Blockchain-based Credit & Payment Platform

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2 Blockchain-based Credit & Payment Platform WHITEPAPER Last Updated : October 15, 2018 LINKA PTE. LTD. 2

3 Table of Contents 1. ABSTRACT BACKGROUND & MISSION BACKGROUND OF LINKA PROJECT LINKA S MISSION BLOCKCHAIN-BASED CREDIT & PAYMENT PLATFORM LINKA TOKEN AND LINKA POINT LINKA CREDIT PLATFORM LINKA PAYMENT PLATFORM OVERSEAS REMITTANCE SERVICE LINKA EXCHANGE LINKA BLOCKCHAIN LINKA BLOCKCHAIN SYSTEM LAYER S CONFIGURATION LINKA TOKEN & WALLET LINKA CREDIT SYSTEM & P2P REPUTATION SYSTEM LINKA SETTLEMENT, PLUG & PLAY APPLICATION OF FORMAL METHOD FOR SMART CONTRACT VALIDATION LINK SERVICE SYSTEM S CONFIGURATION DIAGRAM LINKA MAINNET BUSINESS MODEL & REWARD PROGRAM BUSINESS MODEL REWARD PROGRAM LINKA TOKEN ECONOMY LINKA TOKEN ALLOCATION LINKA TEAM ROADMAP IMPLEMENTATION SCHEDULE MERCHANT ACQUISITION PLAN RISKS & LEGAL DISCLAIMER

4 1. Abstract Blockchain is an innovative and disruptive technology equipped with the potential to change the world. Cryptocurrencies based on blockchain, such as Bitcoin and Ethereum, are meaningful as a digital asset, but for their high volatility and slow speed, they lack the functionality to perform as a medium of exchange and a store of value, which are among the three main functions of currency. Therefore, cryptocurrencies are difficult to accept as currency and expansion is not easy. To overcome these issues, cryptocurrencies must be used widely as an intermediary asset for credit transactions and convenient to use for daily activities, similar to credit cards. LINKA is an innovative project aiming to create a new currency called LINKA by using the blockchain technology and establish a new economic system where consumption becomes income, as opposed to the conventional understanding that consumption is expenditure. While the existing financial and payment systems present issues such as high costs related to credit rating, security, infrastructure and risk management, they also provide benefits and know-how. By tapping into those benefits and knowhow, and utilizing the distribution ledger technology and smart contracts provided by the blockchain, LINKA will dramatically increase the usability of cryptocurrencies and provide innovative services. Token economy, which is carefully designed to ensure that the fruits of growth are fairly distributed to all participants in the ecosystem, including consumers, sellers, and financial companies, according to their contribution to growth, will create a new economy in which 'consumption' becomes 'income' and make this notion a new trend in finance. In the centralized economies to date, only a small number of entrepreneurs and capitalists have monopolized wealth and this has caused social inequality. This is why people are so enthusiastic about a decentralization system as there is the expectation that individuals will play their roles as members of trust networks and will be compensated fairly. The LINKA project seeks to meet that expectation through consumption activities, which are the final destination of humans physical and mental labor. With LINKA, a blockchain-based credit and payment platform, we will unfold a win-win ecosystem in which consumption becomes income rather than expenditure and the initiative and benefits of finance, which have never been experienced by the mankind, will return to all participants. Just imagine! The initiative of finance returns completely to each participating party, and a world where credit cards and cryptocurrencies can be used easily anytime and anywhere with a smart phone. Thanks to the blockchain-based P2P credit extension, the unbanked and underserved, who have been excluded from the existing financial system, will be included in the virtuous cycle of consumption and production and this virtuous cycle will proliferate across the world. LINKA will make the entire mankind experience a new economic system in reality. Link a World! 4

5 2. Background & Mission 2.1. Background of LINKA Project Following the development of the capitalist economic system and technology, the mankind has lived in a better world. Over time, however, wealth and power are concentrated in the few, and the gap between the rich and the poor is further growing. Consumers who have contributed to the growth of the corporations by using goods and services are left out from the growth without any compensation, while entrepreneurs and capitalists are monopolizing wealth. We have come to the conclusion that this reality can be innovated through the decentralized blockchain technology and the creation of new currencies. Just as every technology has proven its value through progress, the blockchain technology will realize its potential through achieving progresses moving forward. As the mankind developed, currency has also developed. When we look at the development of currency that has been developed with bartering, coins, banknotes, and credit cards, the currency which possesses all of the functional attributes the previous currencies could not offer and which provides new value that the previous currencies could not provide, was adopted as a new currency and spread to the mankind. It is clear that blockchain-based cryptocurrencies should provide better values than today's credit cards in order to become a new currency. LINKA realized that in order to make better currencies than credit cards, one must pay attention to the success factors and problems of the credit cards. The spread of credit cards around the world over the short term was due to the fact that people were given credit to spend even without any money. They have promptly replaced the existing currencies enabling payments without cash, finding and using cash at the ATM if needed, and gaining additional benefits such as discounts and mileages. Instead, consumers and merchants have to pay high interest (revolving / cash service / card loans) and fees, and the problem is that the debt increases as you spend. We determined that we must focus on delivering better values to people while embracing the benefits of credit cards and resolving their existing problems. Today, there are many projects in progress aimed at securing the usability of the cryptocurrencies across various locations. However, most projects are limited to specific areas of payment or credit, and no project offers new values as currencies. In addition, projects using international brand networks such as VISA and MasterCard intensify the high cost structure, vary from the basic idea of the blockchain, and are exposed to the risks of policy change of the brand companies LINKA s Mission By instilling the usability and new values into the cryptocurrencies, LINKA aims to create the world's first cryptocurrencies that are used and circulated daily in the course of everyday life. Making an infrastructure that can be used like nominal currencies does not encourage people to use the cryptocurrencies that carry only the value of digital assets. Under the current financial system, consumption is simply spending. Financial institutions, investors, and third parties make tremendous profits. On the other hand, consumers, small producers and sellers are still poor and are faced with hardships regardless of how hard they work. In addition to providing a convenient, secure and transparent financial service with a new cryptocurrency called LINKA, LINKA is also able to provide a more convenient and secure financial service by destroying the common sense of Consumption = Spending and shifting to the paradigm of Consumption = Income through which LINKA has the mission to create a new ecosystem where both producers and sellers grow together and share the products of growth in a fair manner. The LINKA project is different from the projects that simply allow one to pay with cryptocurrencies, change existing systems into cost effective systems, or make opaque transactions transparent. 5

