Topic: [ANN][XSN] Stakenet - The World's First Trustless Proof of Stake Coin - page 7. (Read 65159 times)

HYDRA DEX | Network Upgrade (Proposal)
As Stakenet DEX begins to wrap up the final elements of Stage 1 and transition to Stage 2 “Prometheus”, our team has prepared initial architecture for the upcoming Stage 3 “Hydra” network upgrade.

NOTE: This Network Upgrade will require a Hard Fork. Current Masternode Governance/DAO will need to adopt the rules proposed. Changes to values and splits could be adjusted after launch via an on-chain governance vote.

In Stage 3, “Hydra”, a percentage of all trading fees from the DEX will go to the Masternode network running the DEX, as a commission payment for running infrastructure and the DEX/orderbook itself. We have been working with Liquidity Providers and Market Makers to come up with what we believe is a fair but industry-leading incentive model. We will dig into more details below.
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Roadmap to Hydra

The DEX needs to be decentralized, thus hosted on the Masternode network, and it needs liquidity for users to trade. There are two types of liquidity in the DEX: Channel Liquidity (making up rentals and layer two routing infrastructure, provided by Masternodes) and Orderbook Liquidity (liquidity given to the orderbook itself, provided by Orderbook Liquidity Providers -OLPs).

Therefore, the main entities on the DEX are:

    Masternodes: Hosts and L2 (channel) Liquidity Providers.
    Orderbook Liquidity Providers.

Channel liquidity is needed for all assets, not just XSN. Masternodes are needed to provide this liquidity by acting as L2 Liquidity Providers. They play a critical role, not only by hosting the DEX but also by joining liquidity channels of all assets through hubs/orderbooks for users to trade on.
1. Masternode Hosts / L2 Liquidity Providers

All Masternodes can be used if they choose to (opt-in) host the DEX, contributing to the network infrastructure and collecting a percentage of the trading fees for executing their functionalities. This is what we call a Masternode Host.

They also have the option to earn additional routing/rental fees if they choose to. Those would not only host the DEX but also act as L2 Liquidity Providers, by providing Channel Liquidity and becoming what we call a Stakenet DEX Hub.

This gives extra benefits to Masternodes, as any channel liquidity for assets they support in their DEX Hub can also be used for trading/market making, giving a greater return for the extra services provided. Keep in mind Channel Liquidity is different from the 15000 XSN locked in Masternodes — those are still locked.

To opt-in to hosting the DEX, your Masternode will have to meet certain hardware requirements. As we go through testing in Stage 2 we will finalize the specs needed for Hydra. As a point of reference, the current specs from developers running DEX Hosts and DEX Hubs are as follows, however; these are subject to change:

Masternode DEX Host: 8 vCPUs / 16GB RAM / 50GB SSD

Masternode DEX Hub: 6 vCPUs / 16GB RAM / 320GB SSD
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DEX Architecture Map
2. Orderbook Liquidity Providers (OLPs)

Any user with a wallet, even without owning a Masternode, can provide liquidity to the orderbook and collect a percentage of the taker fees (similar to Uniswap).

It is important to know that with every trade there is a Maker and a Taker. The Maker provides limit buy/sell orders to the orderbook, and the Taker is the person market buying/selling into them.

Our plan is to operate with a Taker pays Maker structure so market orders pay 0.25% and limit orders have negative fees. This is done by a 0% fee for Makers and 0.25% for Takers. The Maker will be paid between 45–67.5% of the fees from each trade made with them depending on the total DEX volume. This essentially makes negative trading rates for Makers, compared to at best 0% on a spot exchange giving a very strong incentive to trade on our DEX and provide liquidity over anywhere else.

During Stage 2 — Prometheus, and working with our liquidity and market maker partners, our Taker pays Maker model will be active and you will still be able to earn a % from P2P trading during this time. This is open to anyone who provides orderbook liquidity. If you place a Maker order on the DEX and someone executes a trade against it, you will earn a % of fees associated with that trade.
Estimated Masternode rewards

The following is a Masternode reward structure we feel will provide strength and scale with the network based on increasing volume (estimated at a 2800 node count with everyone opting in, trading fees dynamically adjusted between 22.5–45% to Masternodes Hosts based on volume).

We will use 10% of the collected trading fee to buy XSN at market price from the DEX and then burn it. For instance, for a trade of BTC to ETH, we will use the 10% of the trading fee which will be in BTC to then market buy XSN. This will create a continuous buy pressure of XSN itself which will then be burnt to reduce the overall circulation of XSN.

We propose the following equation to balance the rewards between Orderbook Liquidity providers (OLP) and Masternodes Hosts. With the proposed equation, all trading fees collected from the DEX which are to be distributed to the Masternode network will first be used to market buy XSN from the DEX orderbook and then distributed as XSN to the Masternodes.

y = 45 - 0.0225x
z = 90 - y
where:
x = daily volume of the DEX in million dollars.
y = % share of the Masternodes Hosts from trading fees.
z = % share of the OLP’s from trading fees.

