COTI has come in place to establish a decentralized scalable payments network that must be instant, cost-effective, and trust-driven. This next-generation payment solution will bring blessedness and efficiency for global commerce in B2C and C2C settings. Trustchain being known as a base protocol supplements all paucities created by traditional payment methods and cryptocurrencies. Initially, COTI is a solution to the payments industry but soon it will cover other domains. In this review, we went pillar to post of this protocol and discussed almost all aspects of this network.
Cryptocurrencies like Bitcoin, Ethereum, Tether, and many others along with blockchain technologies have appeared as a cogent alternative payment system. These came with numerous solutions ranging from supply chain management to decentralized, verifiable health records. But many first-generation cryptocurrencies saw the light of fruition even after facing a number of challenges.
Low transaction throughput has been a problem with linear blockchain based cryptocurrencies. And COTI is here to make a difference being a next-generation cryptocurrency obtaining high transaction throughput. It makes the easiest way for dispute resolution. COTI is not dependent on blockchain rather it adopts a different way employing a Directed Acyclic Graph (DAG) of transactions namely Cluster.
By providing quick approvals to transactions, DAG drives the formation of the Cluster. Trust Score is a new addition to the approach and this score is updated based on historical behavior.
The Base Layer Protocol
COTI comes with DAG-based distributed ledger technologies to come up with the scalability solution where blockchain-based technologies are still incapable. The effect of DAG-based networks is greater network usage leads to improved network scalability. Those who hardly understand the meaning of it, to make them understand we have to say that such networks create a positive correlation between network usage and network scalability.
Besides ensuring high scalability, the DAG data structure makes sure complete decentralization, instantaneity, and low fees. With the COTI network’s base layer protocol, the DAG data structure is well-consistent. High Trust Score in COTI network accelerates the confirmation time. COTI’s DAG-based distributed ledger technology validates and confirms a maximum of hundreds of thousands of transactions every second.
COTO has brought about a high-performance cryptocurrency namely COTI coin to be used as a payment method including all fees and staking inside its ecosystem. COTI’s Proof of Trust (PoT) refers to the combination of the Trustchain algorithm and Proof of Work. The network launches ‘’on-chain’’ smart contracts for the DAG and DAG’s can be used for several purposes and originators. For different companies, there can be different tokens and coins including voucher tokens, stable coins, dedicated tokens, etc.
If any dispute arises relating to deal settlement through COTI payment, COTI offers an Arbitration Service to arbitrate such situation indeed. That Arbitration service creates a rolling reserve for each merchant to cover possible claims and a system-wide Reserve Credit Fund (RCF) to guarantee it and both funds are maintained in COTI’s native currency.
In the COTI network, Full nodes collect all fees and the network uses a transparent and equitable fee model. Some portion of the collected fees is spent on backing infrastructural technology. Here good service-providing nodes may charge higher fees whereas other nodes may charge less or possibly nothing at all. Nodes need to maintain compliance with the network rules, equitability, and publicly available for charging price. To pay fees, there is COTI coin and except for this coin, no fees can be paid here.
Confusing Terminologies with meaning
1: Trust Score is a terminology that refers to the user metric which is used for effective transaction processing and risk mitigation.
2: Node is a specialized server that is run by a user for common network tasks.
3: When a transaction is checked right before attachment to the cluster then it is called transaction validation.
4: Source transaction refers to a terminal transaction of the cluster having no inbound transactions.
5: COTI’s unique combination of the Trustchain Algorithm and Proof of Work is known as Proof of Trust (PoT).
The Trust Chain Algorithm and Trust Score of transactions
The way COTI can earn consensus between transacting parties is through the Trust Chain Algorithm. As we know, DAGs record transactions on a distributed ledger and the scalability of the cluster are achieved through its use of parallel source selection, and confirmation of transactions and here is the role of COTI’s Trust Scores.
As we know, each transaction receives a Trust Score which is tantamount to the sending account’s Trust Score, and this Trust Score defines the amount of proof-of-work (PoW) that should be performed before transaction attachment and the unvalidated transactions which will be validated and referenced by the transaction.
Faster confirmation of any transaction here depends on Trust Score as a Full Node, at the time of attaching a transaction, needs to validate prior two transactions for a new transaction to be added to the ledger.
To validate a transaction, the process verifies the previous two source transactions. Which two prior transactions are chosen? Definitely is the two which are close to its recent Trust Score. And the process ends up with the formation of Trustchain, a reverse-oriented path, in the Cluster.
The sum-up of all Trust Scores makes up the cumulative Trust Score which the Trustchain Algorithm uses in order to achieve consensus about the confirmation of a transaction. Systematically Trust Chain mostly carries transactions with High Trust Scores. The confirmation of a transaction is taken to account providing that if it is the starting point of a Trustchain having a cumulative Trust Score overcoming the pre-set global confirmation threshold. That cumulative Trust Score passes the threshold at the soonest to achieve consensus leaving trusted users with the opportunity of fast confirmation times and scalability solution.
Here is seen a soft segmentation of the cluster depending on Trust Scores. This is how trusted users get benefited from COTI network.
Source Selection Algorithm
Every transaction is clung to two transactions in a cluster and these two transactions have Trust Scores close to themselves. Building a cluster depending on the transaction sender’s Trust Score is the goal of Source Selection Algorithm. As the algorithm considers several sources in a transaction’s neighborhood, it can respond to changes in the flow of new transactions.
There are a number of steps that are performed at the time of receiving a transaction from a wallet. These steps are-
-Proof of work (PoW).
-Propagation to other Nodes.
In the address validation process, the address of each transaction along with the balance is checked. Then comes to pre-balance checking which helps avert double-spending problem. After these two steps, the following remaining steps are also performed one after another. At the end of the validation process, that transaction is affixed to the Full node. After that, it is disseminated across other nodes and receives Trustchain Consensus and DSP Consensus.
