Exactpro - Challenge 1 - Hackathon Submission

DLT is rapidly claiming its place in the global fintech landscape, penetrating the most critical industry use cases. The multitude of DLT frameworks available brings not only the promise of more financial freedom, but also the challenge of harmonising them from the technical, as well as the regulatory standpoint, to truly guarantee transaction security and transparency. If not taken into account, these aspects could result in DLT jeopardising the payments ecosystems both nationally and internationally. Setting up a single inter-DLT framework seems like a viable solution to address the risks and allow more users to access the technology.

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1. 1 BUILD SOFTWARE TO TEST SOFTWARE BUILD SOFTWARE TO TEST SOFTWARE exactpro.com Cross-chain Ecosystem Exactpro – Challenge 1 – Interoperability
2. 2 BUILD SOFTWARE TO TEST SOFTWARE SWIFT Hackathon 2022 - Business Challenge Articulation 1. The Challenge What is the core challenge you believe your solution will solve? Where is the problem seen? Why is this challenge important? What is the problem magnitude? Why does it need to be solved now? 3. Reusability/Scalability ty How can the techniques implemented in your solution be extended to other use cases / industry challenges? How scalable is your solution in terms of computational complexity? What challenges may arise in order to achieve this on a wider scale? 2. Business Opportunity What is the business opportunity derived from solving this solution? (both for yourself and Swift) DLT is rapidly claiming its place in the global fintech landscape, penetrating the most critical industry use cases. The multitude of DLT frameworks available brings not only the promise of more financial freedom, but also the challenge of harmonising them from the technical, as well as the regulatory standpoint, to truly guarantee transaction security and transparency. If not taken into account, these aspects could result in DLT jeopardising the payments ecosystems both nationally and internationally. Setting up a single inter-DLT framework seems like a viable solution to address the risks and allow more users to access the technology. Our proposed cross-chain swap platform represents a new DLT-based payments ecosystem with the “inter-token” (interoperable token) at its heart. Inter-token is tradable across all blockchains that are part of the ecosystem and can be traded freely within the ecosystem in a single transaction. In contrast to the current widespread implementations of cross-chain payments, having a trusted ecosystem eliminates the need for using Hashed Timelock Contracts (HTLC) and having to mitigate the associated drawbacks. A unified platform would help increase transaction speed, streamline national and cross-border payments, and reduce end-user costs of maintaining separate accounts on separate blockchain implementations, among other benefits. The main challenge in the implementation is the necessity to set up the “inter-currency”, i.e. network-specific “inter-tokens” that circulate on par with the native tokens on each blockchain-partner of the ecosystem. “Inter-token” liquidity balancing would also have to be set up. The system can be scaled to as many blockchain partners as is needed and – performance-wise – is only limited by the original networks. An ecosystem of 3 networks is demonstrated in our architecture, but the “universal payment system” approach can be applied further to 1) more networks and 2) more use cases, such as building an interoperable supply-chain platform. Organisation: Exactpro Challenge 1 - Interoperability
3. 3 BUILD SOFTWARE TO TEST SOFTWARE The Cross-chain Ecosystem – High-level Setup The Cross-chain Ecosystem: - Has “inter-token” (interoperable token) as its own form of currency that can be bought/sold with blockchain-native tokens and freely circulates between and within original blockchains. - May be extended by deployment of NFTs or other native inter-tokens, pegged to digital or traditional currencies. - Expands the possibilities for users of different blockchains with the ability to make cross-chain transactions via “inter-token”. Harmonises a variety of blockchain implementations and mitigates the technical disparities between them by setting up equal rules for token operations. - Simplifies the current token exchange: Hashed TimeLock Contracts (HTLCs) are no longer needed for cross-chain transfers. – inter-token equally present on each blockchain Organisation: Exactpro Challenge 1 - Interoperability
4. 4 BUILD SOFTWARE TO TEST SOFTWARE Cross-chain swap: existing approach (example of a problematic scenario) HTLC сross-chain bridge example • Wealth Chain • Participant Agnes • Participant Bjorn • Helium Chain Off-chain Creates secret password Creates the password’s hash 1 Sends 2 2 1) Swap info 2) Password’s hash 3) Time constraints 3 3 Agrees to swap information Agnes Bjorn → Unlocks HTLC using the password → receives Helium tokens Creates HTLC with agreed upon amount of Wealth tokens Negative Scenario Wealth Chain Agnes TX1 Bjorn TX1 Checks the validity of HTLC (amount, hash, time) 5 4 Time has run out! → HTLC is unlocked 10 Creates HTLC with agreed upon amount of Helium tokens Helium Chain Bjorn TX2 Agnes TX2 TX3 Checks the validity of HTLC (amount, hash, time) 7 6 8 ! secret password revealed ! 9 Bjorn is unable to get his part of the deal 12 Receives Wealth tokens back 11 Organisation: Exactpro Challenge 1 - Interoperability
