2) Financials 6 2.1) ICO 6 2.2) Fees 8. 3) Roadmap 10

Transcription

1

2 Table of Contents 1) Introduction 2 1.1) Benefits of a Decentralized Exchange 2 1.2) Why Tron? 4 1.3) TronWatch Market 4 1.4) Market Opportunity 4 1.5) About TronWatch 5 2) Financials 6 2.1) ICO 6 2.2) Fees 8 3) Roadmap 10 4) Exchange Features ) User Experience ) Market & Limit Orders ) API ) Utility DApps ) White Label Exchange ) Referrals 13 5) Architecture ) Core Use Cases ) Smart Contracts ) Order Matching Engine ) Website ) API 27 6) Conclusion 28 7) Appendices 29 1 of 33

3 1) Introduction In August 2018, the daily trading volume of cryptocurrency exchanges averaged between $5 billion and $8 billion. Despite the fact that cryptocurrencies like Bitcoin were developed specifically to decentralize the nature of financial transactions, the bulk of this trading activity is still primarily executed on centralized exchange platforms, such as Coinbase or Binance. Centralized exchange platforms, while offering certain benefits like speed and cross-asset swaps, require an element of trust. They leave users vulnerable to hacks and do not give you direct control over your own money. Decentralized exchanges (DEXs) enable peer-to-peer trades. They do not rely on third-party operators to handle user funds; instead, all funds are managed by an immutable smart contract. Smart contracts establish an agreement between parties, and the rules for that agreement cannot be modified or bypassed in any way. This allows two parties to transaction directly, without a need to trust or even know the other party. 1.1) Benefits of a Decentralized Exchange Centralized exchanges hold user funds. They are intermediaries that act as middlemen to facilitate trading. When you deposit money into a centralized exchange, you are sending the funds to the exchange operator in return for an IOU in their private database. All trading happens in their private database. The promise is that you can later withdraw your funds - for a fee. Below are some benefits of a decentralized exchange we would like to bring to the Tron network ) Funds Secure Centralized exchanges can be hacked. They are holding funds on behalf of their users, which can amount to a lot of money. This makes centralized exchanges targets for hackers. Just this year (2018), we ve had a few major exchange hacks, including Coincheck for $500 million, Bitgrail for $195 million, and Coinrail for $40 million When a hack occurs on a centralized exchange, everyone suffers. The exchange typically halts operations during an investigation, and it might take months before they are fully operational again. Depending on how much the exchange loses, they may deduct holdings from all users to offset the damage. And as we are still seeing play out with Mt Gox, they could go bankrupt and spend years in court before users can access any of their funds again. 2 of 33

4 With a decentralized exchange, a smart contract either holds funds for trading or has permission to spend on your behalf. At first, this sounds comparable to a centralized exchange; however, with a smart contract, the rules for how those funds are handled are immutable. There is no server that could be compromised in order to steal funds, no individual or group with administrative privileges, and no way anyone could access a user s funds without a valid signature from that user approving a trade ) No Personally Identifiable Information When you trade on a decentralized exchange, only your public address is known. There are no accounts and no need to go through Know Your Customer (KYC) ) Accounts Cannot be Frozen Centralized exchanges may freeze your account at any time, and are often required to do so in order to comply with local regulations. When this occurs, you can neither trade nor withdraw. So, not only are you prevented from accessing your money, you may get trapped holding a coin or token you wanted to sell. There is no way to freeze an account on a DEX. No one can prevent an account from interacting with the smart contract, so users can always make trades or withdraw funds ) No Downtime A centralized exchange periodically goes down for maintenance, and during this time all trading is halted. More commonly, centralized exchanges can have issues which impact specific coins - for example, issues which may result in a suspension of withdrawals for an unspecified amount of time. There is no downtime with a DEX. As long as the chain is available, the DEX is operational ) Cheaper Withdrawals We ve seen centralized exchanges charge high withdrawal fees. And on a centralized exchange, you may not be able to withdraw your entire holdings, leaving a few pennies behind here and there. With a DEX, you only pay the on-chain transaction fees. There are no minimums or other limitations on the quantity when withdrawing from a DEX, and therefore there is no dust left behind. 3 of 33