COTI has come in place with the challenge to fix the issues of risk relating to transactions, speed, volume, and scalability. COTI uses an innovative base-layer protocol in the form of a directed acyclic graph (DAG) ledger which is built from transactions connected through time by harnessing trust-based algorithms. Here Trust Scores are provided depending on the union of the network participants’ historical behavior data and objective information regarding them. A unique machine learning algorithm does the job of calculating the score. The higher the Trust Score is, the faster the confirmation time of the transaction is. How is the approach innovative? It is because unlikely other networks, before attaching new transactions, two previous transactions with similar degrees of trust are overseen here.
To maintain network security, COTI has developed mechanisms for monitoring, detecting, and defending any attack; double-spending issue is one of the issues that is solved here. They have an Arbitration Service to resolve any emerging dispute.
Full Nodes and DSP Nodes check balance
Balance checking in here is done by COTI’s Full nodes and DSP Nodes in order to keeping up the consistency of the payment system. At restarting of a Node, recalculation of balance from the last Clusterstamp state is done. Current balance and Pre-balance are two types of balances controlled by Full Nodes and DSP Nodes.
With one cardinal coin for fee payments, the COTO MultiDAG ecosystem supports many different tokens and smart contracts. COTI has become able to provide efficient transaction processing with the help of the DAG model. The efficiency came from each cluster supporting one token among various clusters. Different clusters are here in COTI to perform different jobs.
All identification and KYC procedures are akin to one another in the COTI MultiDAG. Only because of that there does exist a frictionless crypto universe for many token of various types.
COTI’s smart contracts
There is maintained a Turing-complete computational methods by COTI’s smart contracts. We find an exception in COTI’s smart contract than others which is COTI smart contracts are executed on-chain and decentralized. A dedicated cluster in the COTI MultiDAG is used here to record the steps in smart contract execution and Full Nodes verifies the process several times prior to receiving full confirmation.
Using a specialized high-level program language, smart contracts are coded and translated to low-level VM-executable language, byte code. A COTI user creates and signs smart contracts. A trigger transaction brings created smart contracts into effect to make these re-enterable. To get the smart contract fee paid, trigger transactions provide a link to the transaction depositing COTI coins.
Full Nodes execute smart contract bytecode in parallel. As previously said, Full nodes verify two previous transactions before attaching a new transaction and the same method is followed for all Cluster transactions. At the attachment of the transaction due to the bytecode instruction, the Full Node will add its signature checking the results.
There is no necessity of gas conception in COTI because of its blockless structure (DAG), and COTI’s smart contract execution fees are minimal and economical.
As COTI has come in place with the developments in high throughput, quick confirmations and low fees, these enable the creation of highly usable stable coins. Things are different in COTI unlikely to other protocols as each stable coin’s transactions form its own Cluster with its own confirmation rules.
Many people make question that why there is no fixed supply of stable coins. It is because these cryptocurrencies have a constant rate to some real-world asset. In COTI, organization of all stable coin clusters is done by using sender’s Trust Score.
Depending on the ruling of the particular stable coin, either smart contracts or the stable coin originator’s wallet mint and burn the stable coin tokens.
There is another type of coins namely dedicated coins, for example the COTI MultiDAG is such a coin. Enterprises create these tokens to run their respective use cases like for loyalty programs, discounts, coupons, and many more.
What is an account in COTI comprised of? There is a set of user’s cryptography addresses in an account. DSP nodes sign addresses and Full Nodes addresses, which may not a have a negative balance. Addresses here are cryptographically created from user’s seed public keys.
In COTI, Full Nodes collect all the fees. You will find all base transactions in the main transaction bundle. Base transactions spend COTI from the Full Node addresses and the Full Node signature along with the whole transaction sign there. To justify the correctness of the network fee entangled in the transaction bundle, other Full Nodes verify that.
With escrow and other cryptography lock possibilities, COTI provides users with multisig accounts.
Rolling Reserve is a blessing opportunity for buyer’s protection. The system being a share of a seller’s funds that is frozen is a core component of the buyer protection system. For maximum efficiency, the Rolling Reserve in COTI is implemented at the protocol level.
At the end of the freezing term, the Rolling Reserve account fund can be transferred to the seller’s account. Another way of spending the fund is using it as a payment to the plaintiff providing that the user loses a case. He Rolling Reserve account is a part of the COTI Arbitration system as a pseudo-user.
There is also role of seller’s Trust Score at the time of creating a payment transaction as the Rolling Reserve share and freezing term are dependent on the Score.
Effective transaction processing, risk deduction, and network structuring have become possible to a high extent in COTI network by Trust Score. There are Trust Score Nodes that calculate Trust Scores.
There is discrepancy in the Trust Score between a Node’s Trust Score and a Node owner’s Trust Score. There are also various Trust Score metrics in COTI network adopted by actors. Depending on the event type and payment statistics, the Trust Score sways. It’s urgent for all accounts to have a Trust Score.
What is the mystery behind designing the Trust Score Algorithm? Definitely the purpose is to make sure the maximum performance of the Trust Score-based Source Selection Algorithm. External events like bankruptcy of any company have effect on Trust Scores.
What are the uses of Trust Scores?
Trust Scores ensure high priority to highly trusted users and also have a role in parallel transaction processing and arranging transactions. Through setting PoW levels, Trust Scores help determine fee levels. It also defines the Rolling Reserve requirements for merchants.
Besides all these, Trust Scores have role in optimizing Node workload and setting the Arbitrator threshold.
Various types of Trust Scores
Depending on the type of participant, there are also different types of Trust Score counting algorithms. Trust Scores in COTI are applicable both to users and Node. A question left that what Trust Score is given to a Node at the time of its creation. At that time, the Node is given an Initial Trust Score value act up to the owner’s trust Score. But once the creation process is over, the Trust Scores become independent.
But when it is the case of a user, the node Trust Score calculation is calculated with different parameters. The highness in Trust Scores depends on the working of a Node for the COTI network. Negative events like double spending attempts, issuing invalid transactions affect Node Trust Scores.
