Borderless A Decentralized Digital Asset Exchange Borderless_Whitepaper1.0

Borderless
A Decentralized Digital Asset Exchange

NOTE: the contents of this white paper are under active revision, comments are appreciated.

Index
1.INTRODUCING BORDERLESS   3
2.BORDERLESS MARKET   3
1)SECURITY   3
3.BORDERLESS GATEWAYS   4
4 TECHNOLOGY BEHIND BORDERLESS SYSTEM   4
1)HIGH PERFORMANCE AND SCALABILITY   4
2)LMAX DISRUPTOR   5
3)ASSIGN IDS TO AVOID HASHES   6
4)REMOVE SIGNATURE VERIFICATION FROM BUSINESS LOGIC PROCESSOR   7
5)DESIGN TRANSACTIONS FOR STATIC VALIDATION   7
6)SMART CONTRACTS   7
7)OBJECT ORIENTED DATA MODEL   8
5.BORDERLESS BLOCKCHAIN MARKET   8
1)BLOCK-CHAIN MARKET   8
2)ADVANCED TRADING AND CONTRACTS   10
6.FUNCTIONAL CHARACTERISTICS OF BORDERLESS SYSTEM   10
1)ISSUING NEW ASSETS AND IDENTITY MANAGEMENT   10
2)DECENTRALIZED ASSET EXCHANGE   11
3)VALUE OF DECENTRALIZATION   11
4)FAST, BUT NOT TOO FAST   12
5)SECURE   12
6)NO LIMITS   12
7)LOW FEES   13
8)TRADE ALMOST ANYTHING   13
9)OPEN SOURCE AND COMPLETE TRANSPARENCY   13
10)PRIVACY   13
11)OPTION   13
12)MARGIN AND SHORT SELLING   14
13)FUTURE OF BANKING   14
14)ROLES OF AN EXCHANGE   14
15)CENTRALIZATION COMPROMISES PRIVACY   15
16)SEPARATION OF POWERS   15
17)COLLATERALIZED BLOCKCHAIN IOUS   16

18）GLOBAL UNIFIED ORDER BOOK   16
19) ELLIPTIC-CURVE CRYPTOGRAPHY   17
7.REFERRAL REWARDS PROGRAM   18
8.LEGAL CLASSIFICATION OF BORDERLESS AND BORDERLESS-DERIVED BDSASSETS   19
1)BID / ASK TRANSACTION PUBLISHED TO THE BLOCKCHAIN   20
2)SHORT SELL TRANSACTION PUBLISHED TO THE BLOCKCHAIN   20
3)MARGIN CALLS AND COVERING EXECUTED BY MINERS   20
4)CONTRACT BETWEEN DEVELOPERS AND USERS   21
5)EXCHANGE REGULATIONS   21

1.Introducing Borderless
Borderless is a Polymorphic Digital Asset Exchange, which means that it can morph into many different types of BorderlessAssets(BDS). A BorderlessAsset operates in a manner similar to Bitcoin with some optimizations and new rules that allow Borderless to provide the backing for its value. Borderless has the property that dividends will be paid on Borderless and Borderless derived BorderlessAssets held for a specific time period. These dividends come from part of the mining rewards and transaction fees, are awarded every block, and are implemented in a manner that does not burden the network.

2.Borderless Market
A digital free market financial system that can facilitate trade in any asset class without introducing valueless middlemen or centralized issuers of assets. Borderless aims to develop a foundation that will serve as reference point for both Borderless and its competition.

Built-in Decentralized Mining Pool
The techniques Borderless uses to enable a distributed mining pool with no central server could be integrated to make it quick and easy for most users to do some mining even as the difficulty increases. This would not be a requirement of the Borderless protocol, but would be supported by the network.

1)Security

a)51% Denial of Service Resistance
All witness nodes have a financial incentive to validate chains. All miners have incentive to reject blocks that include a large number of ‘never--before--seen’ transactions and fees because it means someone is ‘holding out’ in an effort to collect fees or manipulate the network. Because most users can ‘profitably’ mine, all users will actively cooperate in preventing these kinds of manipulation attempts. As a result, the cost of a 51% DOS attack requires the attacker to

subsidize the entire network and their competition which will increase the profitability of mining and thus make it more expensive to maintain the 51% Double Spend attack.

b)Encrypted Communications
All communication between nodes will be encrypted for two reasons: it will frustrate packet filtering, and it will make it harder to determine the origin of new transactions.

