bitcoin or, further, of other altcoins underlying a certain functionality, or a certain set of functionalities for certain purposes, while some of them have indeed managed to create some further unique and value-adding features and functionalities in the cryptocurrency sphere.
When we analysed this cryptocurrency universe starting from the two most valuable projects in terms of their market value i.e. those that have been generally the most appreciated, together covering about half of the total cryptocurrency market capitalization, bitcoin and ethereum, and their forks or derivatives, we realized that we could not use them as platforms for our project: both the processing speed and the number of transactions processed by the networks at any given moment are far too low for our purposes, so to facilitate a global payments network offering virtually 'free real-time global payments' is not possible by using those blockchains; even if there are 'sidechain' developments such as the "Lightning" network with its payment channels for bitcoin and Raiden for ethereum, they are still in their testing stages and not available for general use and adoption in the live networks, and no one knows whether they will be able to really solve the problem through such sidechain developments, when the core network structure is such that in their current forms they would not be able to serve as global payment networks, in addition to being tremendous consumers of energy. It is clear that no new major blockchain can be developed in such an energy-devouring manner, because the energy-intensive nature of bitcoin has already become a big issue, when the blockchain and its use have increased manifold from the original levels and ideas – clearly, such energy-intensive approach simply is not sustainable.
Even if ethereum advertises itself as a global application development platform via its 'smart contracts' facility, the highly congested nature of the network, where the currently best known application are the initial coin offerings (ICOs) and other token sales instead of any continuous, generally used applications that offer real-life products or services involving a high volume of concurrent transactions or the like, could not be applicable for our purposes – or the purposes of any global payments or value transfer network.
We thus considered that none of the mining-intensive blockchains were suitable for our purposes, associated with high latency / low transaction confirmation speed, low throughput / low scalability in terms of transaction volume, and very energy-intensive mining process. For our purposes, as listed above, important attributes are low latency / fast confirmation speed and an ability to process a great number of transactions per second, ability to support multiple assets – any asset – and even be 'currency-agnostic' or 'asset-agnostic' to enable truly global / universal payment network, a global value transfer system, and enable e.g. micropayments, remittances, and mobile payments as such directly on the blockchain through its native interfaces. Among some of the major existing blockchains, there are projects, inspired by a non-mining open source consensus protocol called Tendermint that was created out of desire to have a solution to substantially reduce the levels of electric power consumption caused by bitcoin and be more environmentally friendly and at the same time achieve greater speed and scalability of transaction volumes, such as Ripple and Stellar (that in turn has been originally based on Ripple, a fork/copy that has been then taken further from that; while Ripple itself is now in the process of rebuilding its entire protocol to make up for some of the serious structural deficiencies of its original setup that would prevent any true decentralization of its blockchain), which meet many of these important attributes such as fairly low latency, much greater transaction processing and confirmation speed, low energy consumption / no mining requirement, currency agnostic structure and support for the transfer of value of multiple assets.
Ripple had initially provided an end-user wallet application, but had later on ditched that functionality, in order to be able to concentrate serving an institutional clientele rather than to offer a competing service. Our philosophy is instead to be directly open to all, to provide users with both the institutional and individual interfaces or "network bridges", as we believe that to be able to create a really universal service, one needs to be open to all in an equal manner; it is obvious that blockchain technologies will disrupt and replace traditional banks, payment messaging and settlement networks, clearinghouses, closed-loop card schemes, payment remittance networks and so on anyway, so all institutions will either need to adopt to that reality regardless, or lose their market position and competitiveness: HydraNet will offer an open solution to all segments, and it will be up to them to use them or not; additionally, HydraNet will set up sample network bridge models/entities to demonstrate the functionality and benefits of the network, such as an optional "bridge bank entity", but the network itself will not prefer any bridge in particular but be equal to all. Like Ripple, Stellar that may have certain features that make its network more 'open' than that of Ripple, where anyone is said to be able to join the network instead of the 'curated list of nodes' maintained by Ripple, making it, however, look like a more centrally controlled network, while the HydraNet ecosystem will evolve differently from any of those projects. Also, there have been criticisms towards the lack of true decentralization of the Tendermint protocol, where validator nodes have had voting power in accordance of the tokens they have ‘bonded’ (which is a form of proof-of-stake approach) as ‘security deposits’ for proper network behavior, meaning that the voting power basically can be bought and all nodes are not of equal importance. Such approach could lead large institutions or other validator node operators to effectively control the blockchain, making it centralized instead of being decentralized.
We have benchmarked our plans with a number of other blockchain projects, in particular with those that have their attributes closer to what we require as functionalities, and learned from them including learning what should not be done. In the HydraNet structure, we will avoid 'reinventing the wheel' in areas, where well-functioning solutions or approaches to problem solving already exist, and adopt solutions or structures that we appreciate as 'best practices' in those areas, and leverage them further as parts of the Hydra blockchain and ecosystem, which as a whole is an authentic, unique combination of features, functionalities and qualities that we consider optimal and important in order to succeed in our mission of making global financial services faster, cheaper, simpler, more convenient, accessible and secure, and to offer it all with style and substance, and reach our vision of building a leading blockchain and ecosystem for global finance of the new era.
There is no project similar to ours, to create a complete global finance-oriented blockchain-driven ecosystem inclusive of its protocol and blockchain, sample network bridges and nodes, and the platform for global decentralized applications, to provide its users with the convenience of end-to-end movement of value between the 'traditional economy' through the Hydra network bridges.
Users keep an account in the system, where the user’s account is identified by the user’s public key or address i.e. practically the account number of the user. Each account can hold a sum of tokens (the native digital asset or cryptocurrency of the blockchain) that can change with new transactions. Nodes relay new transactions as they are signed and submitted by users to a node of the network. A transaction is valid if it follows the rules of our protocol (e.g. sufficient funds to send etc.). Valid transactions are grouped into blocks that together form the HydraNet blockchain. The validation and transactions hashes are merkle tree root hashes of the signatures and transaction data included in the block.
Validators are users with accounts that participate in the consensus protocol by broadcasting cryptographic signatures, or votes, to agree upon the next block.
At the core of the platform will be a scalable and flexible second generation blockchain architecturethat will allow the HydraNet blockchain to process a vast number of transactions virtually in real time. The Hydra blockchain (that maintains the network accounts and transactions on its distributed ledger) will effectively fulfill the functions of a (i) decentralized exchange capable of transferring any asset of value including both crypto and real economy assets, (ii) liquidity provider mechanism for the HydraNet blockchain ecosystem participants, (iii) clearinghouse messaging network for the said asset transfers, and (iv) asset-backed gateway between the blockchain-based cryptoeconomy and the "bridge" entities acting as gateways to and from the traditional economy, holding traditional assets against the blockchain network credit as issued (so that it can fulfill the function of a truly global value transfer network).
The Hydra Protocol will be a universal protocol aimed at powering the most cost-efficient and fastest payment system for transfer of value online on the Hydra Network (HydraNet). The advanced second-generation Hydra blockchain technology will enable users to transfer funds (including fiat currencies, digital currencies, securities, commodities and other forms of value) across geographic boundaries as fast as seamlessly as sending an email or a message – the vision we originally set for free, real-time and global payments in a different context a long time ago. The Hydra Protocol will enable the full realisation of the objective for an instant payment service for free, real-time and global money transfers – in addition of having taken it to the next level in terms of not only transferring money but any item of value. This will take us closer to realising the concept of "internet of value" that many entrepreneurs have also worked on in their projects, but no such global network exists so far.
Like other blockchains with their native digital assets or currencies, the Hydra Protocol will enable peer-to-peer transaction settlement across a decentralized network of computers, the HydraNet – in a way, such network can be seen as a 'decentralized supercomputer' as a whole. A decentralized network normally consists of peers that are connected to each other in a peer-to-peer network and relay new information by gossip (nodes) and that can run independently of each other. Each node keeps a complete copy of a totally ordered sequence of events in the form of a blockchain as in bitcoin. The he power to transmit information is distributed among a network of servers, instead of being driven from one primary, centralized source. This means that the Hydra network will not depend on any single entity, which would make it vulnerable to attacks that all centralized closed-loop entities may experience. The idea is to have as many independent servers participate in the Hydra network as possible, so that the network will still run successfully even if any single server or a number of servers fail.