Trust Score ranges
If a participant commits a wrongdoing, he will be given a zero Trust Score. Generally all Trust Scores are real numbers within the range [0, 100]. The [0, 10] range is reserved for malicious network participants. The Initial Trust Score Algorithm (ITSA) assigns TS values in the range [10, 30]. The initial TS values for legal entities and for all merchants lie within the broader range [10, 40].
COTI network gets its storage and computational power from Trust Score Nodes which are decentralized servers. And the storage and computational power are required to calculate Trust Scores.
Initial Trust Score Algorithm
The algorithm helps calculate the Initial Trust Score of a network. The ITSA within the COTI KYC Server uses the sensitive user details from the KYC /AML procedures to calculate the Initial Trust Score. Users can fill more in the questionnaire that they are required to supply additional details to increase the Trust Score.
Initial Trust Score Algorithm uses the data for a user
At the time of joining the network, it is compulsory to complete KYC verification as the ITSA gives a new participant a minimum Trust Score based on this KYC verification. Generally, a KYC form contains more information, but it is up to a user that how much information he will fill in. If the user fills in more data, the Trust Score will be larger. In that case, if anyone raises a claim of doing something, the Arbitration service will consider the issue.
Initial Trust Score Algorithm uses the data for legal entities
A KYC form for legal entities includes incorporation data, owner data, beneficiary owners, directors, responsible officer identifications, shares, issued securities, balance sheets, auditor reports, and business profile data. Before opening up an account, legal entities are also required to complete KYC procedures.
Initial Trust Score Algorithm uses the data for merchants
To follow KYC procedures and questionnaire is also essential for merchants.
Initial Trust Score Algorithm uses the data for robots and IoT devices
We know that Trust Score is essential for every participant in COTI network. To calculate IoT devices Trust Score, COTI is deeming to use HighIoT (high-iot.com). The Initial Trust Score for devices and roboots will be in part borrowed from the device owner.
Trust Score Update Algorithm
This algorithm confirms decentralized Trust Score Nodes of the user’s behavior through collecting data. With an eye to enabling Trust Score recalculations and outlawing the possibility of double counting, Trust Score Nodes store the received copies of all processed transactions in their own database in shortened form.
There are several events like arbitration outcomes, and decays, which are of two types including exponential decay and limitation terms, for them that affect the Trust Score and Trust Score Nodes manage them all.
Trust Scores for Nodes
From the initial stage of node creation to further usages of Nodes, there is the existence of Trust Scores and Trust Scores are a universal concept that are applicable not only to users but also to Nodes. Except the issue of parameters, the way of calculating Trust Scores of users and Nodes are the same. Negative issues like double spending; issuing invalid transactions degrades Trust Scores. Node Trust Scores are updated with time with copes of all processed transactions.
What is the use of COTI wallet? The wallet is used for managing accounts and transferring funds to different addresses. There is a seed in COTI wallet that helps generate private and public keys. There is no fear if someone loses his key, because he can recover these from user’s secret key. A wallet connects to the Full Node which is chosen by the user to receive COTI network data and commence transactions. In that case, a random will be chosen providing that there is no preferred Full Node. Customizability of COTI’s wallet provides users with contentment.
To enable secure and trustworthy payments, COTI distributed Cluster responsibility to several types of Nodes; there are four Nodes in COTI network including Full Node, DSP Node, Trust Score Node, and History Node.
Full Nodes: Full Nodes in the COTI network performs a number of jobs. They are as follows:
-They are responsible for Trustchain consensus.
-They receive new transactions, validate them, and do PoW and attach them to the DAG.
-Full Nodes execute COTI smart contracts in a decentralized manner.
-Full Nodes collect all fees for all protocol usage and transfer the network fee to the Network
The Double Spending Prevention Nodes (DSP Nodes):
DSP nodes perform the jobs of DSP Consensus, account balance control and general control and data integrity. A user needs to deposit a substantial amount of COTI in order to operate a DSP Node. To make sure the complete deduction of double spending prevention, each transaction is approved and signed by the majority of DSP Nodes.
To calculate and store Participant Trust Scores and Participant KYC statues, there are dedicated servers namely Trust Score Nodes. There are also History Nodes from where full account history can be retrieved.
There are two types of servers in COTI namely KYC Server and Zero Spend Servers. In KYC server area, new users connect for KYC/AML verification purposes. KYC Servers help create a user’s Trust Score and creating server keys for user seed generation. Without the necessity of updating Trust Score questionnaire, users will not need to connect to KYC server again.
On the other hand, Zero Spend Servers dispatch zero-value transactions when a source in the Cluster has waited a long time except being validated by another transaction, or if a transaction cannot attach to a source using the Source Selection Algorithm.
Proof of Work
The cardinal responsibility in COTI network of attaching new transactions is shouldered on all Full Nodes. The role of PoW is to protect the network from spamming attempts. Proof of Work (PoW) schemes has been designed with to motto of easy to verify but difficult to solve.
The usual job of PoW in the case of cryptocurrencies is trust decentralization and participant incentivisation. But when you are thinking of any meaningful economic return on investment, it is really troublesome that PoW not be optimized and accelerated by FPGA or ASIC designs. That’s why many cryptocurrencies prefer Sequential Memory-Hard Function. This approach has a demerit which is when they are turned to use large amounts of memory, they lose the property of being easy to verify.
About Memory Hard PoW
A number of companies which are specialized in the manufacture of application-specific integrated circuits (ASICs) came to light and the purpose of their arrival is to compute billions of SHA256 hashes to mine Bitcoin blocks which Bitcoin requires. The significance of memory hardness is to make the PoW function resistant to specialized hardware. Using these specialized hardware bring about some harmful effects which are-
-Unlikely to generic hardware-dominated ecosystem, the fact with specialized hardware is each actor’s mining potential is linear in their quantity of pre-existing capital which leads to the negation of the democratic distribution aspect of cryptocurrency.
-When such specialized hardware is in use, there is high possibility of 51% attacks to be happened.
-Using specialized hardware increases resource waste. And the share of resource waste in this ecosystem is near to 100% of all network consumption.