3.Borderless Gateways
Borderless gateways provide service to exchange currency with BdsCNY, BdsUSD. Many gateways prefer the low risk approach of one-for-one redemption , this would allow small fluctuation in exchange for BdsCNY. Users then pay a small variable conversion cost as they exit from BdsUSD to fiat USD through gateways.

On the other hand, many users will want a direct conversion from BdsCNY to fiat CNY. In this mode of operation, the gateway takes care of providing all of the liquidity within a fixed percentage transaction fee. The gateways then compete on offering the lowest possible spread.

4 Technology Behind Borderless System

1)High Performance and Scalability
High performance blockchain technology is necessary for cryptocurrencies and smart contract platforms to provide a viable alternative to existing financial platforms. Borderless is designed from the ground up to process more transactions every second than VISA and MasterCard combined. With Delegated Proof of Stake, the can process 100,000 transaction in an average of just 1 second.

To achieve this industry-leading performance, Borderless has borrowed lessons learned from the LMAX Exchange, which is able to process 6 million transactions per second. Among these lessons are the following key points:

1.Keep everything in memory.
2.Keep the core business logic in a single thread.
3.Keep cryptographic operations (hashes and signatures) out of the core business logic.
4.Divide validation into state-dependent and state-independent checks.
5.Use an object oriented data model.

By following these simple rules, Borderless is able to process 100,000 transactions per second without any significant effort devoted to optimization. Future optimizations are expected to bring the performance of Borderless to levels similar to LMAX. It should be noted that the performance achieved by Borderless is highly dependent upon having a compatible transaction protocol. It would not be possible to achieve the same level of performance in a protocol where the Core Business Logic is run in a virtual machine that performs cryptographic operations and references all objects with hash identifiers. Blockchains are inherently single-threaded, and the

performance of a single core of a CPU is the most limited and least scalable resource of all. Borderless is designed to get the most out of this single thread of execution

Background
A blockchain is a global ledger that orders transactions, whereby each transaction deterministically modifies a shared global state at a specified timestamp. The order in which transactions are processed can change the validity of other transactions. For example, you cannot withdraw money from your bank account until after your paycheck deposit has cleared. It becomes impossible to know whether or not a transaction is valid until after all prior transactions that impact a particular account have been processed. In theory, transactions for two unrelated accounts can be processed at the same time, provided that they do not share any common dependency. In practice, the cost of identifying which transactions are truly independent of each other on a ledger empowered by smart contracts with arbitrary conditions is intractable. The only way to be sure that two transactions are truly independent is by maintaining completely separate ledgers and then periodically transferring value between them. An analogy could be made to the performance trade offs in the design of Non-Uniform Memory Access (NUMA) vs Uniform Memory Access. In practice, Uniform Memory Access is much easier for developers to design for, and has lower costs. NUMA architectures are usually adopted as a last resort when building supercomputers or giant clusters.The computer industry has grown to realize that scaling performance through parallelism is nowhere near as easy as the early days when all that was necessary was to increase the clock speed of the CPU. It is for this reason that CPU designers pushed the single-threaded performance to the limits before attempting to adopt a multi-threaded approach to increase performance. When multi-threading is not enough, then, and only then, is cluster computing considered an option.

Many in the cryptocurrency industry have attempted to solve the scalability issue by immediately moving to a “cluster” solution without fully exploring what is technologically possible on a single core of a single computer.

2)LMAX Disruptor

The LMAX Disruptor provides a case study on an architecture with a high degree of scalability and performance, showing what is achievable within a single execution thread. LMAX is a retail trading platform that aims to be the fastest exchange in the world. They have been generous enough to share what they have learned publicly.

A brief overview of LMAX architecture:

The Business Logic Processor is where all of the sequential transactions and order matching is processed. It is a single thread that is able to process millions of orders per second. This architecture is readily ported to the realm of cryptocurrencies and blockchain designs. The role of the Input Disruptor is to gather orders from users from many different sources and assign them a deterministic order. After assigning them an order they are replicated, logged, and broadcast to many redundant business logic

processors. The tasks of the Input Disruptor are parallel and easily farmed out to a cluster of computers. An Output Disruptor takes care of notifying anyone who cares about the results. This is also a parallel task. Ultimately, LMAX was able to process 6 million transactions per second through the Business Logic Processor using a single core of a commodity CPU using the Java virtual machine. If LMAX can achieve 6 million transactions per second, then certainly there is no need for cryptocurrency and smart contract platforms to reach for clustered solutions when they are not even processing 10 transactions per second.