5 1.2) Why Tron? Tron is a relatively young platform, having launched their mainnet in June With its goal to decentralize the web and its focus on creating a DApp-friendly infrastructure, Tron is sure to attract developers and ICOs. There is potential for many tokens to be available on the Tron Network in the near future, and TronWatch wants to help them be successful. 1.3) TronWatch Market To that end, we are creating TronWatch Market, a decentralized exchange (DEX) which will allow you to trade any Tron token safely and securely. TronWatch Market will greatly increase liquidity and bring value to each token on the Tron Network. DEX funds are managed by a smart contract and never in the possession of any other individual or entity. With a DEX, your funds are always secure and your account will never be frozen. Our previous contributions to the Tron community have proven to be of value to the network, and we are eager to take the next step with the development of this exchange. 1.4) Market Opportunity Tron is positioning itself to enable more ICOs. They will be competing with Ethereum, where users have grown frustrated with the unpredictable fees and slow progress towards addressing the scalability concerns. Companies launching ICOs on Tron will need a place for their tokens to be traded. At the time of this writing there is no DEX supporting the Tron network. It s a bit of a chicken and an egg situation: ICOs need a DEX before they can launch on Tron, or risk having no way of trading while they seek approval from a centralized exchange. 4 of 33

6 Since there are no decentralized exchanges for Tron yet, looking at the daily volume of the top decentralized exchanges on Ethereum may provide some insights into the upcoming market opportunity ( from DApp Radar in Sept 2018 ). Exchange Daily Volume (USD) IDEX $1,380,642 ForkDelta $394,250 Bancor $378,981 LocalEthereum $71,509 Kyber Network $32, ) About TronWatch We ( TronWatch ) are a team of developers working within the TRON blockchain ecosystem. Our contributions to the community include the TronWatch Desktop Wallet and the TronLink Chrome extension. We were also involved in shaping TronWeb. Our only focus is helping TRON reach its full potential. TronLink ( github ) TronLink provides similar usage to the Tron Network as MetaMask does with the Ethereum Network. Developers are able to create and interact with dapps in the browser, which opens up a whole new realm that Tron has never seen before. Desktop Wallet ( github ) TronWatch is a fully Open Source Wallet for TRON. It covers all the important features the protocol has to offer. You can send, receive, vote, and buy tokens with this wallet. Supports Windows and Mac OS. 5 of 33

7 2) Financials Below, we discuss our ICO and how we will be funding development, covering launch expenses, and funding ongoing operations. 2.1) ICO The TronWatch Market token (TWM) will be launched as a TRX10 token on Tron. TRX10 tokens are supported by Tron natively and include ICO functionality. This leverages an existing standard, so people interested in participating in the ICO know exactly what to expect. The TWM token will be available during ICO for 0.5 TRX per token (approx $0.01). There will be three milestones for the ICO, shown below. Milestone Amount (USD) Soft Cap $270,000 Feature Unlock $2,000,000 Hard Cap $5,000,000 We must hit the soft cap in order to proceed. If the ICO fails to raise this amount, all participants will be refunded. Reaching the Feature Unlock milestone will allow us to fund additional development, adding several valuable features mentioned throughout this document. It s important to note that even without these additional features, we are offering a complete DEX which we believe people will love. If the ICO sells out completely, we will have collected no more than the stated hard cap. 6 of 33

8 2.1.1) TWM Token Allocation There will be 1,000,000,000 TWM (1 billion) issued in total, for the following purposes: % Amount (TWM) Participant 50% 500,000,000 ICO* 25% 250,000,000 Founding team** 10% 100,000,000 Advisors 10% 100,000,000 Marketing 5% 50,000,000 Security / bug bounties * ICO supply not sold in the ICO is burned. ** Vests monthly on over the course of 2 years. The vesting starts 3 months after ICO ) ICO Budget Funds raised during ICO will be received in TRX. The team will allocate the funds raised as follows: % Participant 70% Salaries 10% Launch expenses 5% Operations 15% Reserve funds 7 of 33