To cope up with the demand, hardware manufacturers possibly pack terabytes of memory into their devices. But buying many off-the-shelf memory cards by hobbyists and high cost of manufacturing memory can alleviate this effect. PoW poses this quality to validate the work being asymmetrical in terms of the amount of memory required.
Suitability of PoW in COTI
The way PoW works in the COTI network is different from the way it works in the Bitcoin and Ethereum ecosystem. PoW plays the role of defining the truth in Bitcoin and Ethereum ecosystems. But in COTI, PoW works to balance incentives for network participants and avert spamming. Whereas PoW, in COTI, is a protection mechanism with almost no impact on consensus, it is a central point to consensus in Bitcoin and Ethereum.
COTI (AlphaNet) PoW
The terminology ‘’Hashing’’ is unknown to many and so to let them know about hashing we have to say that it is a method of cryptography that converts any form of data into a unique string of text. Scrypt for Litecoin, Ethash for Ethereum, and SHA256 for Bitcoin are few examples of hashing for cryptocurrencies. Such algorithm came in place to lower the impact of purpose-built hardware on the mining ecosystem of the coin. With the increment in value of Bitcoin, mining became handy with hardware designed for parallel processing. And things get deeper with the further increase in the economic value of mining. Then comes to building custom chips purpose-built for mining that can dominate competing technologies. Efficient ASIC hardware ensures mining faster and anyone can order these ASICs. Here there is a priority on electricity and thus China has become the central city for mining.
If you are thinking about a solution to minimize the impact of ASIC miners, then using a memory intensive hashing algorithm can be a remedy. Use of a sequence of hashing algorithms can be thought of as another solution. In this system the output of one becomes the input of the next.
But COTI has come up with its PoW algorithm to make an unique solution leaving all these hashing algorithms apart. To talk about the formation of COTI PoW hashing algorithm, I have to say that the hashing algorithm is comprised of multiple hashing algorithms operating in chain fashion with the ordering dependent on the last 16 bytes of the hash of the previous block.
The PoW Algorithm in brief
Proof of Work is the original consensus algorithm that confirms transactions and generates new blocks to the chain. It works on the basis of several mathematical puzzles. Among these puzzles, there is hash function or in other word how to find the input knowing the output. Another is integer function which can be said how to present a number as a multiplication of two other number in other word. The other one is guided tour puzzle protocol which can be illustrated in other word as how to find a chain of hash function values’ problem.
-Normalization of values in the range of 0-100 should be done depending on the TS+ DL+ Amount.
-We ought to select and generate the hash of all algorithm sequentially concatenated from the algorithm group set.
-The selection should be done once before all are used and the time threshold is reached.
-A sequence is maintained here at the time of execution of each hash.
-Here we have to commence with the first algorithm and use each algorithm that needs to find its respective nonce to solve for the current normalized difficulty. As an input, only the nonce with valid hash would be used.
-Previously generated hash will be counted as an input for the subsequent algorithm.
-Therefore, the PoW validation should be held instantly to make sure all algorithms are indeed executed and performed properly.
The issue of Scaling
If the PoW is memory hard, then it is not sufficient for cryptocurrencies, rather it should be malleable. It is because malleability helps scale the difficulty of the work to finely tune the block production rate.
Double Spending Prevention and DSP Consensus
COTI walked in a different way to bring about a solution to the double spending issue that has been a problem with all high-performance distributed ledgers. The network added few highly trusted Nodes to the network with only one function which is to make a decision over whether a transaction is legitimate or a double spend. The achievement of consensus depends on DSP Node signatures here.
The role DSP Nodes follow to prevent double-spending are-
-They maintain a light version of the Cluster with pre-calculated balances for all accounts.
-After attaching a new transaction to the Cluster, they receive a copy of this.
-They supervise new transactions against a set of heuristics so that they can identify possible double-spending attempts.
-And then, they supervise new transactions against available account balances.
-As legitimacy relies on signing transactions by DSP Nodes, they sign legitimate transactions.
-If DSP Nodes suspect any transaction to be a double-spend, they flag that transaction.
-After that, they inform Trust Score Servers about such double-spending attempts.
But if the transaction verification needs to be quickly solved, in that case DSP Nodes only check the accounts involved rather than the signature of a transaction. The activity of checking takes place right after adding a transaction to the Cluster.
Requirements to run a DSP Node
Why DSP Node is run actually? DSP Node is indeed run to avert double-spending. A user should fulfill some obligatory requirements to run a DSP Node. First of all, he should have a high Trust Score besides depositing a substantial amount of COTI in a special multisig account. The quality of load balancing, the performance, and the security of the DSP Node must be supervised remotely.
If Clusters continue increasing, it becomes unmanageable in storage size. COTI has executed the Clusterstamp which has two phases indeed. One of the phases is the last fully confirmed transactions become the genesis transactions in the next generation of the Cluster. Another phase is all non-confirmed transactions are kept in the working DAG and all other confirmed transactions are excluded from the working DAG kept by Full Nodes.
Clusterstamp, which is stored in the COTO History Node, has been designed to work automatically. History Nodes here receive copies of all propagated transactions along with their confirmation states. Clusterstamp makes sure there is no possible fraud by providing a useful reference point and an opportunity for performing a system-wide audit.
There will be a mathematical framework for making deductions about the Cluster along with high level mathematical observations in a simplified context.
There are a number of possible attacks that can be seen and we are defining these attacks one by one in the following:
Double-spending attack has been place from the very early stage and it is still vivid. Every payment solution is at risk of such attack. There are dedicated Nodes in COTI that always carry out additional transaction monitoring with an eye to averting double-spending attacks.
It is an attack where an attacker spends infinitesimal quantities to a large number of accounts intending to waste the storage resources of nodes. A trusted accounts enjoys some facilities including quick transaction speed, low fees etc. In some cases we see that an account’s trust score get decreased as an attacker makes many small transactions causing an increase in the PoW required to create new transactions. There are also some ways maintaining which an attacker can launch such attacks. In COTI, such attacks can hardly succeed as Full Nodes verify all transactions.