To implement a high performance blockchain, Borderless must adopt the same techniques used by LMAX. Several key fundamentals must be met: Keep everything in memory, avoid synchronization primitives (locks, atomic operations) and minimize unnecessary computation in the business logic processor. Memory is becoming cheaper every day because it is extremely parallel in its design. The amount of information that is required to track the account balance and permissions of every person on the Internet is less than 1 Terabyte of RAM, which can be purchased for less than $15,000 and installed on commodity (high-end) server motherboards. Long before 3 billion people adopt the system, this kind of hardware will be in the average desktop. The real bottleneck is not the memory requirements, but the bandwidth requirements. At 1 million transactions per second and 256 bytes per transaction, the network would require 256 megabytes per second (1 Gbit/sec). This kind of bandwidth is not widely available to the average desktop; however, this level of bandwidth is a fraction of the 100 Gbit/s that Internet 2 furnishes to more than 210 U.S. educational institutions, 70 corporations, and 45 non-profit and government agencies.

Therefore, blockchain technology can easily keep everything in RAM and scale to handle millions of transactions per second if it is designed properly.

3)Assign IDs to Avoid Hashes

In a single threaded system, CPU cycles are a scarce resource that need to be conserved. Traditional blockchain designs use cryptographic hashes to generate globally unique IDs that are statistically guaranteed to never have a collision. The problem with these hashes is that they require significantly more memory and more CPU cycles to manipulate. It takes significantly more CPU time to look up an account record by hash than with a direct array index. For example, 64 bit integers are easier to compare and manipulate than 160+bit IDs. Larger hash IDs means there is less room in the CPU cache and that more memory is required. On modern operating systems, infrequently accessed RAM is compressed, but hash identifiers are random data that is not compressible. Fortunately, blockchains give us a means to globally assign unique IDs that do not conflict with one another, so it is possible to completely remove the need to use hash-based identifiers like Bitcoin addresses to refer to an account, balance, or permission.

4)Remove Signature Verification from Business Logic Processor

All transactions on cryptocurrency networks depend upon cryptographic signatures to validate permissions. In the general case, the permissions required can change as a result of other transactions. This means that permissions need to be defined in terms that require no cryptographic calculations within the Business Logic Processor.

To do this, every public key needs to be assigned a unique and immutable ID. After an ID has been assigned, the Input Disruptors can verify that the signature provided matches the ID specified. By the time the transaction makes it to the Business Logic Processor, the only remaining step is to check the IDs.

This same technique can be used to remove pre-condition checking on any immutable object with a static ID.

5)Design Transactions for Static Validation
Many transaction properties can be checked statically, without the need to reference the current global state. These checks include range checking of parameters, de-duplication of inputs, sort order of arrays, etc. Generally speaking, many checks can be performed if the transaction includes the data it “assumes” about the global state. After these checks are performed, all that is necessary for the Business Logic Processor to do is make sure the “assumptions” are still true, which can usually be boiled down to checking a modification timestamp on objects referenced relative to the time the transaction was signed.

6)Smart Contracts

Many blockchains are adopting a general purpose scripting language to define all operations. These designs end up defining the “Business Logic Processor” as a virtual machine and all transactions are defined as scripts to be run by the virtual machine. This approach takes the single-threaded limitations of a real CPU and compounds them by forcing everything through a virtual CPU. A virtual CPU, even with Just-In-Time compilation, will always be slower than a real CPU, but pure speed of calculation isn’t the only issue with the “everything is a script” approach. When transactions are defined at such a low level, it means that most of the static checks and cryptographic operations get sucked back into the Business Logic Processing and the overall throughput falls. A scripting engine should never require a cryptographic signature check to be performed even if it is done through a native call.

Based upon the lessons we learn from LMAX, we know that a virtual machine for a blockchain should be designed with single-threaded performance in mind. This means it

should be optimized for Just-In-Time compilation from the beginning, and that the most frequently used smart contracts should be supported natively by the blockchain, leaving only the rarely-used custom contracts to run in a virtual machine. These custom contracts should be designed around performance, which means the Virtual Machine should limit the addressable memory to something that will fit within the CPU cache.

7)Object Oriented Data Model

One of the benefits of keeping everything in memory is that the software can be designed to mimic the real-world relationships of data. This means that the Business Logic Processor can quickly follow in-memory pointers to the data it needs, rather than being forced to perform expensive database queries. It also means that data can be accessed without copying it, and that the data can be modified in-place. This single optimization offers an order-of-magnitude performance gain over using a database- based approach.