9 2.2) Fees Fees are necessary for any exchange in order to fund ongoing operations. We will be charging a modest trading fee, and will allow users to purchase a discount on future trading fees. There will also be a listing fee for adding new tokens to the site ) Trading Fees Each trade on our exchange will be subject to a small fee. Fee Participant 0.025% Maker 0.1% Taker In an exchange, a market maker is the person who creates an offer for anyone to consider. A taker is the person who selects one or more specific offers to create an order, which is when funds trade hands. For example, here are the fees associated with a trade where the maker offers 1 SEED for 10 TRX (assuming no discounts): The maker sends SEED ( in fees, 1 for the trade). The taker sends TRX (0.01 in fees, 10 for the trade). The maker receives 10 TRX, the taker receives 1 SEED ) Discounts on Future Trading Fees For a small fee paid in TWM, you can get a discount on trading fees - up to 100% off! Cost Discount 10 TWM 5% 50 TWM 10% 250 TWM 25% 1,000 TWM 50% 5,000 TWM FREE trading 8 of 33

10 Discounts never expire, but they may not be transferred to another account. 50% of the discount fee is burned. Trading fees can add up. Any active user of our exchange, including whales, day traders, arbitrage traders, and others will want this discount. Free trading may sound too good to be true, but the way we see it, the more people actively using our exchange, the more other people will want to start using it. We believe there will be significant demand for free trading, which both creates a demand for the TWM token and continuously burns TWM tokens, reducing the circulating supply ) Trading Fees Paid with TWM* All fees paid in TRX will be exchanged for the TWM token using an Automated Market Maker (AMM) contract. Then the fees are distributed to affiliates (referrers and white label exchange operators), if applicable, and to the team s DAO contract. Users won t even know this is happening. The value of this approach is it drives volume for the TWM token. For example: The TronWatch team and its affiliates will receive much of their compensation in TWM, and will need to trade that in the future. There is a need for arbitrage traders to purchase TWM (from our exchange or others) to sell back to the AMM contract in order to keep the price stable ) Listing Fees Users may trade any token they wish by entering the token s address directly. Listing presents the token on the website for easy discovery by users and may include additional information, such as a link to your website. Listing costs 150,000 TWM. 50% of the listing fee is burned ) Stake TWM to Feature* A select few tokens will be featured on our site. The community decides which tokens get the prominent position by voting with staked TWM tokens. The token with the most staked votes at any given time will receive 100% free trading for everyone, as well as the featured placement on-site. The value here is that some TWM tokens will be removed from circulation for a limited time. We believe this may be an attractive option for recent ICOs looking to get their name out there. 9 of 33

11 3) Roadmap Once the soft cap is reached, we will have a full team working on the exchange. The schedule below defines when each milestone will be reached relative to that day. Prototype 4 weeks after reaching the soft cap Smart Contracts: trading is possible on testnet Website: a demo implementation, flushing out the design Pre-Alpha 6 weeks after reaching the soft cap Smart Contracts: feature complete Website: displays order books and enables trading Alpha 8 weeks after reaching the soft cap Smart Contracts: security improvements and optimizations Website: finalizing the experience Beta 10 weeks after reaching the soft cap A security audit is performed and bug bounties offered Launch 15 weeks after reaching the soft cap Mainnet launch of our site and the immutable smart contracts We will strive to hit these dates; however, quality and security are our priorities. This is particularly true for the smart contracts, since we will not be leaving hooks that our team could use to change contract terms after launch. If a challenge arises or a risk is identified, we will take the time to address the concern properly. 10 of 33

12 If the Feature Unlock milestone is met, there are a number of additional features to be included. Some may come after the mainnet launch, such as the white label starter package, while others will require we add time to the schedule above, such as paying trading fees with the TWM token. The schedule below defines the milestones if the Feature Unlock milestone is met. Prototype 5 weeks after reaching the soft cap Smart Contracts: trading is possible on testnet Website: a demo implementation, flushing out the design Pre-Alpha 1 9 weeks after reaching the soft cap Smart Contracts: add support for paying fees with TWM Website: displays order books and enables trading Pre-Alpha 2 12 weeks after reaching the soft cap Smart Contracts: add support for staking Pre-Alpha 3 15 weeks after reaching the soft cap Smart Contracts: feature complete Alpha 17 weeks after reaching the soft cap Smart Contracts: security improvements and optimizations Website: finalizing the experience Beta 20 weeks after reaching the soft cap A security audit is performed and bug bounties offered Launch 25 weeks after reaching the soft cap Mainnet launch of our site and the immutable smart contracts Post-launch 29 weeks after reaching the soft cap White label starter package and export reports features added 11 of 33