Sybil attack is a different type of attack than the other two aforementioned. To run a Sybil attack, an attacker uses numerous accounts with different usernames and email addresses opened up using different computers, virtual machines, and email addresses. As these accounts belong to low trust scores, an attacker adopts a completely different approach which is that he tries to create a subcluster that begins with a double-spend from one account to at the onset of their subcluster and then proceed to validate their own transactions with other accounts. The implementation of this process is done by negating COTI’s Source Selection Algorithm.
But this negation is denied here because of the COTI’s network structure as it requires the attacker to operate at least one malicious Full Node to maintain its subcluster. But on the off chance a long enough chain is created, and then DSP Nodes will avert the possibility of double-spending.
To run such an attack, an attacker attempts to impersonate one of the special Nodes. He has an advantage here as a user at the time of joining COTI remains confused about whether they are using the public key of an attacker or a real COTI Node. But it’s a matter of joy that such an attacker can hardly benefit from COTI network as the COTI client will have the public key of the COTI servers hard-coded in it. That the authentic key of Special Nodes a user has gotten is made sure here as the COTI servers serve a similar function to a certificate authority in an SSL/TLS handshake. This is how a secure connection with the COTI servers is established that helps get the authentic public Keys.
Denial of Service (DDOS) Attacks
Such attacks can hardly benefit in COTI because of its decentralized ledger technology and Full Nodes controlling. But there is an only way for such DDOS attack to make entrance which is through KYC servers. The network continues to work as usual if new participants are kicked off owing to a DDOS attack for several hours or even days.
Malicious Node Attack
Participants here want to buy those Nodes that perform verification such as DSP Nodes. But purchasing DSP Nodes are expensive indeed. Another thing is to let you know that only participants with high Trust Score can create a DSP Node. If a Node is found to be acting maliciously by other DSP Nodes, it will soon run out of all Trust. Along with that, the Node will be blocked and the owner’s deposit will be seized.
Software Patches distribution
Nothing in the world is flawless so do cryptocurrencies. To avert Nodes from being compromised, patches in COTI should be distributed securely. As there is the presence of DSP Nodes and History Nodes in COTI, it is less likely to result in a significant loss.
Developments in the future
COTI has a far-reaching plan to provide an entirely decentralized ecosystem for online platform. That is how COTI is trying to establish a decentralized governance to implement decisions that impact the base protocol and perform several other jobs. They will vote for future changes on such matters. COTI has developed such governance namely Futarchy which will be in operation once the upcoming updated is pushed. It will remain under supervision to measure its outcomes. Decision here will be taken based on the wisdom of the crowd. Future data layer can be stored in the fee space in the COTI’s transaction bundles. Other companies wanting to deploy smart contracts and information over the Cluster will be able to use these layers.
COTI’s Arbitration System
With the digitalization of world, the rate of online transactions is getting increased to a high extent. All goods, labor, and capital will be allocated through decentralized global platforms once the blockchain premise is in reality. Meanwhile transacting cross-border, dispute will eventually arise. Existing dispute resolution technologies are failure to arbitrate such disputes. But COTI incorporates such a reliable decentralized dispute resolution mechanism that is highly able to arbitrate any dispute.
The use of Schelling theory is in coordinating their behavior in the absence of communication. Thomas Schelling, an American economist, introduced the concept in his book The Strategy of Conflict. Vitalik Buterin wanted to see the creation of the Schelling coin with the belief in mind that it would align telling the trust with economic incentives. Clients who don’t have trust in each other, the Schelling Coin can help them find out the truth. In the field of decentralized oracles and prediction markets, the use of Schelling Coin has been from the very early age. The incentives design in the COTI Arbitration Layer has slightly modified design than Schelling coin and this slight modification has been done to answer some challenges like scalability, subjectivity, and some more.
Arbitration and Game Theory
Arbitration is a way to resolve disputes. To resolve such arbitration, Arbitration system hosts a meeting with numerous discussions to explore the real cause between them. After understanding the issues, the system will patch up between then and encourage them to exchange information. There are experienced negotiators who the help parties to assess options and consider proposals to reach an agreement against objective standards. Arbitrators here never disclose a party’s information to another. When there is commercial matter, parties will find arbitration cost effective and speedy indeed.
Let’s look at Game Theory
Game theory being the science of strategy helps decision-making of competing actors in a strategic way. Some rules defines that it deals with interactions. The game theory assumes, comprehends, and explains activities as diversified as pricing strategies of firms, lobbying of political parties. You can see its other uses in the field of social sciences, evolutionary biology, and other areas.
The Arbitration process lead parties to disengage from the problem and to exceed cognitive partiality. The system brings effectiveness in the communication process of parties maintaining personal and commercial relationships in the process, and thus arbitration adds a huge amount of value.
Arbitration is a better option than pure negotiation in some particular cases recommended by game theory. That the aspect of arbitration’s value is under-discussed in some forums, it is thought as a fertile area for arbitrators. Some people ask how it that arbitration can add value is. Generally Arbitrators apply the ‘BATNA’ yardstick, it is the best alternative to a negotiated agreement is the course of action that a party engaged in negotiations will take providing that the talks fail, and no agreement can be reached, to overcome one of the fundamental challenges in negotiation.
One way arbitrator takes some information from parties and transmits only a portion of it to the other side with an eye to exceeding the possible obstacle. But what happens if the negotiation is on their own? In that case, an arbitrator administers a pre-approved process to which parties could not rationally sticks to.
Considering all the above facts, it is expected that game theory can help better analyze aspects of the arbitrator’s role.
Arbitration System of COTI
The COTI’s Arbitration system can solve every type of dispute. Being a multi-purpose court system, it can arbitrate disputes from simple to complex agreements. This autonomous system does its job as a decentralized third party. The decision made by COTI is nor partial as COTI never on game-theoretical economic incentives. To COTI, true decision making is the top priority and that is why the network leverages the technologies of crowd-sourcing, blockchain, and game theory to establish its arbitration system.