Borderless built a high-performance blockchain by removing all calculations that are not part of the critical, order-dependent, evaluation from the core business logic, and designing a protocol that facilitates these kinds of optimizations. This is what Borderless has done.

5.Borderless Blockchain Market
1)Block-chain Market

The purpose of a block-chain is to establish a global consensus on the order of events and current state of the a global transaction ledger. Borderless requires a global ledger that establishes the order of transfers, bids, asks, and market trades. Every 5 minutes the set of all bids and asks included in the previous block are deterministically matched.

Like Bitcoin, every transaction has a set of output balances that can be spent if certain conditions are met. The primary difference between Borderless and Bitcoin is the set of conditions that will allow an output balance to be spent.

The block-chain market is how price information enters the chain and it is essential that this price information be accurate and free from artificial manipulation not founded on market forces. This price information is used to enforce margin requirements.

Users are free to agree on any exchanges they want and their transaction will be published in the blockchain, but trades between consenting individuals are meaningless for automated price discovery because the network has no means of identifying sham trades between two accounts owned by same individual. A successful trade only means

that two people agreed, whereas an unsuccessful bid or ask means that everyone agrees that the bid is too low or the ask is too high.

Users who do not negotiate a trade ‘off chain’ can place their bids/asks on chain. After a miner has processed all transactions he has received, he will pair all compatible bids/asks in highest bid to lowest ask order. Once all trades that can be made are made, the block chain will be left with buy/sell spread of unfulfilled orders. These orders represent the market consensus that the true price is above the buy and below the sell. At this point, the buy price is checked against the margin requirements of all short positions and any short position with insufficient margin is forced to accept the current sell price with the lowest margin position being executed first.

The proceeds of any bids or asks that are paired by a miner may not be spent until after the blockchain forking window (24 hours) has passed because like coinbase transactions, all transactions generated by the miner without signatures of the owners are not movable to another chain during a reorganization. While you cannot spend the proceeds outside of the blockchain market for 24 hours, you can place new bids/asks within the blockchain market and have them executed by subsequent miners.

Canceling an open order is also subject to the 24 hour rule because a chain reorganization after you placed your order but before you canceled it could result in another miner executing your order.

Creating BdsUSD (or BdsCNY) Asset

BdsUSD (or BdsCNY) is a Borderless derived BdsAsset that must be created against valid bid and post collateral in equal to the value of bid. If the bid is accepted, the collateral and purchase price are held by the network until the BdsUSD (or BdsCNY) is redeemed by repurchasing it. The block chain will then redirect the dividends of the collateral to all BdsUSD (or BdsCNY) holders. BdsUSD (or BdsCNY) is entirely fungible and all dividends from all Borderless backing all BdsUSD are pooled to determine the dividends (in Borderless) paid to the holders of BdsUSD (or BdsCNY).

The Borderless backing the BdsUSD (or BdsCNY) may be spent in two ways:

1.by providing BdsUSD (or BdsCNY) as input to the transaction and redeeming it.
2.by a miner who enforces a margin call when the value of the backing falls to less than 150% of the value of the BdsUSD (or BdsCNY).
Margin calls are enforced by the miners when they put together a block. When a miner enforces a margin call, he uses the backing Borderless to repurchase the BdsUSD (or BdsCNY) and thereby redeeming it. After BdsUSD (or BdsCNY) is redeemed it no

longer exists. Any leftover collateral is sent to an address owned by the short position (not kept by the miner).

If the miner is forced to exercise a margin call, the network assess a 5% transaction fee in order to motivate market participants to proactively manage their margin. If the market moves so fast that the margin is insufficient, then the market price of the BdsUSD (or BdsCNY) may fall slightly below parity for a short time if there is insufficient demand for BdsUSD (or BdsCNY) relative to the supply of sellers.

2)Advanced Trading and Contracts

The infrastructure provided by Borderless with automated margin enforcement means that other types of contracts can be created and traded such as call and put options. The market and advertising for these options can occur off chain and once agreed upon can be enforced on chain with relatively simple pending order rules.

6.Functional Characteristics of Borderless System
1)Issuing New Assets and Identity Management

The New York Stock exchange is a company that maintains a ledger to track ownership of stock and debt issued by other companies. It earns money from transaction fees and has its own stock as well. Like the New York Stock exchange, Borderless allows people to issue their stock or debt to be tracked and traded on its distributed ledger. This be trusted network enables issuers to authorise the others under certain stock restrictions.