This equation gives almost an equal share to Masternodes Hosts and Orderbook Liquidity Providers for low DEX volumes. And as the volume increases and OLPs put more liquidity on the DEX, their share increases due to their increased exposure to the market.
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The Masternodes Hosts share from trading fees will be fixed at 22.5% above $1B daily volume.
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To clarify, below are some rough estimations of what one Masternode Host could earn daily from DEX trading fees (estimated at a 2800 MN count of all running the DEX):

$1M daily volume, average daily fees to 1 MN ~ $0.40 (45%)
$10M daily volume, average daily fees to 1 MN ~ $3.99 (44.78%)
$200M daily volume, average daily fees to 1 MN ~ $72.32 (40.5%)
$400M daily volume, average daily fees to 1 MN ~ $128.57 (36%)
$800M daily volume, average daily fees to 1 MN ~ $192.85 (27%)
$1B daily volume, average daily fees to 1 MN ~ $200.89 (22.5%)

This would be paid in XSN to the Masternodes hosting the DEX.

These rewards above would serve as additional rewards on top of the 45% block rewards that go to the Masternodes for providing their node services. Currently, Masternodes yield ~15% APY on block rewards as is, without the HYDRA DEX service being live or any of the other services Masternodes will be able to provide, such as L2 Liquidity Providing or TPoS contracts.
How does liquidity providing work/what's the purpose?

Over 90% of trades on CEXs aren’t done by a normal user — most of the time you are trading against bots: market makers algorithms, arbitrage algorithms, exchange algorithms, etc. As traders don’t like to trade at illiquid exchanges, you have to set up liquidity to attract users.

One unique aspect about our DEX is that it is one of the very first DEX’s able to make instant (layer 2) trades comparable to a CEX. So an OLP can utilize our DEX with a high degree of confidence for arbitrage, for example: to buy a coin at a CEX, while selling from their user-controlled wallet on our DEX.

This will bring liquidity, volume, and fees to both exchanges, while the arbitrage bot/OLP makes some profit and continues the service.

Q: How many people are actually involved in the overall project? Including websites, cloud-service, etc.? and How many people work for X9? and How many people make up the team and how many are developers?

A: In total there are circa 40 people who are involved with the project, which includes team members, 10 developers, website maintenance etc.

Q: Has a new big exchange been approached? Can we expect this in Q1 2021? When will we be listed and what stage are we currently at with them?

A: Due to NDA’s we cannot state an exact date about the exchange listing, but we are working hard to get it done asap.

Q: When will the DEX be launched?

A: You are able to test the current version of the DEX as we type this. The DEX is in open Beta which is a vital stage as this allows us to gather feedback from the community and find as many bugs as possible. We will release the DEX from the open Beta stage once we have integrated and tested ETH & ERC-20 tokens. Once this has been done and everyone is happy with how the DEX performs, then we will be able to give an exact date however; it is fully functional in its current Beta state.

Q: Even though we realize it is complicated to pin down exact dates, is it planned to at least give estimates on achieving the milestones of the roadmap? Since the percentage of approximate completion can be confusing and frustrating (because there is no indication on how long the current progress persists), maybe quarters would be more convenient. and Why not list things on the roadmap that are achievable in a year?

A: Thanks for the feedback and the critic!

We have learned from the past mistakes when using estimates within our roadmap. Innovation is at the forefront of what we do so the majority of the work we do is built from scratch so this requires time and can be very hard to estimate as we have nothing to compare against.

There are times where we rely on third parties, such as Ledger, which can cause unexpected delays and roadmap targets to be missed. Previously we use to have quarters on the roadmap which did not work as we moved targets around.

We understand our roadmap is ambitious roadmap as it includes not only innovation from our developers but also what is being researched. We will keep the roadmap as it stands and we relish the opportunity to complete it!

Q: Could you disclose any plans to audit the DEX and XSN Blockchain or other verifiable assurances or security?

A: At this point the code of MCLW and DEX is closed source, so we won’t have an audit there soon.

We are currently in contact with a code reviewer who might audit the core wallet and also get an audit of the security aspects of our MCLW and lightning DEX later.

Q: Is it possible to be listed on an exchange in Turkey?

A: Previously we listed on a Turkish Exchange, Sistemkoin. This exchange caused a lot of issues (delayed wallet/node upgrades, delaying withdrawals for users, strange price peaks and so forth). We as a team, and in agreement with our Turkish community, requested that we get delisted from their exchange.

Q: Can you elaborate on the utilization of the TOR Network and how exactly it comes into play regarding the Wallet/User anonymity?

A: With TOR Network your IP gets hidden by a decentralized server system, so your crypto wallet addresses can’t be traced back to your home IP. In the future, the wallets’ TOR system will be run by XSN Masternodes.

Q: Is there an ETA on the Cloud-UI polish/update? (staking/ scaling/ filtering/ graphs/ statistics…)

A: The Stakenet Cloud will receive not only a UI update but an overall update in the coming weeks and a much bigger update in the coming months. It will remain mostly MNaaS-focused from there on.