COTI’s arbitration system is a unique addition to the protocol’s other important features. The quality of this arbitration system helps arbitrate fast, reliably, and in an inexpensive way. To arbitrate disputes between buyers and sellers, COTI’s Arbitration system works as a decentralized third party. In this system, an arbitrator jury, which is randomly picked from a large pool of highly trusted network participants, resolves the dispute. There is no bias available here to make the judgment partial.
The COTI Arbitration Service has some principles and they are fairness, justice, equality, voluntariness, decentralization, predictability, and timely resolution.
The process of Arbitration and Privacy
Depending on the topic of the dispute, a user can choose such a court which is specialized in arbitration on the specific topic. For example, a software development dispute will choose a software development court or jury.
Jurors may check privileged information to come to a decision about the dispute. A ledger stores the natural language and the labels of the jurors’ voting options that keep outside observers from accessing this information. The dispute creator sends hash to each party using asymmetric encryption. The user wallet handles every step during COTI Arbitration Process running.
How jurors get chances to be drawn?
Users when picked up as jurors receive an arbitration fee for their work indeed. Only those jurors who stake COTIs will get the chance of being drawn as a jury. The gain from voting with the majority relies on the amount of tokens a juror stakes. COTI stakes makes Sybil attacks nearly impossible in the Arbitration service design. That jurors in the COTI’s Arbitration Systems are incentivized is made sure because of the Proof-of-stake concept.
After considering the evidence, jurors cast their votes submitting a hash (vote). There is punishment for those jurors who fail to submit their votes. Once the vote is cast, it cannot be further changed. As the vote of a juror is unseen to other one, there is no chance of influence. That is why here remains the significance of Schelling point indeed. The option with the highest amount of votes is deemed to be the winning one.
Determining Arbitration Fee
The jurors in the system are working to get paid indeed. The arbitration fee is collected to pay jurors for what they are doing. It has also role in averting attackers from spamming the system. The arbitration fee is collected from the rolling reserve.
Deposit by each party is required and the amount of deposit is tantamount to the arbitration fee. If on party baffles to solve the case, then it will be regarded that the court ruled in favor of the party. On the off chance both parties deposit the funds, the winning party will be repaid once the dispute is resolved indeed.
Depositing the arbitration fee from both parties is essential in case of appeals. An appellant here needs to deposit an extra stake tantamount to the appeal fees. And the winning party will be given the deposited amount.
An appeal is made by a party when he is not contented with the decision made by the jury. In that case the number of jurors becomes twice the previous number of jurors. There must be appeal fees for the extended number of jurors to be paid. The arbitration fees rise in line with the number of appeals. The possibility of appealing a high number of times is significant restrain an attacker from bribing jurors.
Once a decision on a dispute is made by the COTI Arbitration System, tokens are frozen and redistributed among jurors. Coherent jurors get the arbitration fees and those who are not coherent with the group will lose arbitration fees. The mechanism of redistribution follows the footstep of the Schelling Coin. New arbitrators will resolve small disputes as their training with at least one veteran arbitrator present in the poll.
Jurors are amenable to reveal their votes as they will be penalized if they fail to reveal their votes. But redistribution of tokens at each level is done on the basis of the outcome of final appeal in the case of appeals. There is ensured honesty and fairness due to presence of Schelling point.
To mitigate the issues of lazy strategy and the possibility of biased opinion, COTI will implement some measures and they are:
-Only highly trusted network participants are qualified for being arbitrators. And arbitrators are chosen randomly.
-An Ai-based system will analyze arbitrators votes to detect possible biased or lazy arbitrators.
-There will be a control set of questions automatically generated from the case data to check that the arbitrator completed them.
To COTI, both buyers and sellers are equally significant and that is why it teats both of them with a fair resolution. The buyer can follow a way to settle any dispute that depends on how the purchase was funded. To file a dispute, the buyer first of all contacts the seller directly through the COTI wallet Arbitration. The buyer can escalate the dispute to a claim in order to request a refund providing that the two parties fail to come to a decision. The buyer submits sufficient evidence to prove his claim cogent, and if it is proved, the arbitration process goes further to resolve the situation.
How a seller will be known if a buyer files a complaint? The seller will receive an email regarding the complaint and also will see it in the arbitration tab of his wallet. Up until the complaint is resolved, the seller won’t receive the money for the transaction. He will only receive providing that the case is settled in his favor.
Why disputes take place?
A buyer can file a dispute in the case of three reasons. First, if the buyer doesn’t receive an item even after paying for it. Secondly, the item the buyer received is significantly different than what they expected depending on the seller’s description. The third one refers to unauthorized transaction meaning the buyer’s account may have been hacked and that someone made a purchase from the account without his permission.
The way merchants know about the filled dispute against him-
A merchant will know of the fact through his email and a case will be created in the arbitration tab and dashboard of the merchant wallet. Then he logs in to his wallet and goes to the arbitration tab. After clicking View under Action next to the dispute case, he can make a conversation with the buyer and can try to patch up between them without intervention.
Ways to prevent a dispute
A merchant can take up different ways to prevent a dispute. But above all, good communication is essential. The ways he can adopt to prevent a dispute are-
-Adding pictures from multiple angles of the item.
-Providing authentic descriptions of the item.
-Shipping of the item should be done by merchants very quickly with providing tracking information.
-Signing agreements, T&C, risk disclosure etc.
-Ensuring post customer service contract information, including working hours and response time frames.
-Merchants should guarantee the buyer of refund providing that there is a defect with the item.
-Merchants should make sure his attitude and behavior doesn’t hurt the buyer.
What if merchant fails to reach an agreement?
The merchant and the buyer have a 14-day window for a resolution. If both of them fail to reach an agreement within his timeframe, it will be closed after the arbitration process. Any of the parties can extend the dispute to a claim. Based on the decision, arbitrators release funds to merchant accounts. During a dispute is running, merchant rolling reserve funds become temporarily unavailable.
If either party fails to reach a conclusion, any of them can escalate it to a claim. Once the claim is made, jurors become directly involved under the arbitration process to make a decision collecting information.
Reasons of occurring claims
A claim is occurred due to three factors including in the cases of item not received, significantly not as described and unauthorized transaction.