The Borderless platform provides a feature known as "user-issued assets" to help facilitate profitable business models for certain types of services. The term refers to a type of custom token registered on the platform, which users can hold and trade within certain restrictions. The creator of such an asset publically names, describes, and distributes its tokens, and can specify customized requirements, such as an approved whitelist of accounts permitted to hold the tokens, or the associated trading and transfer fees.

For example, it is conceivable that a currency exchange can use Borderless's trading engine to provide its trading services. Businesses can only accept cash from customers they certified, and store the relevant UIA vouchers in the customer's Borderless white list account. And these customers can use Borderless trading engine to trade these UIA, while the issuer can also receive a percentage of the set transaction fee. When the user completes the transaction and wants to withdraw, the issuer can convert and send the corresponding currency to the user according to the UIA the user holds. In this way, the customer gets the transaction service he needs, and the business gets the transaction fee. Borderless platform aims to help the both sides become more efficient

as much as possible meanwhile getting their own benefits. Digital currency exchanges and remittance agencies can issue their own gateway assets (UIA), which enables capital access on Borderless.

Companies can issue their own stocks directly in the Borderless blockchain, and these BorderlessUIA can be set to fully comply with existing regulatory and related legal provisions. UIA can also be used as a reward coupon, coupons, third party currency, credit, product receipts, public funds, warranty vouchers and so on. Companies that wish to issue their own stocks or bonds on the Borderless network will have to pay a small fee to retain their stock code. These companies can define their own rules and transaction fees, in full accordance with their own requirements to display and trade UIA on Borderless.

2)Decentralized Asset Exchange

Borderless provides a high-performance decentralized exchange, with all the features you would expect in a trading platform. Not only orders are settled the second you submit them, but also can provide you mortgage bonds so to use leverage and provide interest. The option contract also allows you to hedge your position.

Throughout history, centralized exchanges have repeatedly proven unreliable and untrustworthy. Whether it is MF Global,Mt. Gox, or BitStamp, many people have been cheated because they allowed a 3rd party to hold their funds. It doesn’t matter how big they are, or how many auditors, regulators or insurers are involved, every kind of fraud, abuse, and theft can occur. It is time for a change. Keep reading to learn about the benefits of using the world’s first fully decentralized exchange, Borderless.

3)Value of Decentralization

Decentralization gives Borderless robustness against failure. When a centralized exchange is compromised, millions of dollars and thousands of users are impacted all at once. In a decentralized system, any attack or failure impacts only a single user and their funds. Users are in control of their own security, which can be much better than any centralized entity.

There is a fixed cost associated with attempting to hack an exchange or an individual user. The difference is the size of the reward. If you place a multi-million dollar bounty on attacking a specific exchange, then you can expect a lot more effort to be put into compromising that exchange than would be put into attacking your individual account.

Within a given company, multiple people usually have access to customer funds. You may have heard the expression, “Three can keep a secret if two are dead”. Currently, all

centralized exchanges end up depending upon multiple people who share the responsibility of guarding the secret key that controls the funds. If any one of them is compromised, everyone’s funds are put at risk. Because of this, being individually responsible for maintaining your own secrets is the only safe option.

4)Fast, but not too fast

With Borderless your trades execute in seconds, just like any centralized website interface. Unlike centralized exchanges, there can be no high-frequency trading, front running, or hidden orders. This puts all traders on a level playing field.

On Wall Street, traders go to great lengths to get as physically close to the exchange systems as possible, because their trading bots make decisions so quickly that the speed of light is a considerable factor. A decentralized exchange is location-neutral, and gives everyone equal opportunity.

5)Secure

Every Dollar, Euro, bitcoin and ounce of gold held as a SmartCoin on the Borderless exchange is backed by up to thrice the reserves of traditional centralized exchanges. The traditional banking system has long practiced what I like to call “fictional reserve banking”, more commonly known as “fractional reserve banking”. In the Bitcoin ecosystem, we demand at least 100% reserve. A single hack, mistake, or theft can quickly turn a 100% reserve system into a fractional reserve system, or worse, a “no reserve system”. Without any reserves, it is unlikely that an exchange can give you the funds it owes you.

By always maintaining reserves, you can rest assured that Borderless is solvent in almost any market. All of the reserves are kept as BDS held on the blockchain, and they cannot be stolen, because there are no private keys that can be compromised to steal the reserves.

6)No Limits

You can trade any amount, at any time, from anywhere, without withdrawal limits. All other legally compliant exchanges have daily withdrawal limits. Those who wish to exceed standard limits must provide increasingly invasive levels of documentation. Some exchanges, such as Coinbase, even limit what you can do with your money after you have withdrawn it. Other exchanges demand documentation of how you earned your cryptocurrency.