HydraNet will be a physical network of computers running a common open-source software, developed by Argentas. Users plugged into the Argentas-developed software will transact according to rules set by the Hydra Protocol. Similar to other universal Internet protocols – e.g. SMTP for email and HTTP for websites – Hydra Protocol is basically a set of rules that govern how computers connected over the Internet participating in the HydraNet communicate with each other.
This architecture will enable virtually free and real-time global transactions, when the native cryptocurrency 'living' in the network, is used, and be superior to any first generation blockchains and to traditional payments such as interbank fund transfers. However, the design of the Protocol, unlike most other digital currency protocols, will also enable currency (and asset) agnostic operations, which is a very important quality in solving the problem of global payments, and will mean that the users are not required to transact in the Protocol's native digital asset / currency but can transact virtually in any currency (and transfer virtually any asset) in ways that will reduce the costs to a fraction of traditional bank or other asset transfers and enable virtually real-time transaction settlement (immediate confirmation and settlement). Such conceived optionality in the Protocol to use or not to use the native currency of the blockchain will enable HydraNet to become a global payments hub, communicating between HydraNet and any external 'bridge entities' operating in traditional fiat currencies or other assets, enabling payments or transfer of any asset/item of value over the internet using the HydraNet, with or without its native digital asset (bridge entities will not be directly involved in a transaction unless it requires to "cash in" or out of an asset that is subject to a HydraNet transaction).
Based on study of real-life examples as described above and on our specific planning, certain architectural choices in the Protocol will enable a near real-time settlement within a few seconds at least (with an objective to eventually reach sub-second and virtually real-time settlement speed), while faster speeds may be possible already at initial stages, as testing of certain concepts has demonstrated. The Protocol, by its design to accommodate transfer of any asset of value, will also essentially run as a decentralized currency exchange (this is different from 'normal' cryptocurrency and other exchanges that can either run their own exchanges as HydraNet bridges or run interfaces to the native Hydra decentralized digital asset exchange), with the applicable script routing each international transaction to the most advantageous FX bid/ask spread (including the fiat/crypto pairs) available in the network posted by its exchange and/or market-making 'bridge' participants or other contributing HydraNet ecosystem entities (when not directly being transferred in the form of the native digital asset between the sender and the recipient, but when either or both of them act in other currencies; there will always be the possibility to convert any asset having an exchange rate against the native digital asset by using it, so that asset A is exchanged for the native asset, and simultaneously from the native digital asset to asset B).
Given the nature of the HydraNet blockchain as a global value transfer network including global fund transfers, the features of the Hydra Protocol will enable it to much better perform the task previously handled by the traditional interbank fund transfer systems such as SWIFT, which will make it possible to replace them over time, when HydraNet becomes widely adopted – the technology and architecture underpinning SWIFT is certainly not what suits the needs of modern global online payments and other value transfers. Eventually, with HydraNet, traditional time and resource-consuming correspondent banking and other payment methods being only additional costly layers upon traditional funds transfer or payment card (Visa, MC, Amex etc.) systems, will be made redundant (while they can still function as 'bridge entities' to HydraNet) – who would pay multiple fees, wait for multiple delays to pass, and assume multiple counterparty risks, when all these can be eliminated for good and transact without any of those inconveniences and risks?
The era of real-time global payments is here: within the HydraNet itself, contrary to traditional payments, by definition, there is no counterparty risk, as the operation of HydraNet and its native digital asset / cryptocurrency will be independent of any company or institution, or any central authority that could be attacked, so they are also safer than any payment going through traditional payment networks.
Assessing the nature of Hydra as a protocol is critical in order to grasp the potential of the software being developed, and the appeal for both its prospective direct users and partners (in the role of 'bridge entities' or similar, leveraging HydraNet for their own value-adding purposes). Hydra Protocol includes a set of rules for instant online payment transactions and their immediate clearing and settlement: it governs how two parties can transfer ownership of any currency or item of value. This makes it interesting: using HydraNet, it will be possible not only make transfer 'money' but any item of 'value', leveraging the capabilities of the HydraNet blockchain, and thus extending the functionality of HydraNet far beyond normal payment transactions. This is the next step in realizing the concept for the 'Internet of value'.
In the Hydra Protocol, each participant (as a network node – this is different from the end user perspective as participant) must determine others it considers important within the HydraNet. It will wait for the vast majority of those others (other network nodes) to agree on any transaction before considering the transaction settled. In turn, those important participants will not agree to the transaction until the participants they define as important agree as well, and so on. Eventually, enough of the network will accept a transaction so that it will become infeasible for an attacker to roll it back. Based on this consensus formed, only then will any participants consider the transaction settled. HP's consensus mechanism will ensure the integrity of the financial value transfer network. Its structure of decentralized control may stimulate organic growth of the network, because any party can join the network, without any centralized controlling party required for authorization of such network participation. Like the original bitcoin blockchain, the decentralized, organic character of the network is its strength that has made it practically unassailable.
The HP will have two key properties that make the Hydra network a powerful asset transfer system. First, to start with, it will have an extremely low computational power requirement (because there is no energy-intensive mining requirement like e.g. for bitcoin), especially when compared to bitcoin's proof of work (very energy-intensive mining process). Second, it will have a very high transaction throughput, and could reach up to tens of thousands of transactions per second (early stage), and eventually up to millions of transactions per second, which is the requirement for a true global payments network of the crypto era.
Even if the protocol enables disintermediation, the protocol itself does not disintermediate banks, other financial services providers, or any other institutional network users – whether they are disintermediated will depend on the choices of the users of payment services: individuals, merchants, corporates and the banks and other network-using institutions themselves, whether they use HydraNet directly or through bridge entities such as banks. This is, once again, synonymous with other Internet protocols like HTTP (the protocol for the Internet) or SMTP (the protocol for email): the same way, no company can cut access to these public goods, because no company controls them – so any disintermediation is not for the protocol to decide: the Protocol, and the blockchain platform being governed by it, will only offer the 'tubes', the infrastructure, and the eventual choice is of users and service providers.
At the same time, financial institutions of many kinds will have a value-adding role as the network bridge entities, providing access for funds and other traditional assets to enter and exit the HydraNet, and as market makers to provide liquidity within the network for any of those assets. Transferring value as the native digital asset or in another form does will not, however, require Argentas or any financial institution. The role of a bridge entity will be only necessary, when and if the user wishes to convert the native digital asset into a fiat currency or a physical asset operated or maintained by such a bridge entity that can be an exchange, a bank, a payments institution or the like.
As an Internet protocol, by definition, no one will own the HydraNet, and the open source software will be completely free. Argentas will not collect fees, or limit access to HydraNet, as it would be against its very purpose as an open source, decentralized, unassailable value transfer network.
Traditionally, every bank or other type of a financial institution manages a ledger of accounts in its own closed-end accounting system. In a digital world, payments are essentially just updates to the database comprising such closed accounting ledger. A bank can transfer funds between in-house accounts by effectively moving e.g. an amount of money from a cell to another in its bookkeeping. The complexity in the world of payments arises from the fact that every company normally has its own proprietary, closed ledger, and two banks or other companies running two different systems cannot easily communicate directly between their closed ledger systems.
Like a traditional ledger, the Hydra ledger will record a list of all the balances and transactions belonging to every single account on the HydraNet blockchain – this is very easy to understand, when one considers traditional bank accounts. In contrast to the closed bank ledger, a complete copy of the global HydraNet ledger will be hosted on each server running the software. Any entity will be able to run a Hydra server: these servers will form the decentralized Hydra network, allowing the ledger to be distributed as widely as possible.