6 Fundamentally speaking, LINKA aims to innovate the economic system. Through the paradigm shift in which consumption becomes income, LINKA seeks social innovation through which the leadership of finance is handed over to the participants, the social cost is minimized, and all the participants are fairly compensated. Through these innovations, we hope that you will join us in creating a new era in which individuals will be happy and the mankind will flourish. 6

7 3. Blockchain-based Credit & Payment Platform The LINKA platform is a comprehensive financial platform that provides blockchain-based credit and payment solutions. People consume with their own assets and loan assets, and most of their consumptions take place in the credit society where the economy has developed. For example, in the private final consumption expenditure in Korea, the percentage of credit card payment and settlement is close to 80%. Banks extend loans based on the deposits of individuals and corporations (business operators), and credit card companies extend credits by providing credit limits for the individuals to expand consumption. In order for the economy to continue to grow, consumption activities are essential, and credit creation for increasing the purchasing power accelerates economic development by promoting consumption. The source of the tremendous profits of the banks and credit card companies is the loan business attracting the payment and settlement accounts and using the average balance of the accounts. [Figure] Existing credit card and bank business model LINKA shifts this into a blockchain-based credit and payment platform. As a result, the LINKA blockchain network replaces the role of the credit card companies and banks, and LINKA users can make payments, cash withdrawals, and take out loans as much as their credit limits. In addition, transparent low cost credit transactions between participating parties and prompt payment and settlement will be available, and fair compensation will be provided to and between the participants through the LINKA reward program. 7

8 [Pic] LINKA, a blockchain-based credit and payment platform 3.1. LINKA TOKEN and LINKA POINT LINKA tokens and LINKA points are the bloodstreams that breathe life into and grow the LINKA platform. LINKA tokens are the medium of all economic activities that take place on the LINKA platform, and are used to compensate the platform participants and pay commissions. LINKA issues only a limited number of LINKA tokens (LINKA Tokens) that meet the ERC20 standard, and LINKA tokens are made available for inter personal transactions and transactions through exchanges. The LINKA Points are issued separately from the LINKA Tokens and are 1:1 equivalent in value to the nominal currencies (fiat). LINKA points are used on the LINKA blockchain platform only. Because LINKA Point is linked to nominal currency, it is used as a means of paying credit limits, fund transfers, payment and settlement and a means of merchant sales payment within the platform, and can be withdrawn at any time in cash. The issuance of LINKA tokens is limited, and LINKA points can be issued without restriction on the basis of cryptocurrencies or appropriate deposits LINKA CREDIT PLATFORM Just as a credit card company would extend a credit limit to its member, LINKA extends the LINKA credit limits to the users. LINKA credit limit is determined by the basic credit automatically calculated at the time of subscription, LINKA token, cryptocurrency-backed credit granted with cryptocurrencies as collateral, and P2P reputation credit via the acquaintances evaluation, etc., which are then reflected in the basic credit after calculation. The evaluation of each item and the calculation of the credit limit are made through the LINKA Credit Scoring System (LCSS). In addition to the LINKA credit limits, the LINKA users can receive additional credit limits in the form of P2P or crowdfunding from other LINKA users. 8

9 Users can freely make their credit card purchases, remittances, cash withdrawals, etc. within the credit limits granted. The LINKA credit platform can also be applied to major cryptocurrencies associated with LINKA, and can be used in real time by the LINKA merchants around the world through an integrated wallet in the form of an Affiliated Card Basic Credit [Figure] LINKA credit platform Basic credit is a credit automatically granted when one signs up for a LINKA Wallet. The identity authentication of the user, the authentication of the mobile phone, the real name verification for the bank account, the retained quantity and transaction volume of the LINKA tokens, and the activity of the SNS are considered comprehensively all together for determination Cryptocurrency-backed Credit A user who has registered a LINKA Token or other cryptocurrency in the LINKA Wallet or a user who has a cryptocurrency and an encrypted token in the LINKA affiliated exchange may obtain a cryptocurrency backed credit at the time of application. LINKA calculates the credit value by assigning the appropriate collateral value in accordance with the price volatility of each cryptocurrency, the price trend, the transaction volume, etc., and offers the LINKA points under the credit limit. In this event, LINKA takes a locking measure against the secured cryptocurrency. LINKA reflects the market price of the secured cryptocurrencies and changes and reflects the secured value and the LINKA credit limit on a daily basis LINKA Loan Apart from LINKA credit limits and LINKA Token-backed credit, LINKA provides loan services with different payback options such as a lump sum payment or installment payment over the period from six months to one year. LINKA loan consists of a credit-based loan that is linked to the Behavior score calculated monthly depending on a user s activities, and a LINKA Token-backed loan connected to the LINKA Token that the user has in his or her possession. LINKA provides lower interest rates compared to those offered by current financial institutions, thanks to its credit and risk management skills. This 9