With Borderless, no one must approve your account. You have complete financial freedom.

7)Low Fees

Each transaction only needs to pay a small transaction fee. Other exchanges charge a percentage of your transaction volume. The more traditional exchanges like E-Trade or Scottrade charge over $5 per trade. Taking these price comparisons into consideration, clearly it doesn’t get any cheaper than Borderless.

8)Trade Almost Anything

Trade in Gold, Silver, Gas, and Oil in addition to your national currency and cryptocurrencies. Few limits exists on what can be traded on the Borderless exchange. The Borderless exchange can support assets that can track stocks, bonds, indexes, or inflation. Companies can issue their own stock on the Borderless network and allow easy, low-cost trading with complete protection against naked shorting. What other cryptocurrency exchange allows you to trade in gold and silver? Learn more about how Borderless creates trust-free digital assets pegged to almost anything.

You can earn interest on gold and silver, while what are the other banks or exchanges will pay interest for these two? If the market is very bullish on Borderless, every dollar, euro, Bitcoin and other assets on Borderless will pay you a significant positive rate of return.

9)Open Source and Complete Transparency

Borderless source code has been published in, the global third largest open source site, github.com. All communication is open sourced and is supported by a very open community. There is no other place can be as transparent as Borderless.

10)Privacy

By using Borderless you can protect your privacy. Like Bitcoin, all the transactions are completely open, without getting bonded to your true identity. No IRS documents will be required. Neither will anyone asks for the copy of your passport, driver's license, utilities and credit report.

11)Option

Not only you can complete the traditional transaction, you can also buy and sell options to help hedge your position. All option contracts are fully secured without default risk.

12)Margin and Short Selling

If you want some leverages to increase your income, Borderless enables you to borrow and sell anything, including dollars, gold, silver, Bitcoin etc. All margin positions require 300% of the initial margin and 200% of the maintenance margin, without the need for credit checks

13)Future of Banking

Borderless is under fast development, with its characters and advantages, we can obviously see the future of banking. Eventually we will get a decentralized, trust-free exchange, which can trade with any other exchanges without worrying if they might be closed. If you are interested to see how Borderless operate, you can check “future of crypto-currency exchange”.

Imagine if there is an exchange that allows you to take no risk of exposing your privacy while getting in tough with the other sides when you are buying or selling digital assets. Imagine that if an exchange can provide very low transaction fees while without any deposit or withdraw limits. Imagine you are able to trade with any kind of currency, even gold and silver. Imagine if the market can provide the best liquidity. This is BdsUSD, the best exchange in digital assets industry, our secret weapon.

14)Roles of an Exchange

The roles that traditional exchanges perform today encompass:

1.Receiving cryptocurrency and issuing IOUs.

2.Receiving fiat and issuing IOUs.

3.Processing an order book.

4.Redeeming IOUs.

Each of these stages requires a high degree of trust and direct counterparty risk, because they involve an IOU from the exchange. To get the best liquidity and lowest spreads requires a large and active order book, and this means that most people gravitate toward a few core exchanges, leaving everyone exposed to the same counterparty risk.

Moving money into or out of an exchange often incurs a significant time delay, which means that active traders must keep their funds on the exchange. This magnifies the amount of risk to users of the exchange. It also magnifies the risk to all users in the

cryptocurrency ecosystem. Each large security breach results in significant sell pressure, from both the thief looking to cash in their loot, and from regular users hoping to sell before the thief.

15)Centralization Compromises Privacy

Cryptocurrencies depend upon a public ledger ,which makes privacy challenging, because everyone can see every transaction. Bitcoin gives every user one or more account numbers, and that gives many people a false sense of security. People assume that as long as no one knows your account number and you use a new account number with every transaction that no one can tie all of your bitcoins to your real life identity.

This is where the large centralized exchanges become a problem. In order to comply with government regulations, exchanges must know everyone they do business with. Since many bitcoin transactions flow through an exchange, the exchange learns who everyone is and can start to track who is doing business with whom. Coinbase is already closing accounts based upon who you do business with after withdrawing your bitcoins.

In order to have even the slightest bit of privacy, the exchange functionality needs to be divided among hundreds of parties who are unlikely to collude to compromise identity. This is not economically practical today, because the exchange order book creates market incentives that naturally tend toward centralization in just a few exchanges with the vast majority of market share.