On a high level, one can think of Hydra as a neutral, open-source, distributed ledger that connects all parties and on which developers can build innovative payment or other applications, such as peer-to-peer lending products leveraging the intrinsic feature of the HydraNet blockchain to issue credit (which brings the functionality closer to replacing any traditional closer-loop bank structures). If every company's back-end can communicate with HydraNet, then the Hydra Protocol can also act as a universal link between companies and institutions globally – in addition to directly serving end users directly through various interfaces (network gateways). Hydra will not only enable transfer messages like those of SWIFT, but a real time transaction settlement as well, which the closed-loop SWIFT system does not enable, which means that the Hydra solution comprises not only the payment transfer and messaging, but also instant clearing and settlement, which will render both SWIFT and the traditional correspondent banking structures eventually redundant.
This is a disruptive solution that is a genuine value-adding improvement because, and, not only what is described above, but like email, using HydraNet is totally neutral and free. It is not controlled by any country or region, or any central authority. And unlike centralized solutions, no company can impose future costs to use the network. Contrary to traditional messaging systems like SWIFT, card schemes like Visa, MasterCard and Amex, and clearing and settlement systems like ACH or Target 2 of ECB, which are all closed-end systems, HydraNet will be an open, decentralised network running the distributed ledger software developed by Argentas.
Hydra Core will be the software acting as the backbone of the network. Hydra Core nodes (network servers) will do the work of keeping the network running by validating transactions through HP. The nodes will also allow owners to issue new assets in the network (one does not have to own a network node to be able to issue an asset on the HydraNet though) or submit transactions to the network. Anyone will be able to download Hydra Core and start running a node. There will be a server application connecting to Hydra Core nodes and allowing applications to interact with the Hydra network through an API interface and software development kit (SDK) that should be familiar to any competent web developer. Anyone will be able to download and run a HydraNet server application software.
The Hydra Protocol will be built upon, with the objective of improving upon, other cryptocurrencies, where their characteristics, strengths and weaknesses, have been analysed and benchmarked in designing HP to suit its particular objectives in improving global payments, as described above. Like other digital currencies, the Hydra Protocol will enable peer-to-peer transaction clearing and settlement through a decentralized network of interconnected computers. This will reduce and, ultimately, eliminate several (fundamentally all, if the native digital asset / currency of the network is used) of the fees, delays and counterparty risk involved in traditional interbank fund transfers or other traditional payments.
In assessing the requirements of the HydraNet, it was seen that in contrast to many other cryptocurrencies, it was considered very important that the Hydra Protocol will be completely currency and asset agnostic and users will not be required to convert local currency into HydraNet's native currency if they do not choose to – even if any transaction can equally take place exclusively in the native digital asset / currency (when completely free global real-time payments take place) – this makes it possible for both totally independent operations (independent of any financial institution whatsoever) and operations extending through financial institutions as 'bridge entities' holding balances of such currencies and other assets.
With these parameters, in addition to the direct use of the HydraNet through the HydraNet Wallet by end users, Argentas will offer a disruptive solution, for banks and other financial services firms to function as (1) bridges into and out of the Hydra Network, and (2) market makers to provide liquidity for FX conversion by posting bids/asks for each currency pair within the intrinsic Hydra decentralized exchange framework. HP will route each transaction to the trader(s) or other FX transaction counterparties with the best price in the decentralized exchange of the HydraNet. This demonstrates that HydraNet will be able to function either as a "pure play" cryptocurrency transaction network, or as a hybrid, currency and asset agnostic network providing value-added equally to its network bridge entities, that often are traditional financial institutions.
Bridge entities are entities that HydraNet users trust to hold their deposits in fiat money or other traditional assets and issue credits into the HydraNet to match those deposits. They literally function as a bridges between different currencies and the Hydra network. All money transactions in the Hydra network (excluding the ones effected in the native digital currency of HydraNet) take place in the form of credit issued by such bridge entities that essentially fulfil two key functions:
- Bridge entities take the user's deposit and issue the corresponding credit to the user's account address on the HydraNet ledger.
- The user can make a withdrawal by bringing the bridge entity the credit they issued.
This is very easy to understand: the essence of traditional banking, the issuance of credit, is used, but in an entirely novel way in the context of the blockchain.
The user will have to signal trust to the bridge entity in order to honor the user's deposits and withdrawals of credit it has issued. As stated, using bridge entities is not essential for HydraNet's operation that can be run independently with its native digital asset, but the use of bridge entities enables the inclusion of fiat money and other traditional assets in the global value transfer system.
To understand a similar logic in a closed ledger setting, let's look at for example PayPal that is a very familiar case for most end users. In order to use Paypal, the user should deposit money in from his or her bank account. Paypal then gives the user credit in his or her Paypal account. Then, one can now send that Paypal credit to anyone that trusts Paypal (i.e. anyone with a Paypal account). Someone that received this Paypal credit can convert it to real money using Paypal by withdrawing it to the bank or to a payment card, or using it to buy other goods or services.
In principle, such bridge entities effectively fulfill the same function in the HydraNet setup. The difference is that all such bridge entities are operating on the same HydraNet so they can all directly transact with each other now – this will make the setup much more powerful than that of PayPal for example. The HydraNet users will be able to easily send and exchange all these different bridge entity credits between each other. The power and capability of HydraNet as an open global value transfer system will be far greater than that of PayPal, however, which represents past generation technologies and a traditional closed ledger system.
To demonstrate the full functionality of the ecosystem, Hydra plans create, directly or through partners, sample bridge entities such as bank entities to both promote the HydraNet and show its capabilities to other banks and institutions. At the same time, any institution can freely join HydraNet as a bridge entity. There are no preferences between any such entities. Such bank entities and HydraNet will be independent of each other: none of them will need the other in order to function, and HydraNet can perform the same bridge functions with any other bank that is willing to establish a bridge entity with HydraNet.
There are several potential advantages of using the disruptive Hydra Protocol for interbank transfers, replacing them:
- Because users will not be required to convert to native digital currency of HydraNet in order to transact on the Protocol given its designed currency/asset agnostic nature, the sender of the funds will only need to worry about one fee, which is the FX spread. This spread, moreover, will be minimized given HydraNet's algorithm to route transactions to the lowest spread on the network.
- Transactions on the Hydra network will be expected to settle within a few seconds (and ultimately virtually in real-time). This will enable faster access to user's funds, improving the overall user experience, be it directly or through a bridge bank, and improving working capital for businesses using HydraNet directly.
If users interface directly with a bank to access HydraNet, KYC/AML and compliance requirements around client interaction through such bridge entities will be already in place and can largely remain the same. This simplifies situations, where transactions involve non-native currencies at both ends and require settlement and clearing in such fiat currencies.
Continuous uninterrupted 24/7 HydraNet operations vs. traditional work week of old-world payment networks and banks
In contrast to the existing payment systems following the old, bureaucratic Monday to Friday, 8 am to 4 pm schedule, the distributed Hydra ledger will operate 24/7 and provide for real-time, bilateral settlement, also eliminating the need for any third party clearing agents_._ Two counterparties that are integrated into HydraNet will be able to exchange funds or assets simultaneously, eliminating both counterparty and timing-related risks. A whole new era for both transfers and clearing & settlement of any transactions.
A consensus-based protocol ensures that every transaction is replicated and recorded in all the machines in the network in the same order. The scheme for state replication in this context is implemented in the blockchain paradigm, where the blockchain is the resultant hash-linked batched log of transactions replicated deterministically across all processes in the network.
Hydra Protocol (HP) will be a model that is suitable for worldwide consensus. The Hydra network will be a shared public ledger administered collectively by a network of servers. The ledger will maintains and updates the accounts and balances of Hydra users - the HydraNet servers will communicate with each other to verify transactions and synchronize the ledger every few seconds. Transactions on the HydraNet will be authorized and settled through a process called consensus.