10 enables LINKA to satisfy the financial needs of users and strengthen their financial soundness. [Figure] LINKA Loan P2P Reputation Credit LINKA users can increase their credit limits using the P2P reputation credit. P2P reputation credit is a credit extension method that utilizes an 'acquaintance s assessment 'that is more direct and useful than the SNS activity that is reflected on the basic credit. LINKA users ask their acquaintances to evaluate their reputation, and if they answer the questionnaire, their answers are interpreted, and additional limits are separately granted. The main evaluation factors are the number of evaluators, the relationship between evaluators and the users (family, colleagues at work, alumni, etc.), and reliability questionnaire scores. The P2P reputation credit is implemented using smart contracts, calculated only at the time of application and reflected in the LINKA credit line. When using the P2P reputation credit, a platform usage fee (paid with LINKA tokens) is charged, depending on the credit scale and the number of evaluators. When the LINKA users normally use the P2P reputation credit limit granted through the acquaintance evaluation, the reward is paid to the evaluator with LINKA tokens. It has been designed so that if the creditworthiness of the user deteriorates, such as by virtue of delinquency or inability to pay, the evaluator 's reputation score will decline, ensuring that the evaluator will evaluate carefully P2P Loan Credit Through the LINKA credit platform, users can receive a loan credit limit among themselves in addition to the LINKA credit limit. Similar to the existing card loans and bank credit loans, it is implemented through smart contracts among the LINKA users. For the P2P loan transactions, LINKA provides the LINKA credit scores and LINKA credit limits, etc., so that the lender can determine the creditworthiness of the applicant, and the lender will provide the applicant with the credit limits established by him or herself. After the P2P loan contract is executed, the loan credit limits and redemption behaviors are monitored in real time and automatically reflected in the LINKA credit score every month. LINKA receives a platform usage fee from the applicant and the lender in exchange for performing the credit rating information, payment and settlement, and notification of special situations. 10

11 Crowdfunded Loan Credit The P2P loan credit is taking credits from a single lender, whereas the crowdfunded loan credit is taken from multiple lenders. The lenders can reduce risks relative to the P2P loan credit extension, and the applicant has the advantage of obtaining a higher credit limit. P2P loan credit and crowdfund loan credit are likely to spread widely across Southeast Asia, Latin America, and Africa, where financial institutions and payment and settlement infrastructure are lacking. Examples include, people with the means within the communities extend credits to the members of their communities, or the users of developed countries extend credits to the users of developing countries, or commodity stores (LINKA merchants) extend credits to local residents and allow them to make purchases, among others. As the government led Official Development Assistance (ODA) contributes to the development of social infrastructure of developing countries, P2P loan credits and crowdfund loan credits based on cryptocurrencies will play the role of a social safety net assisting with the individuals self-support and independence LINKA Credit Scoring System, LCSS The differentiated feature of the LINKA credit scoring system is that it reflects SNS activity and reputation assessment, which is most renowned by and among the credit users. This allows LINKA to extend its credits to the unbanked who lack any credit information and the underserved class struggling with insufficient credit. [Figure] LINKA credit scoring system Another feature is the real time monitoring of usage history, enabling the early detection of risks and reflecting them in the credit. By reflecting the most up-to-date information in the credit, one can lower risks and provide more credit. When various social payments are activated, it is possible to identify the 11

12 social relationships of the users, and so qualitative evaluation will be available. A foundation for big data analysis will be laid out, where true credit evaluation can be made based on a trust network. An AI Assistant, which knows me better than I do, will help me to maintain the health of the LINKA ecosystem by analyzing and advising on my consumption patterns LINKA PAYMENT PLATFORM The cryptocurrency payment and settlement is faced with such issues as long confirmation times, incomplete security, and inconvenient UI / UX. The LINKA payment platform provides a prompt and transparent settlement using a convenient UX and distribution ledger technology utilizing prompt authorization and reverse payment via operating servers. Furthermore, provision of open API enables anyone to participate in the LINKA settlement platform including the existing credit card companies, banks, telecommunication companies, and membership business operators (approximately KRW 200 trillion of global membership marketing costs). This will further promote the securing of the LINKA's global user base and the development of the merchant network. While the cryptocurrency payment and settlement project using the existing card payment networks is dependent on the policies of VISA and Mastercard, among others, LINKA will have a self-sustaining capacity as an independent payment and settlement ecosystem and will replace the international brand network over the long term LINKA Reversed-direction Payment In the era when only merchants had computers, it was efficient to employ the merchant centric payment method based on the customer information received. However, the consumer centric payment method in which the customer receives the store information for payment and settlement is even more efficient and safe way without incurring a personal information leakage. This is more suitable for a cryptocurrency based payment and settlement in which a user directly manages a private key. Converse to the payment procedures of the existing payment card settlement systems, LINKA provides a customer driven, innovative reverse payment and settlement solution through which it forwards the information of the payments to be made by the merchants (merchant s name, product name, price) to the customer's smartphone, whose details the customer verifies and directly executes payment. The characteristics of the LINKA s reverse payment and settlement are as follows. 1) Maximum Security It prevents the leakage of customer's personal information, generates, transmits and receives onetime ID for each transaction to ensure the most secure payment possible. 2) High Convenience & Minimization of Payment Process Consumers can maximize convenience with easy payment of Touch & Confirm, and merchants will be able to concentrate on reducing operating costs and providing quality service by eliminating cumbersome payment processing tasks. 3) Low Cost Payment Consumers and merchants can download free LINKA wallets and mobile POS applications on to their phones, regardless of operating system, and use them immediately without the need for separate devices and installation costs. 4) Integration of Payment and Marketing When a payment request signal is received from a merchant, a complex payment and settlement 12