A seller must respond to the claim within 10 days. If the seller doesn’t respond within the period, the claim will end up being in the favor of buyer carrying a bad luck for the seller. Some people think that having a claim filed against a merchant will cause punishment for him. But it’s not actually true. However, the merchant’s Trust Score will be affected providing that a claim is too high, or other indicators are trending negatively.
The trail parameters will be defined depending on the type of dispute. The trial parameters include arbitrators’ training level, the number of arbitrators in the jury, fee levels and party’s anonymity level.
Credit not processed
In that case, the merchant hasn’t yet provided a refund or credit when the transaction was cancelled. Merchant here can show some causes like he can show the customer has been refunded through other means, or merchants cannot issue a refund while a payment is being disputed.
After being understood of the compliant, the merchants can explain the misunderstanding or to resolve it. But if merchant’s attempt ends in smoke, the dispute will be handed over to arbitration process.
In order to avert such incident, merchants ought to provide a clear return policy and make it easily accessible. It is also merchant’s duty to honor the returns or refund that customers request.
When a claim comes from customers that they have been charged several times for the same product or service, it is known as duplicity. Merchants need to show, in that case, that each payment was for a separate product or service. But before demonstrating such a cause, the merchants have to ascertain first whether the charging was done incorrectly or intentionally. If it is not, then all relevant copies should be collected that prove that each payment was made separately.
Merchants should accept the payment as duplicate providing that there were duplicate payments. Meanwhile a dispute is running, merchants don’t issue a refund. Merchants can resolve the dispute only when he can understand it. But if merchants end in smoke in soling the dispute, the dispute is extended to arbitrators.
Fraudulent purchase happens when an account is hacked. A COTI token holder claims that he didn’t authorize a payment. In that case, first of all, it should be proved that what the COTI token holder is claiming is true indeed. After identifying it, they should get the account holder to withdraw the dispute.
But it should also be made sure by the merchants whether authorized users forgot about payments they make. If a merchant can make the buyer withdraw the dispute after resolving the issue, then it is the success for the merchants. But whatever buyer agrees or disagrees, it is obligatory for merchants to submit evidence for the dispute. Merchants should accept the dispute providing that the payment was actually made fraudulently.
These disputes are not categorized. To find out the actual reason of the payment being disputed, the merchant can seek for additional details to the customer.
Products that cannot be accepted
Such dispute arises when a product received is not up to the mark or defective. In that case the merchants should demonstrate that the product was delivered as described at the time of purchase. Merchants can resolve the issue only if the buyer understand what the merchants say. The success of merchants lies in withdrawing the dispute by the buyer.
Products or service not received
From the title you have already gotten aware of that such dispute arises when products or service purchased are not received by the buyer yet. If such dispute arises, then merchant need to prove that the customer received the product and this must have taken place before the date the dispute was initiated.
The merchant should show any critical reason for the product not receiving in time. The success for the merchant is to get the buyer to withdraw the dispute by resolving the case. And if buyer and seller fail to reach an agreement, the dispute will be solved by the arbitrators.
Such dispute arises with the claim that a merchant continues charging a customer even after a subscription is cancelled. To prove that the merchant is free of the claim, that merchant must prove that the subscription was still active and that the customer was aware of the cancellation procedure.
The merchant can explain the misunderstanding only when he can understand the case. The merchant must be in touch of the customer to resolve the dispute.
In that case the customer doesn’t recognize the payment appearing in his account history. When such dispute arises, the merchant helps the customer in identifying the payment. Two cases are seen when such a dispute arises, the first case is sometimes people forget about payments they make, and the second case is an authorized user on the account made the payment.
Submission of evidences
Evidence submission is a must when a dispute is in the hand of arbitrators. Considering the evidences, arbitrators decide the outcome of the dispute. The evidences that are being submitted to the arbitrators should pertinent to the dispute. The information that should be submitted include web logs, email communications, shipment tracking numbers, delivery confirmations, proof of prior refunds or replacements. It is advisable to provide only the facts concerning the original purchase using a neutral and professional tone as these keep the evidence relevant.
Evidence should be clear and accurate
For refuting a claim, arbitrators need to view the evidences. Fair decision making gets interrupted if the evinces are not clear and accurate. Participants can attach images and PDF to make the evidences more cogent. It is advisable to include a clear screenshot of terms or policies as they appear during the checkout process or on the merchant site providing that they are an important part of the defense.
Some proof of customer authorization should be included, such as:
-AVS (Address Verification System) match.
-Signed receipts or contracts.
-IP address that matches the customer’s verified billing address.
Inclusion of proof of service or delivery
If everything is from okay from merchant’s side, but customers raise several claims lie products r services not received, any fraudulent activity found, in that case the merchant should provide proper and authentic evidences in favor of his delivery or service.
The merchant should bring forth the evidences of proof of shipment and delivery to prove that he delivered the item properly. A merchant better choose such a delivery method which requires signature on delivery as it carries a strong evidence. On the other hand IP address or web logs are well evidences when a customer purchases digital goods.
But things become different when the customer provides a ‘ship to’ name that differs from their own, and in that case customer should be ready to provide documentation explaining why they are different.
As part of evidence, a legible screenshot of how the terms of service or other policies should be presented during checkout.
COTI Arbitration System has an important function which is all arbitrators vote on decentralized governance decisions.
In COTI Arbitration System, only users with High Trust Score get chance to be selected as arbitrators. Arbitrators, who are legal entities, are randomly chosen from the pool of network participants which is maintained by the arbitration system of COTI. Arbitrators are required to have a sufficient amount of COTI locked per their stake and released once the dispute decision has been made to participate in the arbitration process.
Recruitment and training Arbitrators
There is a committee of randomly selected arbitrators who will obtain the capability to select arbitrators and add them to the network. Arbitrators must be proficient in relevant language and should be adept at performing the arbitration tasks at a high standard. To make candidates effective for contributing to the dispute resolution process, COTI will make available online training programs. The training program will include online courses, procedures and manuals, online certification exams, and internship by participating in small disputes cases.