This process entails Hydra servers mutually agreeing that a transaction within the network is valid before updating the ledger. This entire process of coming to consensus on the Hydra network will occur approximately every few seconds, with an eventual goal to reach sub-second confirmation times. This type of a consensus process clearly consumes much less time and energy than bitcoin's "proof-of-work" (PoW) i.e. mining-based transaction confirmation process that is very energy-intensive, slow and increasingly expensive, thus not suited for the needs of virtually free global real-time payments.
All nodes of a distributed system must periodically (in a space of a few seconds, or eventually less than a second) update the state they are replicating , in this case a transaction ledger. Each update to the ledger is identified by a unique slot; the consensus protocol will ensure that all nodes agree upon slot content.
In this state updating process, when the HydraNet nodes decide that an update is correct and can be safely entered into the ledger, they will externalize, or publish,the agreed-upon statement to their identical copies of the ledger. Consensus is reached when all nodes update their ledgers and publish the same transaction value.
To verify whether transactions are valid or not, HydraNet servers will use public/private key cryptography. Every transaction that is submitted will be signed with a unique digital signature (the same way as bitcoin transactions are signed with the private key) – in a way this is similar to how people sign paper checks with a physical signature in traditional banking. Hydra network servers – or nodes – will mathematically verify that the correct signature is submitted i.e. the signature (private key) of the owner of the funds, before including any submitted transactions in a new ledger being recorded in the blockchain.
HP has been structured to manage the main risk of a system applying the distributed consensus mechanism: the system cannot agree on a statement without the risk of getting blocked and losing liveness. Therefore, it is possible for a transaction to be validated to get stuck in a permanently indeterminate state before the system reaches agreement on it. The goal of HP will be to minimize and eliminate such blocking and the potential for divergence. The protocol will therefore treat statements so that it is possible to neutralize blocked statements or transactions in the process of being validated, if they get stuck in the voting process — all this is based a voting-based approach to the problem.
A vote is a referendum on the value associated with the vote i.e. the value the nodes are voting on. The vote-based approach means that, to eventually register a value in the blockchain, a node will have to commit the vote tied to that value.
Every network node participating may either commitor abortany vote. If a part of the nodes were to get stuck, all nodes could fail to reach an agreement. There must be a way to neutralize an incorrect option, because otherwise the whole blockchain could in theory get stuck and end up in an indeterminate state, which is a scenario that must be prevented altogether. To neutralize an incorrect transaction, or an incorrect value proposed for a transaction, a group of nodes will accept to abort it, it will become irrelevant, and then the group of nodes move on to vote on another (correct) option.
If, on the other hand, the group of nodes will ratify the statement "commit the transaction," then the they will agree on the value tied to that vote. A statement "commit the transaction" will be valid, and therefore can legitimately appear in votes, only if all incompatible votes have been aborted. In such a setup, there will be no blocked states for intact nodes. There will always be a sequence of events through which intact nodes can reach agreement on and commit a value, guaranteeing continuous operation of the blockchain.
This consensus transaction validation process as described is what will enable the HydraNet to offer users virtually real-time settlement (typically a few seconds, and ultimately virtually real-time as the eventual objective) and bypass the need of a central operator, which will circumvent layers of fees that financial institutions, business and/or consumer bear for traditional payments. _In other words, the process of consensus is what will enable fast, secure and decentralized settlement on the Hydra network._HP will simultaneously enjoy a number of key properties: decentralized control, low latency, flexible trust, and enhanced security. Most other main approaches to consensus enjoy at most three but not all of these key properties. This will distinguish Hydra from many other digital currency protocols, such as bitcoin, as described above, which rely on the PoW mining process to validate transactions on the blockchain. Unlike bitcoin, Hydra will not rely on mining to reach consensus, so will not consume the large amounts of energy that bitcoin does, nor is the network's security related to the amount of processing power devoted to it.
HP will be a construction for the so-called Byzantine Generals' agreement (BGA). There are many variants of the BGA – some of them practically require almost all network nodes to agree to a transaction in order to get confirmed, and some very high supermajority. Our objective is to optimize the level of majority so that practically no high supermajority is required as is the case in certain other blockchains, because too high level required would risk to block the blockchain in the case of divergent views of the nodes, and in certain cases cause the network liveness to be lost, which both risks are managed by the combination of lowering the required majority level and introducing decision tranches in the process to optimize the level of majority required for the consensus, and prevent any paralysis of the network in the case of divergent views or similar disagreements.
Considering a distributed system, in parallel to a situation of an official physical meeting between people, a quorum means a set of nodes sufficient to reach agreement. Often it is so that good quorum share nodes and lead to quorums that overlap. This overlap is called quorum intersection. When quorums do not intersect the result will be disjoint quorums. Because they can independently agree on contradictory statements, disjoint quorums would be able to undermine consensus. This is a theoretical risk that can be managed.
In the network, each and every node will be responsible for ensuring that its choice of decision tranche does not violate quorum intersection and cause problems that might undermine the network consensus. Making a responsible choice normally means ensuring the decision tranches are large enough and that the nodes they contain are important enough not to risk their reputations by not being honest and feeding different, incorrect information to different nodes.
In decision tranche selection, nodes must maintain a distinct balance between network liveness and safety. The system must be responsive, but not at the expense of correctness:
- It is said that nodes lack liveness when they get blocked on the way to agreement, slowing down the system.
- Nodes lack safety when they externalize values inconsistent with those externalized at other nodes, undermining system-wide agreement. Such nodes are divergent.
- A divergent state occurs when ledgers held by different nodes store contradictory, irreconcilable states. A blocked system is considered less dangerous than a divergent one.
Additionally, if nodes depend too heavily on bad nodes, they are called befouled. Befouled nodes will form a dispensable set, which means intact nodes can ratify statements without the cooperation of befouled nodes and befouled nodes cannot undermine agreement among intact nodes. If no intact node has voted to commit any vote, they can then move on to any vote higher than any they have pledged to abort. Lack of response from befouled nodes will not block intact nodes from assembling quorums and making progress.
The protocol will prove that we can reach agreement and validate a transaction, but what happens if a part of nodes vote for different things and no quorum ratifies any choice? This question — a split vote — is precisely why we need to associate each option (proposed transaction, or transaction value) with a vote. The voting process includes how to deal with scenarios like split votes. Consensus must be reached in order to make changes to the ledger. This is what is known as an atomic process – either a transaction is completely verified, or not verified at all.
In an asynchronous, system (where no assumptions are made about time) of deterministic processes, no protocol can guarantee consensus even with one faulty process. Much research has gone into understanding ways to circumvent this risk by slightly modifying the problem domain, e.g. by sacrificing determinism, adding time, etc. Bitcoin circumvents this risk result by making some assumptions about the synchrony of the network (i.e. nodes soon sync up with the network) and time (i.e. miners dedicate limited time and resources to the best blockchain).
It is critical to be able to manage or "tolerate" and manage the above-mentioned potential causes of failures in the consensus-seeking confirmation process, or otherwise the whole system may get jammed. It is important to be able to ensure consensus can be reached even when individual nodes act arbitrarily, which is a behavior generally known as Byzantine failure – otherwise the whole blockchain could end up being jammed in an endless indeterminate state. To be able to tolerate Byzantine failure, contrary to certain other fault-prone blockchains, HP will not require unanimous consent from the complete set of nodes for the system to reach agreement, but to tolerate nodes that lie or send incorrect messages as well.
This version of the Byzantine agreement will include the concept of a decision tranche, the subset of a quorum that can convince one particular network node of agreement, just like a person, or a few persons of a certain view in a meeting can be convinced of a decision.
However, several differences between different variants of the Byzantine agreement exist. A Byzantine agreement guarantees distributed consensus despite the Byzantine failure of participants. In this version, HP will include membership that is open to all, and decentralized control vs. limited membership and virtually centralized control in certain other cases. In HP, in order to manage the potential risk of the network getting jammed into an indeterminate state, contrary to many other versions, each node will choose its own decision tranche.The quorums reached by the whole blockchain will result from these individual decisions by separate nodes.