13 can be made reflecting coupons and points that can be immediately used, resulting in a remarkable increase in the customer convenience. Evaluation of the merchant after payment is also available LINKA Mobile Point of Sale The LINKA mobile POS is a multifunctional free application that can handle both LINKA credit limit payment and settlement based on blockchain and the traditional credit / debit card payment and settlement. The Cloud based method can also enable simultaneous use by the store owners and employees on each of their own smartphones / tables, and even a single smartphone can be used to manage multiples stores. It can be used immediately after downloading the application with a non-faceto-face contract. Since the POS does not handle customer information, there are no risks involved in handling customer information and illegal use. [Figure] Various functions of the LINKA mobile POS The LINKA mobile POS uses sound wave / NFC / QR codes to provide selective or complex payment methods that are tailored to the customer's situation. It also provides remote payment and table order & settlement services, which are used for SNS sellers, delivery, telecommunications vendors, and subscription payment. Coupons, membership (points), stamping services, etc. can be used through simple setting by the small and medium sized merchants who cannot have their own systems by providing sales management, employee management function and merchants self-marketing programs. The LINKA s payment platform uses distribution ledger technology to eliminate complex and time consuming settlement transactions, materializing prompt and transparent settlements. The merchants 13

14 payment is made with LINKA Points, and the merchant can convert into and withdraw cash at any time. If one does not withdraw the LINKA Points immediately, one will receive a reward at the level of bank deposit interest rate LINKA Wallet LINKA Wallet is a multifunctional wallet with which one can make payments under credit limit and payments via credit / debit cards, bank accounts, and points based on cryptocurrencies. LINKA Wallet offers a variety of payment options to satisfy consumers' consumption patterns. Everyone would to have waited in line to make payment in a restaurant or coffee shop during lunch hours. Due to the spread of Dutch treat, waiting time for payment has grown longer. To solve this problem, the LINKA team has developed a differentiated social payment algorithm enabling the use of the LINKA Wallet to settle with acquaintances, split payments, and pay for others wherever desired. [Figure] LINKA Wallet In addition, the Wallet users will be able to exchange their cryptocurrencies with other cryptocurrencies in the LINKA Wallet without the hassle of going to an exchange to cash out their cryptocurrencies, or they will be able to use the cryptocurrency backed credits and receive the LINKA credit limit immediately for use LINKA Payment Process The cryptocurrency based LINKA credit payments are approved in real time via the LINKA s operating server and are quickly settled. Meanwhile, traditional credit card and account transactions can be processed in real time by using LINKA reserve to reduce the complex processing process and costs by directly connecting a card company and a bank without going through the existing Payment Gateway (PG) and Value Added Network. During the payment and settlement process, cancellation transactions such as exchanges and refunds are always generated at a certain ratio of all transactions for each type of business. In general, credit 14

15 card payments can be canceled before executing purchase, and since the customer is billed after a certain period of time, cancelling approval after purchase can also be very convenient. However, the settlement of cryptocurrency is difficult due to the nature of irreversibility. LINKA does not use cryptocurrencies directly for settlement, but because it uses its own LINKA points secured by cryptocurrencies, cancellation transactions are easy to process. Since the cancellation of credit card settlement must follow the settlement process of the credit card company, a certain ratio of the LINKA point balance paid to the merchant is locked against cancelled transactions. [Figure] LINKA s payment and settlement platform process 3.4. Overseas Remittance Service A new type of remittance services can be provided using the LINKA s credit and payment platforms. Considering that competition is fierce in the overseas remittance market with regard to remittance fees, LINKA provides much-reduced remittance fees, which is enabled by blockchain technology, and creates a new value produced by increased assets. Sending money is fast and transparent as this is done with the transfer of LINKA Token or LINKA Point in the blockchain system, and a receiver can withdraw cash in the local currency instantly. Up to this point, there is no difference to the existing financial institutions or global remittance companies except for the remittance service charges. The distinctive feature of the LINKA services is that the receiver can use LINKA Token or LINKA Point directly for shopping without having to selling them or converting them into cash. This feature contributes to increasing a user s assets as LINKA Token will be given as a reward for any purchase. If a receiver is unbanked, the receiver needs to visit a designated outlet or merchant to withdraw money received. This takes time and effort to go through and complete the necessary steps such as identity verification on top of remittance charges. However, with LINKA, not only LINKA-affiliated merchants but also any user with a LINKA wallet account can function as a cash withdrawal outlet. Convenience is even increased as parties involved can determine a transaction fee as they wish. 15

16 [Figure] LINKA s overseas remittance services 3.5. LINKA Exchange Similar to the BTC market, users can exchange LINKA Token for Bitcoin, Ethereum and other cryptocurrencies on the LINKA Market, an exchange platform, where LINKA Token is the key currency. One of the benefits of using the LINKA Market is that the exchange between LINKA Token and cryptocurrencies is easy and convenient as there is no need to go through a complicated registration process. Also, promising cryptocurrencies that have undergone a review and met LINKA s criteria to be listed on the LINKA Market can take advantage of the same benefits as those of ICO without having to pay high listing fees. Lastly, users who urgently need money can get a loan backed by LINKA Token simply by exchanging their cryptocurrencies for LINKA Token without having to sell them. It is expected that as the LINKA s ecosystem expands it will attract more users who may eventually become users of LINKA Exchange. Thus, the LINKA s Exchange presents high growth potential to become a top-tier global exchange. 16

17 4. LINKA BLOCKCHAIN 4.1. LINKA BLOCKCHAIN SYSTEM LAYER S CONFIGURATION The LINKA blockchain system is consisted of 4 layers. [Figure] LINKA s blockchain system layer LINKA Core Blockchain The LINKA core blockchain is implemented by applying "LINKA PoA", which is a most effective consensus algorithm for securely processing large scaled transactions, including the blockchain s main components of distribution ledger and smart contract management and operating platform. The LINKA core blockchain layer is a consortium of private blockchains shared by multiple participants and must satisfy the following requirements. Share the distribution ledger between participant groups whose interests collide yet are generally based on trust New participants can participate easily, and the blockchain nodes can be operated in par with each other Pursue efficiency and stability by naturally reducing the participation of non-performing blockchain nodes Consensus algorithm whose performance and scalability are assured to facilitate large scaled volume transaction processing and expansion While there are some cases where the private blockchain for corporation is restricted in use only for the corporations and so a consensus algorithm is not used, the LINKA system intends to approve transactions transparently and promptly using the "LINKA PoA" consensus algorithm. In the LINKA blockchain network, a combination algorithm of generating blocks is used, through which the participants monitor each other in an equitable way and maximize the unique functions of the blockchain controlled. 17