COTI will implement some KYC/AML due diligence points which are being described in the descending order:
-The identity of customers.
-Beneficial owner identity.
-Purpose and intended nature of business relations.
-Large amount transactions in EU and UK should be reviewed along with ongoing monitoring.
-Explanation of source of funds.
Computer-aided dispute resolution
AI-based tools will come along with the next version to help analyze case data and provide recommendations to arbitrators about the way by which certain disputes can be judged. This will increase efficiency deducting cognitive costs of arbitrators.
This AI based online dispute resolution method will have a three step model, which is based on a fixed order. The participants can select any tool appropriate for their dispute resolution from the virtual space.
In that case some rules are followed like first of all, if the negotiation were to fail, the negotiation support tool should provide feedback on the likely outcomes of the dispute. Secondly, using argumentation techniques, the tool should try to resolve any existing conflicts. Thirdly, the tool ought to employ decision analysis techniques and trade-off strategies to drive dispute resolution. The third step will be followed if second step fails to resolve those issues.
Decision Support systems
Decision support systems being computer-based means for managing knowledge reduces the work-load of users. By automating the process, the system helps users improve their decisions. The system accepts, stores, uses, receives and presents knowledge relevant to the decisions being made.
We are now going to talk about some tools that have been used to develop intelligent negotiation support systems. These tools include rule-based reasoning, case-based reasoning, machine learning, and neural network. Rule-based reasoning is a place in where the knowledge of a specific legal domain is represented as a collection of rules of the form ‘if then action/conclusion’. Then comes case-based reasoning that uses previous experience to analyze or solve a new problem. The AI system in machine learning tries to learn new knowledge automatically. And the last one neural network is comprised of many self-adjusting processing elements cooperating in a densely interconnected network. Actually the goal of these systems to show users that how close or far they are from a negotiated settlement.
Adjusted Winner and Smartsettle
To provide fair solutions of claims, Adjusted Winner and Smartsettle, which both are negotiation support systems, use game theoretic techniques. Here the desire of disputants is given equal priority. Users here in both the systems are required to rank and value each issue in the dispute by allocating the sum of one hundred points amongst all the issue. Optimization of each user’s desires is done then by game theoretic optimization algorithm.
What method Adjusted winner follow is it allocates divisible goods between two parties as fairly as possible using the designation of the items in a dispute. Upon being sure of an item to been in dispute, it adds that item to dispute list. Thus the value of each item is determined by the indication of parties as they distribute 100 points among themselves that paves the way for resolving the dispute at a later stage. After assigning the points privately by both parties, a arbitrators uses Adjusted winner to allocate the items to each party to ascertain which item may need to be shared.
Opposing parties or professional arbitrator use Smartsettle to help involves in negotiation process. Smartsettle focus on feasible alternatives and if not such alternatives are found, then the program helps parties by developing counter proposals.
No partiality can influence arbitrators in the process of resolving a dispute because they work independently and arbitrator jury is selected randomly. Here no communication is held between arbitrators. Arbitrators receive case data and cast their votes using the arbitrator client. But how much arbitrators is needed to resolve a case is dependent on the case.
Merchant Rolling Reserve
To avoid business risks, there is no alternative to merchant rolling reserve. What is rolling reserve indeed? It is a share of merchant’s transactions that is put by to cover any potential business risks. This rolling reserve funds are maintained in native COTI currency. What size would be of a merchant’s rolling reserve depends on the merchant’s Trust Score. The Arbitration Service creates a rolling reserve for each merchant to shield them against possible claims and a system-wide Reserve Credit Fund (RCF). This rolling reserve helps a merchant when compensation for losing a dispute becomes obligatory for him. The ability of selling goods and services will be forfeited for merchants providing that they do not meet the rolling reserve requirements.
There are two consequences for merchants happen depending on their winning or losing. No additional transaction comes in place providing that the merchants win. But losing to resolve a dispute carries the need of compensation for merchants. At such case, the Arbitration System creates a transaction that transfers money from the merchant’s rolling reserve to the customer’s account.
What happens when a merchant’s rolling reserve is not sufficient? If such situation appears, the Reserve Credit Fund will be used with the condition that the merchant is bound to reimburse the RCF within a fixed period of time.
The customer is remunerated from the merchant’s rolling reserve funds providing that the customer is winner. But no further action is taken when the merchant is the winner.
There are several fees including arbitration initiating cost, dispute resolution fee, arbitrator fee, and merchant rolling reserve fee. The arbitration initiating cost is the fee payable by the plaintiff upon complying. The fee decreases the demand for arbitration and it is refundable if the plaintiff won the case. Then, comes to dispute resolution fee which is paid by the party that loses the case. The arbitrator fee is a wage for those arbitrators participating in the arbitration process and the fee is dependent on the case type.
The Merchant rolling reserve fee is the last one to come. The calculation of rolling reserve is based on merchant’s turnover and Trust Score. This rolling reserve is maintained for protection against any risk. At the end of the term of the rolling reserve, funds are released back to the merchant’s account.
Though COTO Arbitration system resolves disputes between parties, it doesn’t deal with potential criminal cases. A circumstance in which an international cooperation focusing on the provision of its services to the local market may prevent clients from accessing other jurisdictional courts and adjudicating their dispute act up to the local laws cannot be accepted by any jurisdictional court. So, it can be said that any online dealing can subject a merchant to the jurisdiction of local court. So e-commerce merchant should know the legal consequence of his activities wherever he is working.
There can be seen a collusion between arbitrators or between arbitrators and one of the parties while a disputed transaction is under arbitration process. Such collusion causes arbitrators to be highly penalized. But occurring of such collusion is very less likely in COTI as arbitrators are randomly selected to the jury.
There is some documentation that is needed for dispute resolution. They are:
-Confirmations (emails, faxes, etc)
-Proof of shipment o return.
-Any other document supporting the case.
Dispute Affects Trust Scores
Winning or losing a dispute has a direct impact on the Trust Score of merchants and consumers. As the penalty is inevitable for both parties, it prevents a user from unnecessary lodging disputes