16)Separation of Powers

There is no reason why the same entity needs to be responsible for issuing IOUs and for processing the order book. It is only because these two roles are combined that we have a tendency toward centralization in the Bitcoin exchange space. If we want to create a decentralized exchange then the first step is to move the order book on to the blockchain where everyone can see it.

In this model, exchanges merely become gateways that receive USD and issue GatewayUSD on the blockchain. Later, they receive GatewayUSD and then execute a wire transfer. They will make their money entirely on transaction fees and not from a percentage of market fees.

The blockchain allows users to trade, for example, BitstampUSD against BitfinexUSD, in order to easily move funds from one gateway to another. Users could even trade BitstampUSD against BitstampBTC or BitstampUSD vs BitfinexBTC.

Unfortunately, simply moving the order book to the blockchain is not enough, because the market will naturally centralize around a few gateway IOUs and the markets for them. BitstampUSD is not fungible with BitfinexUSD because they have different trust profiles and regulatory considerations. Any of these IOUs are subject to default just like the IOUs that currently exist on the exchanges’ internal databases. What we need to do is move the trust from individual issuers to the blockchain itself.

17)Collateralized Blockchain IOUs

The heart of Borderless is the BdsAsset system which enables the creation of 300% collateralized IOUs from the Borderless network. A BdsUSD has all of the properties of Bitcoin combined with the price stability of the US dollar. At any point in time you can sell a BdsUSD for at least 1 dollar worth of BDS. If at any time the value of the collateral falls below a certain point the blockchain will automatically buy back the BdsUSD with a dollars worth of BDS.

When you hold BdsUSD the value of your holdings will remain pegged to the dollar so long as BdsShares itself has reasonable volatility. Reasonable volatility in this case means that it can handle greater volatility than Bitcoin has ever seen in its lifetime. The price of Borderless would have to fall to less than 1/3 its starting price in less than 24 hours and then stay there. No legitimate, widely adopted cryptocurrency has ever seen that kind of price movement. This means that BdsUSD is secure against just about everything but an unfixable software bug in the Borderless protocol itself. By the time Borderless matures to the level Bitcoin is at today, we expect the probability of that kind of bug to be similar to that of Bitcoin having such an event.

If you want to learn more about how our system anchors the BdsAsset mechanism through the market, see the detailed article that discusses the mechanism。
18）Global Unified Order Book

Once the market adopts BdsUSD and BdsBTC as more reliable and decentralized alternatives to BitstampUSD and BitfinexBTC, you will see the majority of trading volume move toward BdsUSD vs BdsBTC. The only time someone would want to move from BdsUSD to BitstampUSD is when they are in the process of withdrawing to the traditional banking system.

The impact of a global unified order book is to end all arbitrage opportunities, minimize spreads, and maximize liquidity. By having the trades executed on the Borderless network, we also eliminate high-frequency trading and front running. High frequency trading and front running depend upon centralized exchanges with high volume and

deep markets. When the vast majority of trading activity moves to a decentralized, trust- free exchange, the remaining centralized exchanges become much less appealing to high-frequency traders.

19) Elliptic-curve cryptography

Elliptic-curve cryptography (ECC) is an approach to public-key cryptography based on the algebraic structure of elliptic curves over finite fields. The use of elliptic curves in cryptography was suggested independently by Neal Koblitz and Victor S. Miller in 1985.

7.Referral Rewards Program

Borderless has an advanced referral program built directly into its software to get exponential growth in users. Borderless gives most part of its income by rewarding those who sign up new users.

If you want to join Borderless, you will get a lot by becoming a lifetime member. Lifetime Members get a percentage cashback on every transaction fee they pay and qualify to earn referral income from users they register with or refer to the network. A Lifetime membership is associated with a certain one-time fee, which can make transaction payments and referral bonus easier to get.

Working principle
Each new account must be created by an existing account, and this requirement is to allow the existing account to pay for the account registration fee. The person who paid the fee is the Registrar. In general, this registrar is likely to be a wallet service provider. If anyone is registered as a Lifetime Member, they have the right to divide the referral income and an optional referrer.

If the registrant does not pay to become a Lifetime Member, the new account will inherit the recommended configuration from the registrar account. At any time, each account pay to become a Lifetime Member. When an account is successfully upgraded, the upgrade fee will be assigned to the registrant and the referrer, and the account becomes "its own referrer". When an account is its own referrer, he will receive a certain percentage of cash back for each transaction.
8.Legal Classification of Borderless and Borderless-derived BdsAssets

Before offering our opinion on the legal classification of BdsAssets we want to remind the reader that we are not lawyers and the following does not constitute legal advice. Please consult a legal professional in your jurisdiction before taking any actions based upon our opinions expressed below.