18 Consensus algorithm and technical review Since the financial system must ensure the highest level of reliability, a conservative approach is needed, and accordingly, a validated block generation consensus algorithm should be used. Recently, various methods for increasing the TPS have been attempted, but LINKA believes that the methods can be applied after validation. Therefore, we intend to apply PoA, an open Ethereum sidechain with Proof of Authority consensus, reached by independent validators, and LINKA PoA, which applies the current structure of restricting the validator to a small number of participants to the consortium. This may be said to be suitable for the LINKA s blockchain networks that are planning global expansion while simultaneously maintaining a core blockchain of atypical integrity Consequently, "LINKA PoA" will result in a relatively faster acquisition of the final distribution ledger accepted by all consortium participants, thereby eliminating the need for additional processes to mutually identify the participants' ledgers and saving costs. In the case of an extremely large number of participants, in addition to the consensus algorithm change, participants of close relationship can share the chains in such ways as Sharding, Channel, Layered, or Ethereum s Plasma, enabling smooth operation. In addition, LINKA tokens and smart contracts support ERC20, and since theoretical logic validation takes place, transfer to a better performing blockchain platform is also easy LINKA Account and Smart Contract The logic on the LINKA blockchain is implemented on a blockchain that provides a Turing complete environment based on the Church-Turing Thesis (Alonzo Church , Alan Turing ). The blockchain itself is becoming an extensively used platform as the Turing completeness environment is fully provided to the blockchain starting with Ethereum, and so its use is rapidly expanding. This expanded environment is referred to as a virtual machine (VM) and the utilization area is referred to as a smart contract. Logic and rules written in smart contracts are permanently recorded in the LINKA s core blockchain and executed without forgery or falsification. The contents recorded in the smart contract are the LINKA Token and LINKA Token Smart Contract, the account-based LINKA Credit, the LINKA Credit Scoring Smart Contract, and the LINKA Settlement Smart Contract, which are recorded in the LINKA blockchain for transparent and fair management. The LINKA blockchain system requires a conservative Fault Tolerance issue approach, scalability and time driven integrity, and a Turning complete environment. So first, we will implement the LINKA s core blockchain-based on Ethereum. Ethereum satisfying the above conditions has been validated for a relatively long period of time and also supports ERC20 compatible tokens so that additional tokens can be issued or migrated to various blockchain platforms. The LINKA payment and settlement system is a private consortium chain that will be built through Ethereum, and credit and credit related evaluations will be built with some public chains and some consortium private chains, and LINKA tokens will be built through public chain and will be linked with credit networks via the LINKA inter-blockchain network. The LINKA core blockchain can be built in any blockchain that provides VM in a Turning complete environment. 18

19 BaaS (Backend as a Service) The third layer is a service of APIs provided via BaaS, and consists of BaaS App, BaaS Management App / Web, BaaS Business API, and BaaS Extended Business API. The BaaS App is a backend service that links to LINKA's application services, including LINKA Wallet and LINKA Mobile POS. BaaS Management App / Web is a service for providing management application and web for business partners such as small business owners who do not own a legacy system, and enables the handling of work such as balance and payment and settlement. The BaaS Business API is an API required for system connection for business partners who own a legacy system and can automate system operation through the process integration of legacy systems. The main contents include management modules such as LINKA token, LINKA credit, and LINKA payment and settlement. The BaaS Extended Business API provides an API for business partners to implement additional business models. Business partners can expand the added values of the LINKA network and generate profits via direct or indirect expansion of such businesses as by linking LINKA token, LINKA credit, LINKA settlement, among other basic modules, to other blockchain networks, linking to other virtual currencies, and by linking to key exchanges. The LINKA distribution API service follows the RESTful (Representational State Transfer) API method. The participants of the consortium communicate with the LINKA API server using the encryption tokens issued by the LINKA API and organize services. By carrying and exchanging JWT (JSON Web Token, HS256: HMAC with SHA-256) tokens, all packets can be checked as to whether they are the data transmitted from the authorized users, whereby abnormal service calls and operations are fundamentally blocked or ignored. Packet communication can be reliably serviced without being made public by using HTTPS built on SSL (Secure Sockets Layer, SHA-256). Through the LINKA BaaS, participants of the consortium will be able to develop and utilize services such as LINKA Credit, LINKA Settlement, and LINKA Token Application Service The LINKA Application Service is divided into the LINKA Wallet used by general users, the LINKA mobile POS app used by business partner (BP) operators, and the management and operation UI / UXs used by the consortium participants and business partners. Each user of the application service is encrypted with a private key and a public key, and is constructed as a BaaS (Backend as a Service) that implements packet security. The packet is encrypted so that the sensitive credit information of the user is communicated securely with the server, and only the information approved by the user is disclosed to the participant who is allowed to share such as the consortium companies. The LINKA Wallet used by general users carries the same level of security and authorization capacity as the Internet banking and other financial service applications LINKA TOKEN & WALLET The LINKA token is issued to the public Ethereum blockchain. The tokens issued to the public blockchain are easily circulated and can be listed at the exchange. The issued tokens can be found in the LINKA Wallet. LINKA Wallet can store cryptocurrencies such as Bitcoin and Ethereum as well as LINKA tokens. The credit limits of the users based on the LINKA tokens and other cryptocurrencies held 19