Q: Will the DEX be easy to use when released? Because the current system is very complex.

A: Yes, that’s what we have been working on the last months — it is called simple swap UI (SSUI). All you need to do is load your wallet with funds and only click “exchange” — and your work is done.


Q: Will the dex support XRP/ XLM/ Stablecoins in the future? and Any chance we will see Monero (XMR) on the DEX?

A: We have to be specific here: XLM (Stellar) has lightning enabled and should be possible to add eg after we have finished ETH and ERC-20 tokens integration. XRP (Ripple) isn’t lightning swap compatible, but still by using our hubs we will be able to add any coin, as long as we have a way to interact via a wallet or a node. Specially the ones that have high tx/s rate, low block time and cheap tx fees (e.g. XRP). In those cases, an on-chain instant low fee trade would be feasible (e.g. Lightning BTC <> on-chain XRP).

Stablecoins, eg USDT, USDC and DAI are ERC-20 tokens, so they will be added by using the Connext Network, especially USDT will be one of the very first tokens we are going to add.

XMR (Monero) is working at the moment on becoming atomic swap compatible, which is the base for becoming lightning compatible (read more here: https://www.reddit.com/r/Monero/comments/gx2ow6/ccs_funding_required_monero_atomic_swaps_research/ ). If XMR won’t become lightning compatible, we will add it to our Atomic-Swap tab.

Q: How long does it take to get the aggregator connected to a new exchange?

A: It mostly depends on the exchange to be integrated as there are different aspects to check:

•     How similar their API design is to other already integrated exchanges
•     How many open source clients are available for their API and in what programming languages they are written
•     How active / responsive their tech support is
•     How the requests limits and trading rules defined
•     What are the reporting tools they offer

Considering a fair amount of testing, it might need up to 2 weeks — months for any exchange to be fully integrated for an aggregator.

Once the exchange is connected and flexible configurations are implemented, it technically only takes seconds to add new pairs. However the hub aggregators will make sure everything runs stable, so they will test, add funds to the exchanges etc. before releasing it to the public.[/i]

Q: How important does the X9 Team consider Privacy Coins? Can we count on coins that have a Privacy by Default blockchain, like ZK-Snark technology or RingCT or Mimblewimble? (Not lightning capable, partially Atomic-Swap capable)

A: Privacy is very important to us, this is why we are using TOR and Lightning Network swaps (offchain => not visible to anyone outside). When we have our Atomic Swap tab ready we will also implement atomic swap compatible privacy coins. Also the privacy coin Beam coin might become lightning compatible. Furthermore we are actively watching privacy technology like Mimblewimble we could integrate into our own blockchain too.

Q: (How) will the Stakenet blockchain be connected to the DEX? What services can masternodes contribute to the DEX and the XSN ecosystem?

A: The XSN blockchain will be integrated at stage 3, called hydra, and will play an important role in the monitoring and policing of hubs. The blockchain will be used to set rules and regulations for the DEX operators that ensure good behavior and reliable service. In return for the blockchains service to act as “referee” for the operator, payment must be made in the native currency XSN (the extra work for the additional conversion does not lie with the users, but with the operators / DEX hub nodes).

To explain this, we have to go back a little: there is currently a problem in the Lightning network, because you don’t really know whether a hub or a blockchain service made many mistakes in the past or failed to perform swaps.

This problem could be solved along the lines of “karma” points. So if a hub causes a lot of errors and fails to meet user swaps, it has “bad karma”, if it behaves well it has “good karma”.

This is the perfect and ideal job for a blockchain, as this is some kind of auditing work (watching the hubs & services) you get rewarded for (like miners get rewarded for auditing work).

So the result would be that hubs running on the XSN network are reliable and have a reputation (= good karma) for good service. Users then prefer to connect and trade through these hubs (with “good karma”) when they do. Hubs (= liquidity providers) in turn earn fees, which gives operators an incentive to provide liquidity (the more liquidity they provide, the higher volume they can support). Higher exchange volume through their node would equate to higher $ returns.

Without a XSN masternode and without “karma points” you cannot offer and be paid for the following:

•     CPU and DB services from third parties
•     TOR services
•     Securities for the liquidity of Lightning Network
•     Securities with more stablecoins, e.g. a XSN backed stablecoin
•     Watchtower Services
•     Escrow Services … and more critical services to be added in a later future.

Let’s wrap it up:

The XSN blockchain itself would act as an auditor, auditing the hubs to track their performance and behaviors. This is needed to mass scale, otherwise the service & experience would be poor for the users of the DEX (lots of failed orders, easily DDOS’d, low liquidity etc).

The service of auditing requires rewards/ payment to the blockchain (in this case for example the blockchain can apply rules to “force” hubs to send XSN to a burn for example). This is how the XSN blockchain and token have utility for the DEX. Keep in mind the DEX is just ONE of the many dApps and services that the XSN blockchain will provide

Thanks to everyone who made this great AMA possible! We will release the Stakenet AMA part II in the next few days. If you have more questions join us on Discord and follow us on Twitter to stay up-to-date with our latest news and developments.