Throughout this paper we make reference to short, long, margin, call and put options and other traditional financial terms and instruments, however these are only analogies used to explain the behaviour of these new BdsAssets. In our opinion these instruments do not meet the legal definition of a financial asset, instrument, bond, or anything else on the books aside from the most generic term 'asset'. Before attempting to classify these new BdsAssets lets review the current definitions.

A financial asset is an intangible asset that derives value because of a contractual claim.

A financial instrument is defined as "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity" according to IAS 32 and 39 (International Accounting Standards Board).

A contract is a voluntary agreement by two or more parties, each of whom intends to create one or more legal obligations between them. A contract is a legally enforceable promise or undertaking that something will or will not occur. Elements of a contract include:

1.Offer and acceptance and Meeting of the Minds
2.Intention to be Legally Bound
3.Consideration
Additionally the parties to a contract must have capacity to contract, its purpose must be lawful, the form must be legal, the intent must be to create a legal relationship, and the parties must consent.

Under European Union Law you must consider the MIFID (Markets in Financial Instruments Directive). This directive defines a regulated market as a multilateral system operated and/or managed by a market operator which brings together or

facilitates the bringing together of multiple third- party buying and selling interests in financial instruments - in the system and in accordance with its non-discretionary rules - in a way that results in a contract in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly in accordance with the provisions of Title III.

The common denominator behind all existing financial assets and liabilities (including cash) is a contractual obligation. If there are no contractual obligations made by any party to any other party then by definition Borderless derived BdsAssets are not financial instruments. So lets see if we can find anything within Borderless that satisfies all or even most of the requirements of a contract.

1)Bid / Ask Transaction Published to the Blockchain

A bid or ask is a cryptographically signed transaction by a single, anonymous party. There is no signature by any other party and no obligation to perform. The bid or ask transaction has no legal standing and creates no legal relationships. This bid or ask is processed by a network of anonymous individuals who have no capacity to contract with the anonymous party submitting the bid or ask. In theory, the bid includes payment to anyone who includes the bid in a block and could be considered signed and accepted by the miner. However, once the transaction has been included in a block there is still no outstanding obligation or legal relationship between the two anonymous parties. Furthermore, simply including the transaction in a single block by a single miner does not actually cause the transaction to be executed. It must also be accepted by all other nodes in the network and even if it is accepted there exists no legal relationship or obligation between any two parties. Furthermore, the result of the accepted transaction is merely an anonymous update to a global shared database and could constitute free speech.

2)Short Sell Transaction Published to the Blockchain

These transactions have all of the properties of a Bid / Ask transaction with the only difference being the type of BdsAsset used as the input to the transaction and the nature of the resulting outputs. It is still signed by a single anonymous party and is never signed by any other party. There is no legal obligation created nor legal relationship between two or more parties.

3)Margin Calls and Covering Executed by Miners

No party has a contractual obligation to provide additional margin nor to force covering; however, no party has the ability to prevent their position from being covered when the majority of the network agrees. As a result there is no obligation of any party to enforce

the margin nor legally enforceable consequences if they do not. In fact, no entity is able to enforce the margin and therefore no one to hold liable for failure to act.

4)Contract Between Developers and Users

Borderless is a protocol for exchanging information that could be implemented by any number of individuals. The developers release the software open source without warranty or promise of any specific behaviour. Users of the software get to choose which version to use and which network to join and therefore are in complete control over how they react to the information they receive from the network. Users are even free to modify their software at will and therefore any actions or decisions made by the software are entirely an extension of the user’s will and not that of the developers.

Lastly, the developers of Borderless have only created an accounting system that manages a decentralized database. The value of any particular entry within this database is not under control of the developers.

5)Exchange Regulations

A centralized Bitcoin / Litecoin exchange run by a market operator can be regulated because upon accepting deposits of the BdsAssets known as Bitcoin or Litecoin, the exchange converts them into a promise to pay financial instrument in the form of an account balance with a particular server.

With Borderless there is no market operator and at no point does any actor in the exchange convert a BdsAsset into a financial instrument for the purposes of bringing together multiple third- parties. The reason for this is that there is no first or second party and no contract between any parties.

Topic: Borderless A Decentralized Digital Asset Exchange Borderless_Whitepaper1.0 (Read 256 times)