20 are recorded in the LINKA credit blockchain, whereby the participants participating in the credit blockchain can inquire on and use them as per that authority LINKA CREDIT SYSTEM & P2P REPUTATION SYSTEM In the LINKA's credit system, the user's credit is encrypted and stored in the LINKA core s blockchain. For the efficiency of the LINKA credit chain, only the changed data are stored in the blockchain. The reputation credit rule is applied through the second layer of Smart Contract. [Figure] Credit & P2P Reputation Smart Contract Ethereum's Turing complete environment, where LINKA's smart contract will be uploaded, is called the Ethereum Virtual Machine (EVM), and it implements the LINKA smart contract with a programming language called Solidity. Using Solidity, credits and scoring methods of mutual evaluation methods are transparently expressed in smart contracts. All users will be evaluated in the same way, and the basis and calculation process of the evaluation will be recorded transparently. While keeping the credit information in the blockchain, the user will maintain secure and transparent credit information. The LINKA credit blockchain carries the user's credit information. This information is encrypted with the public key and the private key by the RSA-2048 algorithm, which only the authorized participants can view. The LINKA credit blockchain, when used, allows users to encrypt and share rapid credit changes such as bankruptcy, which requires immediate delivery to the participants. If there is no need to immediately record the credit changes in the blockchain, the data are collected and recorded in a specific unit, thereby providing the optimum information transfer capability among the participants. That is, the data to be transferred immediately and the data to be transferred are distinguished from each other and recorded in the chain, thereby optimizing the efficiency of the LINKA blockchain. An individual's credit rating recorded in a smart contract is securely recorded in his or her own signature and is encrypted so that it can be viewed only by the individual with the authority and by the institution, etc., authorized by the individual. 20

21 4.4. LINKA SETTLEMENT, PLUG & PLAY LINKA SETTLEMENT BLOCKCHAIN Settlement in a credit transaction is the final phase of the transaction, and the ledger on which the settlement data are recorded is one of the most important ledgers. Since matters concerning the actual financial transactions must be finalized, should the information carried by each participant vary from each other, the integrity of the ledger must be maintained by undergoing specific reconfirmation procedures. The first step in the payment and settlement is to aggregate and organize the final data of each participant. The final data are matched through the work of comparing the data so arranged, and manual processing is also common. When LINKA core blockchain is used, these series of processes are automatically settled each time the amount of data set by the consortium is accumulated, and if there is no problem with each other's data, the result will automatically be finalized. At this time, the settlement data block is encrypted with the public key and the private key using the RSA-2048 encryption algorithm to ensure that only the two subjects of the settlement can ascertain them. [Figure] LINKA Settlement Blockchain As described in the above, the blockchain induced payment and settlement information can arrive at the final settlement within a few minutes after the summation of data, rather than generating the final settlement data in the units of one day or several hours, and the amount to be settled is determined and recorded in the blockchain Plug & Play PAYMENT Financial companies, third parties, large scale markets, and franchises have their own payment and settlement systems. To participate in LINKA's payment platform, the LINKA settlement need to be linked with. To this end, LINKA and settlement system can be linked by using API provided by LINKA, but LINKA builds decentralized settlement system using plug and play settlement technology. LINKA's plug and play payment is authorized to build nodes in the LINKA settlement blockchain as the authorized partners participate in the consortium, and participation in the settlement system is 21

22 immediately effectuated by building and maintaining own nodes. Each participant must receive and manage the encryption key, and must comply with the specified data format and protocol. It is possible to reach the settlement ledger only by unidirectional data processing which records only the nodes of the LINKA settlement block managed by the participant him or herself. [Figure] LINKA Plug & Play Settlement 4.5. APPLICATION OF FORMAL METHOD FOR SMART CONTRACT VALIDATION Need for Smart Contract Validation The Turning complete environment which enabled smart contracts provides many degrees of freedom in the blockchain ecosystem, however, the risks and damages of any misuse are irreversible. The decentralized autonomous organization (DAO) hacking incident that occurred in June 2016, which was one of the biggest events in the history of blockchains, is due to the vulnerability of smart contracts. Due to this incident, the Ethereum community was forced to make a hard fork and split into Ethereum and Ethereum Classic. ( This was the result of the misuse of smart contracts which had a devastating impact on the reliability of the entire blockchain ecosystem. As such, validation of smart contracts cannot be overemphasized Introduction of Formal Method for Smart Contract Validation Smart contracts carry mostly simple logics and assume a distributed environment, but they use a single environment that the blockchain environment basically provides. Therefore, a standardization technique using a single process validation method may be applied. 22

23 [Figure] Hoare Logic for formal validation technique Hoare logic was proposed in 1969 by Tony Hoare, a British computer scientist and logician, and is used as a programming language validation or software formal validation technique. If a smart contract is verified with the Hoare logic, and if only a validated smart contract is applied, a logically immaculate smart contract can be created and applied. This will allow participants to trust the smart contract and prevent irreversible damages caused by incorrectly executed contracts. 23

24 4.6. LINK SERVICE SYSTEM S CONFIGURATION DIAGRAM The system configuration diagram of the LINKA service including the blockchain system is as follows. [Figure] Structure of the LINKA system The LINKA blockchain cluster is a collection of private blockchains, consisted of chains of 3 or more consortium blocks for different purposes. Based on which, the Backend as a Service (BasS) services are provided to the service server group and consortium participants. LINKA tokens will be issued in the public domain, and consortium participants (Business Partners) and customers will participate through dedicated applications and software LINKA Blockchain Cluster It corresponds to the LINKA core blockchain layer, and is consisted of a distribution ledger for recording transactions and a blockchain for executing credit and settlement related smart contracts. The LINKA blockchain participants, by basically constructing the corresponding blockchain nodes on their own and connecting with the blockchain network, can generate or inquire on the blocks in par with LINKA. 24