As an open, distributed system, HP will have no centralized authority controlling access to the system, so individual nodes will be able to decide which other network participants they will trust for correct and true information. Nodes will be able to have multiple decision tranches, and these individual node choices may be based on external criteria. For example, a particular network bridge entity, e.g. a bank, might be viewed as reputable, causing other nodes to require its acknowledgment of all transactions; a network user might already have a relationship with bridge entity and want to make sure it and this bank in question both sign off on all transactions.
The decision tranche approach makes it possible not to have any controlled set of nodes, but it enables the network to grow organically with independent nodes joining the network. How such transaction validation approach works in practice, is described below.
The voting technique leveraging the decision tranche approach to get the participating nodes to agreement leads to a Byzantine Generals' agreement. The process through which a node votes for and eventually accepts a statement, allowing a system to reach agreement, is described through the following logical key steps that are in principle common to many consensus-driven transaction validation models: (1) preliminary voting, (2) acceptance, (3) ratification and (4) confirmation messaging.
The first step is the proposing step. In the beginning of the proposing step, the proposer for the transaction broadcasts a proposal for a transaction to its peers via gossip.
The prevote, the first round of voting is preliminary and only happens at the node level. In the beginning of the prevoting step each validator makes a decision. However, in this first step of the voting process, the first node votes to remain open to the possibility of accepting another proposed value for the transaction by asserting that the proposed transaction is valid and promising the node has never and will never individually vote for any option contradicting this proposed transaction value. This node may, however, end up accepting something other than the proposed transaction value if enough of nodes in the decision tranche vote otherwise. During the prevote step, all nodes gossip all prevotes for the round to their neighboring peers.
Due to the quorum intersection, decision tranches influence one another. Consider an alternate path, in which the first nodeinitially votes for another transaction value. It should be noted these votes are only preliminary.
If the second, third and fourth nodes are in decision tranches with the first node, they can block the progress by precommitting to an alternative transaction value. A v-blocking set of nodes will contain at least one node from each of the first node's decision tranches and can block action in all quorums that contain the first node, causing it to precommit to the first proposed value instead of the alternative transaction value.
The first node will actually precommit to the first proposed transaction value if (1) it has never accepted a statement contradicting the first proposed value (any other alternative values), and (2) each member of a v-blocking set claims to precommit to the first proposed transaction value, or each member node of a quorum including the first node either votes for or claims to precommit to the first proposed value.
When every member node of a quorum votes for the first proposed value, the quorum ratifies the first proposed transaction value and precommits to it. A node will not need to ratify a statement firsthand. However, a nodeoften relies on a few others to decide what to accept. This means they are its quorum. If they all vote for the first proposed transaction value, the quorum has ratified this value.
A node can vote for one proposed value and later accept a contradictory one. Voting for the first proposed transaction value does not assert it to be the choice — this value will be accepted as the choice only if it is ratified.
Confirmation will be the final step of the voting process and implies system-wide agreement. To ensure agreement, nodes will exchange confirmation messages. A system agrees on a statement if, once sufficient messages are delivered and processed, and no matter what events subsequently transpire, every responsive, accurate node will accept the statement.
A node, for example, can assert that it has accepted the proposed transaction value by sending the confirmation message "accept this value". When another node sends this confirmation message, the other people in this quorum broadcast the same message. Such messages may convince additional nodes to accept the same proposed value. As in the acceptance example above, if the first nodeinitially votes for a transaction value that contradicts the first proposed value, it can still accept this value if a v-blocking set accepts it. These additional nodes convince as many others as possible, broadcasting the acceptance message until a point when every node that can accept the first proposed message has accepted it.
A subsequent quorum of confirmation messages allows the first node to confirm the proposed transaction value, which implies the system agrees on this value. The voting process has ended and the transaction has thus been validated.
This shows how the decision tranche approach guarantees the continuous operation of the HydraNet and minimizes / eliminates the potential theoretical risks that could otherwise, in an adverse scenario lead to the consensus-driven BGA transaction validation mechanism to get jammed in an indeterminate state and block the blockchain operation entirely. Such risks exist in certain existing blockchains applying different variants of BGA in their consensus-driven transaction validation mechanisms and thus render such blockchains very risky, especially, unless extremely high supermajorities are maintained in transaction confirmation. Such approach makes it very difficult to create an environment for a high number of independent network nodes and practically leads to an almost centrally controlled "non-decentralized" blockchain, where a central entity controls the network nodes, who they are, and their number, to prevent this otherwise very risky network failure from taking place – this is the problem certain of the major blockchains of today are facing unless and until restructured. With our approach, such risks are by definition managed and do not prevent the network from organically growing with independent nodes, when it has been properly set up first.
By definition, the Hydra Protocol will have a native digital asset or 'currency' that exists within the HydraNet. Structurally, this will be similar to other cryptocurrency protocols, which enable the creation and distribution of a native digital or cryptocurrency. As it is normal for digital currencies, this one will be a cryptocurrency i.e. currency that is verifiable using mathematical properties. Cryptocurrencies are digital assets, which can be transferred within the value transfer system of the HydraNet.
Given its intention to become a global value transfer network to be able to move payments and any transfer of value between counterparts online, HydraNet will provide its users with a complete currency choice and will not require users to exclusively transact in the native digital currency (even if the native cryptocurrency does have a very key role in the operations of the HydraNet and the dapps ecosystem that will emerge around it). This feature will facilitate HydraNet's evolution into a global payments hub that is currency and asset agnostic. In this sense, the native digital asset is there also to act as a bridge currency for market makers providing liquidity within the network. The HydraNet ledger will record the user's money as credit, which is issued by network bridge entities. Credit will be issued to the user's online account acting like a virtual wallet in exchange for the user's deposit. Bridge entities will act as bridges between a given currency and the HydraNet. Bridge entities will have to be trusted to hold the user's money and honor the withdrawals. This trust relates to fiat money and other non-native assets that are issued as credit on the network, but concerning the native digital asset of HydraNet, no trust will be required. Thus, users will be able to hold balances in one currency and transact in another currency without converting to the native asset in the process if they choose not to.
The HydraNet ledger will be able to store offers that network users have made to buy or sell currencies. Offers can be defined as public commitments to exchange one type of credit for another at a pre-determined rate. The shared ledger then becomes a global marketplace for offers, a decentralized exchange.
Such buy and sell offers form an orderbook on the decentralized currency exchange of the HydraNet, establishing an orderbook for each currency/issuer pair. So if a user is wanting to exchange e.g. a bank as an issuer for the USD currency against an exchange with ETH, one will look at that particular order book in the ledger to see what the users are posting for offers, and what the transaction price levels have been for buying and selling it for. This mechanism will allow users to not only buy and sell currencies in a foreign exchange like environment, but also to convert currencies from one to another smoothly during transactions that take place.
Routing orders through market maker participants within the HydraNet competing to earn bid/ask spread can be used to translate currencies. Such participants will be important sources of liquidity within the HydraNet. They are likely to be primarily financial institutions with a business in currency or securities market making (i.e. banks, FX asset managers and funds, various trading operations). Participants compete for business within HydraNet and post orders to buy and sell different currency pairs. This process is there to enable payments that require delivery and settlement in different fiat currencies.
The Hydra Protocol design is to find the cheapest price available in the market. This means that the only way an order gets filled is if it is posting the cheapest or best price available for a specific currency pair at the particular time the transaction is executed. The protocol will be able to substantially lower financial and operational costs for anyone moving funds across national or regional boundaries, and take over the roles of so-called 'money center banks'.
Issued HydraNet credit can be sent and received between people participating in the network. HydraNet will by definition have a distributed exchange, so the user will be able to send e.g. EUR credits to a recipient using e.g. your USD credit balance. The network will automatically convert it at the lowest rate for the user: the pathfinding algorithm will further improve on market maker pricing by searching for the cheapest path for payments to move across the network.