5. 5 BUILD SOFTWARE TO TEST SOFTWARE Our Proposed Cross-chain Solution Solution description: 1. – “Inter-token” (interoperable token). Characteristics: ledger-native asset, non-fungible, non-evolvable, on-ledger asset. 2. Inter-token issuer (ecosystem operator) is present in each network and able to issue/burn a universal interoperable token which has equal value in each network. 3. Any participant in the network can buy/sell inter-token in exchange for a network-specific asset (cryptocurrency). 4. Inter-token has equal contract rules across all networks. 5. Inter-token issuance and management is implemented via a custom Cordapp (Corda network), a smart contract with defined logic (Ethereum network) and chaincode (Hyperledger Fabric). 6. The bridges are implemented as original network applications (Cordapp, Fabric Application, Ethereum dapp) and maintained by the ecosystem operator. Business justification: The main idea is that the token is unique and equal (from the cost and rules perspective) in all networks. It is tradable and can be transferred within one ledger and from ledger to ledger. The solution doesn’t guarantee full atomicity, as the token exchange between networks happens in 2 stages – burn and then issue. However, it ensures “eventual consistency”, meaning that if something goes wrong during a given burn or issuance for another party, the token issuer takes responsibility to return (issue) the required amount of inter-tokens back to the transfer process initiator. This is possible due to the fact that the token rules are defined by the ecosystem operator. Issuer/Bridge ecosystem Node + Cordapp DApp Application Cordapp Chaincode PartyA PartyB PartyC Organisation: Exactpro Challenge 1 - Interoperability
6. 6 BUILD SOFTWARE TO TEST SOFTWARE Use Case 1: Inter-token purchase: Corda Corda Atomic Tx (TX1) 1 Issuer Node PartyA Node Purchase flow: PartyA sends TX1 to Issuer in order to buy N inter-tokens for M assets. Transaction (TX1) is atomic, meaning that purchase happens instantly: PartyA transfers M assets to the Issuer, while the Issuer issues N inter-tokens with the ownership assigned to PartyA. ✽ The inter-token sell process is essentially the same. N inter-tokens M assets M assets Organisation: Exactpro Challenge 1 - Interoperability
7. 7 BUILD SOFTWARE TO TEST SOFTWARE Use Case 2: Cross-chain Inter-token Swap: Ethereum to Corda The Issuer/Bridge service plays a key role in the process: 1. It ensures process integrity (checks the tokens existence on the ledger that the transfer request is sent from) 2. It has permissions to issue/burn the token on behalf of the participants. 3. In case something goes wrong during the swap process, the issuer guarantees returning burnt tokens to the swap transaction initiator (PartyB) by issuing N inter-tokens. Party B has the option to cancel a transaction while it is in the ‘pending’ state. PartyA owns N inter-tokens and can use them. PartyB initiates transaction to transfer N inter-tokens to PartyA on the Corda Network. Positive Scenario Ethereum Network PartyB TX1 Issuer/Bridge TX1 Issuer/Bridge executes the smart contract to burn N inter-tokens on behalf of PartyB, notifies the Corda Network counterparty about transaction. 2 1 Gets transaction details and notification that the tokens are burnt on the Ethereum network. Corda Network Issuer/Bridge 3 5 Issues N inter-tokens with the ownership assigned to PartyA. PartyA 4 Organisation: Exactpro Challenge 1 - Interoperability
8. 8 BUILD SOFTWARE TO TEST SOFTWARE Summary and the Ownership Use Case The proposed cross-chain ecosystem allows for “coin-to-coin”, “tokenized asset to single currency”, “tokenized asset purchase with multi-linking”, as well as other types of transactions. The above-mentioned use cases work as long as the participants are acting as part of the ecosystem. Their assets have to be “inter-tokens” issued on the proposed cross-chain network. Tokens/NFTs issued as “inter-tokens” can circulate within and across ledgers: they can be sold/bought for other inter-tokens and/or withdrawn as blockchain-native assets. Naturally, the ecosystem also makes possible a “token-to-token” swap for original blockchain currencies and assets, but we expect these to be rare use cases. Inter-token contracts in different networks are crafted to level out ownership and transaction finality guarantees across all networks-partners of the ecosystem. Addressing Challenge 2 - Ownership The proposed cross-chain ecosystem is well-equipped to address the issue of ownership traceability due to it being a unified network that can store transaction information, the assets final and intermediary statuses, as well as the information on their transition between ledgers. This information can be stored on an internal ledger. Using the aggregated data, the network would be able to produce the transaction history for all transactions that took place within the ecosystem. Organisation: Exactpro Challenge 1 - Interoperability
9. 9 BUILD SOFTWARE TO TEST SOFTWARE Thank You!