25 LINKA Main Service It is the area where the blockchain DApp area and the existing server area are included, and it is an area for constructing a comprehensive server service. It is constructed as a service server by integrating various areas such as a blockchain area, an RDB area, a NoSQL area, and a memory cache area. The User System has user information, card usage information, reward information, merchant information, and currency exchange information. Some important information is recorded in the blockchain when changed, and personal information that requires modification or history deletion is stored in the RDB or NoSQL area. Since the data recorded in the blockchain cannot be deleted, and following the information protection policy, the specific details of the personal information are not carried in the blockchain, yet only the unique ID values are stored, and the actual data are provided in the form of BaaS through the LINKA system. When data are accumulated, it will provide recommendation service and optimized service using artificial intelligence which is learned by machine learning or deep learning LINKA BaaS (Backend as a Service) BaaS is a backend service provided to participants who want to provide LINKA services to the users or to provide their own services using LINKA platform. 1) BaaS App The BaaS App provides APIs enable the LINKA wallet and LINKA mobile POS to operate. By providing API, application development can be achieved efficiently, and the customer's needs can be reflected in the most expedient manner possible. 2) BaaS Mgmt App / Web Through BaaS, partners such as small merchants who do not have legacy or linking systems can perform direct management (payment, settlement, etc.) through App or Web. 3) BaaS Business API / BaaS Extended Business API Participants can build their own services through BaaS, however, the functions which the business partners will generally use are provided through the APIs. The POS system, Membership, and the Legacy systems are implemented for provision, through which they can easily take on their roles as the partners of the LINKA system. The BaaS Business API provides management APIs such as LINKA credit and LINKA settlement, and the BaaS Extended Business API provides basic functions such as LINKA credit and LINKA settlement, and the API necessary for additional business link (linking other blockchains, linking other coins, linking exchanges). 25

26 There are 3 ways to participate in the LINKA platform. 1. Blockchain node s creation and maintenance: Participants who build their own DB and large scale services (i.e., financial companies, large markets, and credit card companies) 2. Building a self-service using BaaS: Participants who intend to build a custom service without their DB 3. Use of BP system: Participants who easily utilize the LINKA platform through PC and mobile client LINKA MANAGEMENT The LINKA management system is a system for managing the entire LINKA platform, and it is also a general system management tool such as user management, currency exchange, system operation, and promotion management. It monitors the quantity of each coin under possession following the exchange of the users, determines the exchange rate, and manages user data management, reporting system, security monitoring and varied management for various systems LINKA Mainnet As mentioned above, the early version of LINKA s core blockchain is implemented by applying the PoA algorithm based on Ethereum. Since Ethereum is a public blockchain in essence, there exist overheads unsuitable for the consortium blockchain on which LINKA operates. The servers on the second, third and fourth layers in the LINKA system are implemented taking this characteristic of Ethereum into account. The low TPS and other overheads will not affect the quality of the services at the beginning. However, as the services expand and traffic increases with the need to contain more information such as detailed payment information, the limitations of the system will call for the development of a LINKA s own Mainnet. In preparation for that, LINKA is working on the design and implementation of the Mainnet P2P Topology The P2P network, a network model that is a basis of blockchain, usually takes a distributed Mesh topology. However, the recent blockchain development trends point to the employment of a partially centralized topology through the delegation process and the technique that controls the number of nodes that create blocks. The attempts to overcome the shortcomings of the early version of blockchain are being made even by 26

27 modifying data models. While these attempts are meaningful, they may negatively affect the fair distribution environment which is the key function of blockchain and accordingly affect the integrity and transparency of blockchain. LINKA Mainnet can improve the performance using the optimized topology without modifying the data models and any restriction in terms of the number of the nodes creating blocks Topology Optimization Algorithm LINKA s blockchain opts for the optimization of topology in order to improve TPS and scalability to the maximum. Since the nodes participating in the consortium already have authority, TPS can be improved by figuring out the optimal route for the entire nodes involved or by optimizing topology with its own algorithm or a heuristic algorithm. As the LINKA Mainnet applies the consortium type PoA consensus algorithm, when a node records a block all the remaining nodes are aware of the node recording the block. The problem with the optimization of the route that all participating nodes pass through is similar to CMST(Capacitated Minimum Spanning Tree) in computing theory. CMST, the modification of MST(Minimum Spanning Tree), involves the question of how to optimize topology with the maximum tolerance range given. Ultimately, it is the same question that we are trying to solve. In the early stage of LINKA where the number of participating nodes is low, the optimized route and topology can be figured out easily by employing a Greedy algorithm which enumerates all possible numbers to find the optimal solution. However, finding the solution of CMST is the NP-hard(Non-deterministic polynomial-time hardness) problem. It implies that when there is a slight increase in the number of participating nodes the time that takes to solve the problem will increase tremendously and disproportionally that it may become impossible to solve the problem within a given time or to predict the time required. Therefore, a heuristic algorithm used frequently for AI will be employed to find the optimal solution. The best known algorithm for the CMST problem is the Esau-Williams heuristic. The best performance of the LINKA s blockchain system will be ensured by developing its own algorithm that is most suitable for its system, and testing, updating and optimizing it continuously while adhering to the fundamental architecture of blockchain. 27