HydraNet architecture will allow the user to send any currency the user holds to anyone else in a different currency through the built-in distributed exchange. Network users will be able to receive any currency through a bridge entity they have added.
For example, if one user wants to send another dollars, using her EUR balance, HydraNet will automatically submit an offer to the distributed exchange selling EUR for USD. The network will then find the best exchange rate for the transaction through its pathfinding mechanism.
A few alternative examples on how the transaction could take place on the HydraNet:
Conversion through a direct offer
The simplest way is a direct exchange between two currencies. The pathfinding mechanism will find an offer on the internal EUR/USD exchange for someone wanting to buy EUR for USD and automatically make the exchange between the two parties.
Using the HydraNet native cryptocurrency as the transaction intermediary currency
The second way is to use the native network cryptocurrency as the intermediary currency. The pathfinding mechanism will look for offers on the network asking for EUR in exchange for the native network cryptocurrency. It will simultaneously look for an offer asking for the same native cryptocurrency in exchange for euros. The network will make those exchanges and send the person buying euros the resulting euro network credit.
Transaction through a chain of conversions
As the third way, in the event of liquid currency crosses / pairs, the cheapest path will often be a direct one step path through one market maker, for example directly from USD to EUR. However, the HydraNet pathfinding feature will seek the cheapest path even if it is a more complex route through several intermediary currencies.
If there are no explicit relationship between offers to buy and sell, HydraNet will try to find offers from the network that will lead a chain of conversions from USD to EUR. For example, USD to AUD, AUD to BTC, BTC to the native cryptocurrency, and from the native one to EUR.
For example, the sender of a payment holds EUR, and the recipient wants to be paid in SGD. Since there may not be a tight market in EUR/SGD, the payment will be routed through several order books to improve the price. The recipient will receive the SGD credit that can be withdrawn at a bridge institution supporting SGD.
Unlike in traditional markets, users will not be exposed to legging risk typical of such multi-step transactions. Hydra will execute multi-step paths as a single atomic transaction. The entire transaction will either complete or it will never happen – there will be no way for a payment to get "stuck" en route. Since Hydra transactions will be just updates to a distributed ledger, multiple legs can be executed at the same instant as they are all included in the same ledger update. There will be no counterparty risk to intermediaries, which is a significant advantage in terms of risk management.
The Hydra Protocol will have a native digital currency. Like other digital currencies, it will be a math-based currency (also known as cryptocurrency), which is by definition a digital asset / currency with verifiable mathematical properties. Just like bitcoin exists natively on the blockchain, this native digital asset will exist natively on the Hydra network as a counterparty-free currency. Ownership of such a cryptocurrency can be directly transferred between peers without any central clearing agent or any such counterparty being involved.
The native cryptocurrency will serve as the principal currency for the in-app economy / ecosystem on Hydra, and, like any other cryptocurrency, will be available for external use.
The Hydra ecosystem will offer simple ways of buying units of this cryptocurrency, which are likely to be listed on a number of cryptocurrency exchanges at their own initiative in addition to the native decentralized exchange, and a range of products services to spend them on within the ecosystem and beyond, driving demand and fundamental value for the cryptocurrency.
The native cryptocurrency, due to the structural design of the HydraNet, could serve as an ideal bridge for illiquid currency pairs: it will add liquidity to Hydra's built-in decentralized exchange by acting as a trading bridge for low volume currency and other asset pairs.
Leveraging the power of the Hydranet, its users will be able to exchange anything of value. This could include fiat currencies, cryptocurrencies, commodities such as gold, securities and even items like loyalty points or airline miles (which feature will also create a lot of application development opportunities for the Hydra ecosystem).
The Hydra Protocol will make a distinction between both the currency balance type and the issuing party. Given the structure of the protocol, it should be noted that balances of the same currency issued by two different issuers e.g. banks will be technically liabilities of different institutions and thus have different counterparty risk profiles. Thus the protocol will see such positions as different financial instruments. When the number of assets and the number of counterparties in the network grows, the number of currency pairs can become unmanageable for a participant. However, there is a good tool to manage such a potential problem: Instead of quoting every possible currency/gateway combination, the native HydraNet cryptocurrency will be able to serve as a useful bridge between such assets / positions, because if every currency is liquid to the native HydraNet cryptocurrency, it is also liquid to other currencies through the native cryptocurrency. This means that the role of the native HydraNet cryptocurrency is critical – it can be seen to become similar as the role of the US dollar, which has dominated as the world's reserve currency and, further, as the bridge between most of other currency pairs in the global financial markets. Financial institutions running operations in different currencies will act as bridges between a given currency and the HydraNet. Because only the native cryptocurrency will be a natively digital asset within HydraNet (as opposed to a network credit balance/liability denominated in another asset), it is the only instrument within HydraNet that will have by definition no counterparty risk, so it can then be globally exchanged between any market participants with no friction. Given that it will have no counterparty, the native cryptocurrency, by definition, will never have any third party fees attached to it either, so it will have a superior position compared to other currencies within HydraNet as the enabler of any transaction and the general network liquidity.
If the native digital currency of HydraNet is increasingly used as an intermediary currency, network users who are unsure of what currency they will need may choose to hold it, since it will by definition translate into all other assets on the network.
The Hydra protocol will enable global payments virtually for free and in real time, as well as transfer of any value. A global Internet for value transfer can create economic efficiencies that are as significant as those brought about by the Internet for information. Hydra's technology will enable users to transfer value (including fiat currencies, digital currencies and other forms of value) across national boundaries as seamlessly as sending an email.
Most of the world's payment systems still operate on infrastructure that was designed in the even half a century ago. Recent technological innovations have made it possible to effect, clear and settle transactions without involving third parties. This has opened the door to move finance to the post-Internet era running on a distributed, open and decentralised architecture. Hydra will provide a free, neutral, effectively real-time and global solution to move payments and other transfers of value into the Internet age.
As the blockchain and blockchain-related technologies and the general computing power evolve continuously, new challenges will be faced in the future, and one needs to be prepared to master them as well. Some of these future issues will be relating to the applicable signature schemes, to make them "quantum resistant", and to the increase of network processing power and load distribution through "smart sharding", and the possible application of the "lighting network" as a second level payments channel.
Even if today's technology is not yet there, the introduction of quantum computing is only a matter of time. This will lead to substantial increase in available computing power, which may help to break the currently robust cryptographic protection of private keys used for signing blockchain transactions. Such developments must be taken into account and prepared for. In the near future, This said, HydraNet will support more signature schemes in the future. In particular, Argentas aims at integrating quantum computer resistant signature schemes to our system.
When the HydraNet transaction volume grows, the load on the network grows proportionally. The network load and the size of the blockchain may grow into massive proportions, if there is a global volume of transactions. Then, various approaches can be implemented to decrease the network load, increase the scalability of the blockchain and increase the processing power further. An approach will be 'smart sharding', where blockchains can asynchronously split and merge to accommodate changes in load. This means that new blocks are always generated quickly and the absence of long queues helps keep transaction speed high and network load reasonable, even if some of the services using the platform become massively popular and voluminous in terms of transactions taking place.
Our primary objective is a "first layer" solution at the native network level to enable vast volumes of transactions in the smallest possible period of time, practically million(s) of transactions per second for a truly global scale as a global value transfer network. However, we explore the opportunities offered by and the applicability of "second layer" payment channel technology proposed by the "lightning network" approach in order to accelerate the speed and increase the volume of payment throughput. Given that there is no commercial grade solution in place for lightning with such volumes, it is early to say as to its applicability and success. As said, the experimentation and potential application of lightning solutions would be only a secondary, not a primary solution for us.
HydraNet Services will provide a platform and bridges / gateways for third-party services that will enable smartphone-like friendly interfaces for decentralized applications and smart contracts built on the HydraNet application development framework.
To act as "bridges" or interfaces / gateways between the "real economy" and "crypto economy" on the HydraNet, there will be a selection of applications for direct native network connections and non-native bridge entities holding other, non-native assets that can be transferred as items of value on the HydraNet.
