Cat cryptocurrency automatic trader bot for bitcoin and altcoins updated jan 26 201838 comments
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This would allow for the structuring of Chains in a logical hierarchy, even though Chains are not hierarchical by nature. Users can even use the same naming conventions, but by making simple modifications, ensure that there are no accidental intersections between their Chains and other Chains. Consider the following path:. Where the slash is a convention for another level of hierarchy.
These two strings must be converted to bytes, and there are many options for doing so. Each of these encodings would result in entirely different ChainIDs for the same string, since the computation of the ChainID is done from the bytes.
Factoids are the main internal scarcity token used to moderate and reward the system actors. The right to put Entries into Factom is represented by Entry Credits.
Factom separates the two value-holding mechanisms, as they serve different purposes. Factoids can be converted into Entry Credits, but not vice versa. Factoids are implemented in much the same way Bitcoin is implemented, allowing for multi-signature security, multiple inputs, multiple outputs, etc. Factoid transactions are managed on a special Factoid Chain. This Factoid Chain is handled more restrictively than other Chains.
Factoids are included into the protocol to completely decentralize Factom, and to reduce bloat and spam in both Factom and Bitcoin. Factoids can be converted to Entry Credits in the protocol, and payed out to Factom servers from the protocol.
They also help to bind consensus. If consensus is lost, then the Factoids will fall in value. The conversion of a Factoid to Entry Credits will be done via a special purchase transaction on the Factoid Chain. This purchase transaction will include:. The Entry Credits, once purchased, cannot be transferred to another public key. They can only be used to pay for Entries or vote for Federated servers. This greatly reduces their value to thieves, since they cannot be resold.
Entry Credit private keys can be held in low security areas with minimal risk. Adding Entries into Factom requires giving up a scarce resource. That resource is Entry Credits, which are derived from Factoids. Adding Entries to Factom is a two step process. First the Entry is paid for committed.
The payment accomplishes two things. It decrements the Entry Credits associated with a user's public key. In the same operation, the hash of the Entry is specified. After the Entry is paid for, the server will wait for the unhashed Entry and include it once seen revealed. There are many benefits of this two step process.
One benefit is to separate the payment overhead from the recorded data. Future users will not be forced to download the data generated by payment minutia. They only need to download the minimum data to validate their system. It allows users to safely and easily ignore the payment information. The other benefit is for censorship resistance.
By committing to accept an Entry before knowing the content makes censorship by the Factom servers obvious. Adam Back has advocated for a similar mechanism for Bitcoin in a post titled " blind symmetric commitment for stronger byzantine voting resilience ". If a user or Audit server can show an Entry which has been properly been paid for, but none of the Federated servers are accepting it, then the censorship is provable.
The transactions deducting Entry Credits will be recorded in a special Chain, similar to the Factoid Chain. The Federated servers will only fill the Chain with valid Entry Credit transactions. The conversion rate of Factoids to Entry Credits will be determined by an oracle. In computer systems, oracles are processes that provide information to a system that cannot be verified or validated by the system.
Initially the conversion rate oracle will be implemented centrally. When we have recruited enough exchanges to record their Factoid exchange rates and trading volumes into a Factom Chain, we will establish a decentralized computation of the exchange rate. The qualifying source Chains as maintained by exchanges will be determined by the conversion rate of Factoids at various exchanges, weighted by volume. After purchase, the Entry Credit Chain s will allocate the Entry Credits to the appropriate public key.
That Entry will look like:. Many users of Factom may not want a wallet, and will not want to hold any cryptocurrency asset. But they will want to create their Chains ledgers and add their Entries.
Servers and other recipients of Factom Tokens can sell Entry Credits to customers for payment via Bitcoin, conventional credit card payments, etc. The user would provide a public key to hold the Entry Credits.
Users could thus buy Entries Credits for Factom without ever owning the Factoids that drive the Factom servers. From a regulation point of view, this is powerful. The servers earn Factoids from the protocol. The only parties to that transaction are the server and the protocol. Then the server sells Entry Credits to users, who eventually return Factoids to the rest of the system. In neither transaction is a tradable token the Factoid transferred between two parties. Factom preserves the first Entry of every Chain to the user who first claims it with a payment.
A convention can be adopted where the first Entry documents the auditing rules for the chain, including a URL to documentation, or the rules in Text, or a hash of an audit program for the chain. This convention can be understood as homesteading. Through a set of revealed secrets, Factom can ensure that the user who creates the Chain determines the contents of the first Entry. See Appendix 2 for the Man in the Middle Attack.
The higher price is to reduce creation of new Chains, which is an externalized cost. The submission to start a Chain includes three parameters:. Once the Chain commit has been accepted, the reveal can occur, and the ChainID is now public.
The Entry must hash to produce the Entry Hash. If any of these conditions are not met, Factom servers do not record the first Entry and the Chain is not created. Factom is a distributed, autonomous layer residing on top of the Bitcoin blockchain.
Further, Factom is architected such that its users do not need any cryptocurrency whatsoever. A distributed, immutable ledger is the radical, foundational, and unprecedented technology represented by the Bitcoin blockchain. The dream of many is to extend the honesty inherent to an immutable ledger validated by math to chaotic, real-world interactions. By allowing the construction of unbounded ledgers backed by the blockchain, Factom extends the benefits of the blockchain to the real world.
It could be software with a human interface, or could be completely automated. The Application is interested in the data organized by the Chains it needs. Applications are possibly Distributed Applications DApps interacting with Factom to provide additional services. For example, one might imagine a trading engine that processes transactions very fast, with very accurate timestamping. Such an Application may nonetheless stream transactions out into Factom chains to document and secure the ledger for the engine.
Such a mechanism could provide real-time cryptographic proof of process, of reserves, and of communications. Let us explore two separate applications that could have immediate demand in the current Bitcoin ecosystem. Let us see how to implement a secure and distributed log platform. Log analysis is a complex task. Additionally, logs tend to be easily forgeable and also heterogeneous as they are produced by each system independently and stored in a variety of media files, databases, cloud services etc.
With Factom and a few uniquely designed crypto-audit tools an entities log analysis can become safer, simpler, and much more powerful. This is the normal scenario for many fixed-rate Bitcoin exchanges globally. But assume now that for some reason the BC receives the payment notification 4 hours after the user transfers via the PP. What if a similar payment problem happened for hundreds or thousands of payments over a period of days or weeks before the issue was identified and resolved?
With current techniques a manual auditing of logs would be necessary and would probably require legal authorizations. With Factom and the right audit applications, it would be trivial to detect where the problem came from, and also make the changing of records impossible post-issue. However, there are significant weaknesses to this approach only solved by having the Factom secure broadcast channel functioning properly.
One potential risk with this process is that an exchange database owner could produce a hash that is not the true representation of the database at all; the exchange hashes an incomplete database which would reduce its apparent liabilities to customers, thereby making them appear solvent to a verifying party.
Here are some scenarios where a fraudulent exchange could easily exclude accounts:. There is evidence that large Bitcoin traders are operating on various exchanges and moving markets significantly. Such traders need to have capital reserves at the largest exchanges to quickly execute orders.
In this way they can be assured that should a hack or liquidity issue arise, they have priority to get their money out first. The second attack is obviously solved by using Factom, while the first is not so obvious. However, the basic concept is that by having frequent time-stamped copies of the exchanges database Merkle hash, one could detect the inclusion or exclusive of large balances before or after audits.
Then, the auditor could simply look into those large inclusions or exclusions, manually.