28 5. BUSINESS MODEL & REWARD PROGRAM 5.1. BUSINESS MODEL LINKA has a business model for each platform. The business model of the LINKA credit platform is the commissions and fees including the loan interest paid by the users of the LINKA Wallet at the time of making cash withdrawals by using credit limits and P2P credit limits and the usage fees for applying for reputation paid at the time of applying for the P2P reputation. The business model for the LINKA payment platform is consisted of merchant fees, merchant self-marketing solution fees, and marketing success fees. In the long run, it also plans to generate profits from its Big Data business, which uses accumulated credit and payment data. In addition, platform fees such as remittance and exchange fees will become key revenue sources in the long run. Fees may vary due to different processes and different stakeholders by means of payment, but by using blockchain technology, omitting the interim step will greatly reduce commissions compared to traditional services. In addition, as the LINKA ecosystem expands, transaction fees will continue to decline over the long term due to the economy of scale. [Table] Revenue sources by platform Object Payer Fee Credit Platform APR P2P Reputation Evaluation Credit Consumer ~10% ~$10 Payment Platform Merchant Fee Self-marketing Solution Merchant ~1.0% ~$10 (Success fee:~10%) Platform fee Exchange User ~0.5% Overseas Remittance Sender ~1.0% Others(Big Data business etc.) User TBD 5.2. REWARD PROGRAM Combined annual operating income of Visa and Mastercard, the world's largest card companies, exceeds USD 26.8 billion (as of 2016). The commissions and fees of the quasi tax nature that go to Issuers & Acquirers and third parties are more than ten times that amount. Just imagine how good the world will be when the profits will be distributed fairly to the participants, such as consumers and merchants, who have participated in the cryptocurrencies based payments and settlements. LINKA pursues a win-win relationship as a company that fulfills its social responsibilities and operates a reward program in which all platform participants are rewarded according to their contribution in order to settle a new credit and settlement paradigm, the LINKA platform, and spread globally. Regardless of the means of payment, including cryptocurrencies and existing card payments, all transactions using the LINKA platform will be compensated with the LINKA tokens for all participants, such as the users, merchants, reputation evaluator and business partners. 28

29 It will also provide the existing credit card payment users with new experiences that will enable them to familiarize themselves with their cryptocurrencies in their everyday lives and use them, where consumption will be income. [Table] LINKA Reward Program Object Reward Means of Reward Credit/Debit/Prepaid/Bank account/point Payer 0.1% ~ 10% of the amount paid LINKA Token LINKA Credit Limit Payer 0.5% ~ 10% of the amount used LINKA Token P2P Reputation Evaluator 10% of reputation evaluation fee LINKA Token Merchant Interest on delayed withdrawal of funds owing to merchant LINKA Point Participants can use the LINKA Tokens earned as rewards like cash in the LINKA ecosystem and exchange the LINKA Token for other cryptocurrencies such as Bitcoin (BTC) through the LINKA Wallet any time. 29

30 6. LINKA TOKEN ECONOMY The LINKA 's mission to create a new economic system in which consumption becomes income is completed through the LINKA Token economy. The user of the LINKA platform receives a reward with LINKA tokens for a certain percentage of the amount used. Since the LINKA tokens are fixed in their volume of issuance, the company must continue to buy them from the market to provide rewards. The greater the LINKA s transaction volume, the greater the demand for LINKA tokens to be rewarded. In addition, the merchants can secure the necessary funds for business expansion through the SOHO Loan with the LINKA tokens as collateral, and since the users can increase the credit limit by using the LINKA token received as the reward for collateral, the trading volume of the LINKA tokens will continuously decline. According to the law of supply and demand, prices rise when demand increases in a limited supply situation. Therefore, the value of a LINKA token must continually increase, and the value of a LINKA token received as a reward will be greater than the money spent by the customer. The token economy where consumption becomes investment and investment becomes income is a new economic system created by LINKA. In the LINKA Token economy, the value of the LINKA tokens will continue to rise, and investors and users who participate in the early stage of the LINKA platform are expected to benefit more from increases in the LINKA token s value. [Figure] LINKA Token Economy LINKA will create a world where all participants in the ecosystem will share their wealth by compensating all participating parties for the incremental value of the LINKA tokens, eliminating all costs, and providing additional profits. 30

31 7. LINKA Token Allocation We will allocate 30% of LINKA Token for a private sale, 30% as funds reserved for rewards, 20% to early investors, 10% to strategic partners and early contributors, and the remaining 10% to the LINKA Team. 31

32 8. LINKA TEAM The LINKA team is consisted of experts who have been directly involved in the blockchain and credit card business at IBM, Visa, American Express, Samsung Card, Shinhan Card and BC Card, and have the capacity to successfully carry out the projects planned by LINKA. [Key members] Justin Lee CEO, LINKA Global Director, Business development at IBM Partner, strategy consulting supervision at EY MBA, Boston University BA, Washington State University Jonathan Kim CEO LINKA Korea Advisor & Member, Korea Blockchain Association Deputy CEO, Berith Korea/JINNHYUN Security Team leader, Electronic Finance Team, Bank of Korea Master s in Finance IT, Konkuk University Bachelor s in Statistics, Dongguk University Sen Han CMO, LINKA Korea Marketing / Branding / PR / Advertising Expert Gyeonggi-do, LG Telecom, Oricom Master s in Advertising, Michigan State University Bachelor s in Psychology, Seoul National University Heesik Choi COO, LINKA Korea Credit Card / Payment Expert Shinhan Card, Shinhan Bank BS/MS in Economics, Korea University 32

33 Juyuep Na CSO, LINKA Korea Credit Card / Payment Expert BC Card, Shinhan Card, LG Card MBA, University of Washington Bert Shim CTO, LINKA Korea CTO, COM2US Samsung Electronics BS/MS in Computer Science, Korea University Wonseok Kim Director, LINKA Korea Credit Card / Payment Expert Samsung Card BS in Computer Science, Korea University Jinmin Kim Director, LINKA Korea Blockchain Expert Coinplug, Hyundai Information Technology BS in Electrical Engineering, Kyung Hee University Dongmin Shin S/W Architect, LINKA Korea Blockchain Developer Ministry of Science and ICT, Samsung Electronics, SKT, etc. Developed many 33