Some of the key interfaces and network bridge entities are wallets, exchanges and banks. To facilitate the end-user value-added of the HydraNet, we will help both seek to join existing ones, and help create a number of new entities that are network 'bridge entities', which will both serve individual and business users' needs as HydraNet endpoints and user interfaces, and act as sample bridges, or gateways to the network, to also illustrate for similar players (other potential bridge entity institutions), how the power of HydraNet can be leveraged. While all of them are designed to operate independently of each other, they can equally be combined into one service, with e.g. the network wallet providing access to all services of such entities for smooth end-user experience, enhancing volume of use and general usability of such services.
Through the network interfaces / bridges, it is very easy to understand the clear use cases for the network end-users, when the power and value-added of the network enabling virtually instant, virtually free global transfers of any asset of value and thus efficient economic activity with full access to a global financial transaction system is brought to their fingertips through these interfaces , being accessible to individuals, merchants, companies, institutions and governments alike. The migration of economic activity into the network in terms of transaction volume and size in different assets will cause a value displacement from archaic structures such as payment card schemes and the SWIFT network for global payment messaging.
Such operations will also have a capability to function independently of the HydraNet, serving the general crypto economy. They will further leverage the capabilities of the HydraNet in different ways that add value to end users participating the HydraNet ecosystem.
Hydra mobile and desktop applications with integrated wallets will also double as HydraNet clients, enabling secure transfers of value within the HydraNet blockchain and interaction with eventual HydraNet smart contracts and applications. HydraNet will offer streamlined interfaces for sending value to contacts and paying for purchases in HydraNet. The HydraNet native currency exchanged by Hydra users will serve as the principal currency for the in-app economy on HydraNet, and, like any other cryptocurrency, will be available for external use.
HydraNet Wallet will be an end-user application to be built on top of the HydraNet, highly secure wallet for the native cryptocurrency of the HydraNet. This digital wallet will provide and easy access point for end users to tap into the HydraNet blockchain benefits, while at the same time allowing Hydra to scale its network into the future. This digital wallet will also eventually enable direct exchange of fiat-backed tokens with decentralized currencies and protocol tokens. Hydra will add more crypto and other currencies and be developed over time along with HydraNet, to eventually become a universal wallet and blockchain application platform. In this sense, the wallet will be developed to enable access to network bridge entities and possibly some of their proprietary services too, which will incentivize network bridge entities to leverage the use of the network wallet to the maximum, as an expansion of their own products and services. When the dapp ecosystem grows, the wallet will also function as a "dapp store", through which such dapps can be acquired and used.
HydraNet will also be an introduction for mainstream end users to blockchain and cryptocurrency technology in general. With HydraNet, end users will have an avenue to engage directly with decentralized currencies in their comfort zone. Through a friendly digital wallet interface, which does not compel any behavioral change, users will be able to secure real-time, peer-to-peer value exchange and payment transactions agnostically across jurisdictions and organizational silos, and across both fiat money and decentralized currencies – a superior user convenience and value-added. With the wallet, the users, in the first phase, will be able to e.g.
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Send and request cryptocurrencies
Send the native and other cryptocurrencies to friends or shop with merchants who accept such cryptocurrencies.
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Securely access all user's accounts
Access all of the user's Hydra wallets, vaults and transaction details on the go - securely.
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Buy and sell cryptocurrencies
Buy and sell native and other cryptocurrencies or digital assets directly from the user's phone by connecting his/her account with HydraNet or elsewhere.
- Unlimited accounting. Any number of wallets can be managed with a hierarchical deterministic wallet implementation, enabling more control over how the user's funds are organized. Powerful backup/recovery features to recover funds if necessary.
- Advanced security. Only the user will hold his/her keys. The user is in control of his/her money. HydraNet will use cryptography to protect the user's funds against attack and offer spending passwords and seeds for all his/her accounts.
- Community development platform. Future releases of Hydra Wallet will allow third party developers to build innovative applications directly for the wallet. Setting up micro credit, to set up recurring payments, or to exchange cryptocurrencies will be easy by customizing the HydraNet Wallet experience.
- Built with web technologies. HydraNet Wallet will be built on top of an open source development platform to build cross-platform desktop apps using Javascript, HTML and CSS.
- Rich and secure APIs. Amazing apps will be possible to be built with plugins for Hydra Wallet, provide you with rich and secure APIs to interact with cryptocurrency backends.
- Extendable with plugins. The core features of HydraNet Wallet will be just the beginning. Argentas' goal will be to give anyone the power to extend HydraNet Wallet with custom plugins, automation and literally any innovation you can come up with.
There are two dimensions to this concept of exchange: (i) there will be the decentralized network exchange , through which any asset can be introduced and traded through its order book and automated bid/offer matching system that has a pathway mechanism to optimize exchanges between any assets in the system, and (ii) any other exchanges, crypto exchanges or "traditional" exchanges that interface with the network and act as network bridges, with any of them being free to connect to the network and leverage its power in their operations.
The decentralized exchange will feature both a (i) direct network interface, and it will be also usable through the (ii) native network wallet dapp, through which transactions will can be posted on the order book and managed in parallel to any other transfers of value.
Argentas will support both the creation of new exchange entities bridging to the network, and the development of its native decentralized exchange in ways that are mutually synergistic: any asset conversion and exchange boosts the network traffic volume and usage.
When bitcoin rose into prominence and reached the awareness of the general public in late 2017, causing multiplication in bitcoin, and other cryptocurrency transaction volumes, this attracted the attention of various parties such as banks, which effected the user transactions to move fiat money to and from crypto exchanges. Banks were pressurized by the regulators and governments to "protect" the users of cryptocurrencies "from themselves" by limiting or even blocking access to services such as payment transfers and credit and debit cards when transacting in relation to cryptocurrencies. Obviously, other motivations than "protection" of adult people from a free choice they are legally entitled to (which is a breach of their lawful rights) were behind this, which more relate to the fear of the incumbents losing power and wealth to something they cannot control or even understand, but the end result is that there is a great need for banking services to the crypto community, to facilitate the bridge between the crypto and "real" economies in ways that understands and serves the needs of crypto users, not adversely block them from using any products and services.
The HydraNet is "gateway / bridge neutral", so any party can join the network and connect through an API, but given both the recent hostile treatment of crypto users by banks and an important role of banks and other entities in acting as network bridges by holding balances of non-native network assets, we consider that it is important to go beyond offering the interfaces to existing entities and, instead, to create model entities that will be fully operational and show, how to ideally bridge between the traditional and crypto economy, and interface with the network, leverage its capabilities and dapps within the wider ecosystem.
A model Argentas ecosystem bank entity can also act as a " laboratory" of decentralized crypto banking, where network services and dapps are smoothly bridged with "closed ledger" services, with many dapps replacing such services – thus the model bank, or model banks, will be able to act as examples of the banks of the future, how 'traditional' banks can morph into participants of the crypto economy, with certain part of their existing services disintegrating and being replaced by dapps of the network, and all this can happen in ways that is not visible for the end user using the service through the wallet dapp or similar, when the interface does not distinguish between a "bank service" and a "network service". While it can be stated that the native network wallet is already a "bank in the network user's pocket", interfacing with separate bank entities will expedite the transition and migration of economic activity from the "real" to crypto economy. Advanced technologies such as artificial intelligence can be applied to automate and streamline the operations to the maximum.
In brief, some of the key points for a bank acting as a network bridge can be summarized as follows:
- Network user need to deal with/convert into fiat money. HydraNet network users will normally need to deal with and convert to/from fiat money, and a network bridge bank can hold such balances that are issued as network credit, thus enabling transactions both ways
- Clearing and settlement needs of the exchange. The same way, assets converted to/from other assets or currencies need to be settled, and if the transactions are not purely between crypto assets but require cash settlement in one end of the transaction, bank services are required for an exchange operation for its clearing and settlement activities
- Need for a 'crypto friendly bank'. As described above, there is a massive need for banks that understand the needs of crypto users and really provide all the required products and services and do not block them. While bank entities may be subject to regulation, it is not appropriate to adopt hostile 'total blockage' attitude to everything and use anti-money laundering as an excuse to everything, as it is also proven that the portion of illicit activities in cryptocurrencies is in the region of one percent, whereas the grey economies transacting in fiat money can attain in some countries dozens of percent of the economic product
- Ability to issue payment cards. Even if the increasing penetration of the cryptocurrencies will eventually render traditional means of payment such as payment cards useless, before that phase of development, it will enhance both the traditional and crypto economy, when balances in crypto assets can be leveraged through use of payment cards, enabling the crypto assets further feed any economic activity. Banks are able to issue such cards, and if the decentralized exchange of HydraNet is leveraged in this case too, automated exchange of crypto assets in any fiat money can conveniently take place in real time, when a card payment happens, creating further synergies in the ecosystem; at the same time, payment cards will not only be replaced by cryptocurrencies but also smartphone proximity chip powered payment services and the like
- Digital operating model matching the digital world of cryptocurrencies. It may be difficult to smoothly interface traditional banks, many of which still have central operating systems dating from the 1970's, with the sleek and modern world of blockchain networks. Therefore, a new bank model needs to be constructed, with is as modern as the blockchain itself, running on a fully automated platform that seamlessly integrated with the network services and dapps without cumbersome multi-layered interfacing between systems that have often been developed for wholly different eras and environments. A new platform will leverage advanced technologies such as machine learning / artificial intelligence, rendering the need for physical staff to the minimum in operations and client communications, and creating superior performance and efficiency
Such bank entities as network bridges will globally enhance the use of the network itself and the growth of the crypto economy, when modern, streamlined bank entities smoothly and seamlessly integrate with the network so that the end user does not even distinguish, what is a bank service and what is directly a native network service or another dapp, while the access to traditional economy and assets enables individuals, merchants, companies, institutions and governments to bring in their assets and transactional activity into such entities and further transact in the network through the conversion of any asset as network credit / balance that is then settled at a network gateway when required.
This indeed will create the " bank of the future", where advanced, digital, online-only automated platform runs as a bridge between traditional and cryptoeconomies, gradually fully morphing into the crypto economy, when the traditional financial closed-loop financial system migrates into an open global DLT based financial system of the new era. What the definition of the word "bank" contains will eventually be quite different from today, as the cryptocurrencies are already in the process of rendering traditional bank accounts useless, as also the example of HydraNet account holding any asset in a digitized network-compatible form shows. Creation of such "model entities" will make such transition as smooth as possible, and create templates for others to follow.
Such deliberate effort to not only promote the network but its gateways, and help create them, will significantly enhance the ecosystem and its value, when all users experience its massive value-added, when assets can be digitized, converted, transacted and held within the same ecosystem, and pooled for economies of scale – all virtually in real time and for free. While both the network and various bridge entities can operate independently of each other , the best synergies and value are created, when they all act as parts of the same ecosystem bridging traditional and crypto economies.
The full power of the network can be eventually achieved not only through the direct interfacing to its core transfer of value and payment transaction services, but through the development of a wider global dapp ecosystem leveraging the blockchain-based network's capabilities and potential.
In order to gain widespread use, applications on the blockchain require a platform that is flexible enough to meet e.g. the following requirements:
Competing with many successful apps of today require the blockchain technology to be capable of potentially handling up to tens of millions of active daily users. In certain cases, an application may not work properly, unless a critical mass of users is reached, and therefore a platform that can handle very large numbers of users is paramount. This also poses a challenge for the processing power of the platform.
Application developers need the flexibility to offer users free services; users should not have to pay in order to use the platform or benefit from its services – otherwise it may be difficult to build meaningful user bases. A blockchain platform that is free to use for users is much more likely gain more widespread adoption. Developers and businesses can then create effective monetization strategies upon the application platform.
Application developers building blockchain based dapps obviously need the flexibility to constantly enhance their applications with new features. The platform must support software and smart contract upgrades, to keep it up to speed. All software is subject to bugs, even with the most rigorous formal verifications. The platform must therefore be robust enough to have the bugs fixed when they inevitably occur.
A good user experience demands reliable feedback with a delay of no more than a few seconds – a very good example is making payments at the POS. Longer delays frustrate users and make applications built on a blockchain less competitive with existing non-blockchain alternatives (closed-end ledgers). The platform must therefore support low latency of transactions.
Large scale applications need to divide often massive workload across multiple processing units and computers. This must not break the ability to process sequential transactions either, because a number of applications may not work without.
While the network's ledger structure has been designed so that it perfectly fits the need to hold, account for and transact in any asset, technically so that any non-native asset is issued as credit on the network, ideally suiting payment, exchange, asset management, holding and servicing operations and banking services, its capabilities can be leveraged in a multitude of financial and other services that benefit from the immutability and authenticity of its transaction record and record-keeping capability.
While it is likely that yet unforeseen applications will be conceived and developed, some of the dapp examples, given the nature of the network, closely relate to the most 'natural' services of the network, given its designed capabilities, such as:
- Merchant processing: point-of-sale (POS), internet payment order processing etc. Naturally, the use of the network as payment dapps is one of the most natural extensions of the network's inherent capabilities, enabling instant clearing and settlement of transactions in any currencies, crypto or fiat, both eliminating any credit risk or delay from merchants in receiving their proceeds from sales, and thus decreasing any working capital financing need, when funds are instantly cleared and received
- Decentalized lending: loans, mortgages, small business lending, micro lending etc. Given the network's intrinsic capability to issue any asset as a credit on the network, a loan, by definition a credit, can very easily issued on the network – this will significantly boost access to financing, and through micro lending facilitate access to financing even in under-developed regions, where most people have not before had any access to financing (or any financial service), preventing practice and growth of economic activity, and, further, creation of wealth – this will all make it accessible to wider segments than ever before
- Investing: stocks, bonds, funds, savings instruments etc. Equally, the network's capability to digitize and hold and transfer any asset of value will attract developers of investment dapps and entities that offer them (which may be linked to network bridge entities or not, if connections are indirect through other interfaces), when transactions, clearing and settlement in any asset can virtually take place instantly, with an immutable record of ownership. Asset values are automatically updated through user interfaces as a part of the seamless user experience.
- Venture capital: seed, traditional, venture debt etc. Dapps providing access to venture finance will benefit both the dapp ecosystem developing around the network and any network user seeking funding, providing vast synergies to all parties involved.
- Identity & reputation management: IDs, authentication, credit scoring etc. The immutable blockchain infrastructure of the network including facility to store supplementary information will facilitate tools to prove identity, authenticate transactions and other acts, and help manage activities like credit scoring, when a certain identity is linked to certain transactions, assets and their performance. The ability to confirm user identity and authenticate them providers synergies to all gateway / bridge entity operations, among others, that often need to know the real identity of the end user and authenticate them.
The network and its gradually evolving ecosystem will enableeventually vast numbers of users globally to use wallets, exchanges, crypto banking and other financial services that will allow them to get on board with cryptocurrencies and crypto-enabled everyday services in an intuitive way, all growing the network use.
The Argentas software is designed from experience with proven concepts and best practices, and represents fundamental progress achieved in second generation blockchain technology, making this all possible like never before. The software is part of project, where Argentas helps to build new open global financial system. The Argentas ecosystem will be formed around its core HydraNet blockchain, network interfaces and bridge entities, and an eventual decentralized application economy.
Through these Phases 1 (network and its interfaces and bridge entities) and 2 (dapps) Argentas will help create a newecosystemof individuals, communities, developers, payment providers, banks, institutions, companies and merchants to drive demand and value for HydraNet and its native digital asset / cryptocurrency. This will boost and grow the crypto economy eventually saturated with goods and services sold for cryptocurrencies. All this will emerge around the network that is not confined to any traditional centralized closed-loop system, but offering equal access, freedom and choice to its users worldwide.