13 4) Exchange Features Note: Asterisks (*) denote features that will be added when the Feature Unlock milestone is met. We are traders and are designing an exchange we would want to use ourselves. This means we want it to be both easy-to-use and secure. 4.1) User Experience The TronWatch Market strives to offer the best experience possible while holding firm to the core principles of decentralized technology, namely immutability, removing the need for users to trust TronWatch or any other parties involved. This includes beautiful trading charts, fast off-chain maker offers, and integration with services to make it easy for people to buy in with a credit card, or to swap another crypto (e.g. BTC for TRX). We will launch with support for English, French, German, and Chinese with the help from native speakers on the team. And we ll be using a service where the community can help to add support for additional languages. 4.2) Market & Limit Orders The TronWatch Market will support market and limit orders, allowing users to interact with our DEX the same way they would on a centralized exchange. This provides a better, more intuitive experience for users and trades will execute successfully more frequently than seen on many of the DEXs available today. 4.3) API An API will allow any front-end implementation to interface with the exchange. This could include a white label exchange website, a native implementation inside a wallet app, or a DApp looking to give users an easy on-ramp for acquiring the required token to use their DApp. 12 of 33

14 4.4) Utility DApps* Many tokens promise utility value by requiring that users transact using their token. This is a huge barrier to entry for users. We will allow DApps to leverage our API to match an order for the user. They can then present a transaction to the user which, once approved, executes the trade and then immediately calls the DApp s smart contract to complete the desired interaction with a single transaction. 4.5) White Label Exchange A white label exchange is an exchange that launches their own front-end experience but leverages all the back-end components from our exchange, including the order matching engine and smart contracts - which means we share liquidity. 50% of trading fees go to the white label provider. This could be another website, a mobile app, integration with a wallet, etc. 4.6) Referrals When someone is referred to our exchange, we track that referral in our database (off-chain). Anytime that user creates a new maker offer or a new taker transaction, the referrer s address is included. Referrals get 50% of the trading fees that user generates. The goal is to encourage people to spread the word about TronWatch Market. 13 of 33

15 5) Architecture Note: Asterisks (*) denote features that will be added if the Feature Unlock milestone is met. We are making a next generation DEX, building on ideas from various existing exchanges and working to overcome their limitations in order to create a great experience. The diagram below outlines the flow, which is detailed in the following sections. 14 of 33

16 5.1) Core Use Cases We will support trading TRX, TRX10 tokens, and TRX20 tokens. TRX10 tokens are a native implementation of a token provided by Tron, with limited capabilities. TRX20 tokens are Tron s equivalent of Ethereum s ERC20 token standard. Every token will be tradable against TRX and our token, TWM. Below, we walk through the core scenarios for this exchange to clarify what steps are involved and indicate which are on-chain transactions ) Maker Buy / Taker Sell Order for a TRX Pair 1. On -chain: Maker deposits TRX into the Exchange 2. Off-chain: Maker signs a maker offer and shares it with the order matching engine 3. On -chain: Taker approves the Exchange contract to spend their TRX20 tokens 4. Off-chain: Taker selects one or more maker offers from the order matching engine 5. On -chain: The taker submits a transaction for the Exchange contract to execute the trade a. The taker may choose to have the TRX sent to their account directly, or remain in the contract for future orders. #1 can be more than the amount offered for this trade. The remaining balance may be spent on future trades. #3 can be more than the balance in the account. This allows you to approve once and then make many trades in the future. 15 of 33

17 5.1.2) Maker Sell / Taker Buy Order for a TRX Pair 1. On -chain: Maker approves the Exchange contract to spend their TRX20 tokens 2. Off-chain: Maker signs a maker offer and shares it with the order matching engine a. The maker may choose to have the TRX sent to their account directly, or remain in the contract for future orders. 3. Off-chain: Taker selects one or more maker offers from the order matching engine 4. On -chain: The taker submits a transaction including the TRX funds for the Exchange contract to execute the trade #1 can be more than the balance in the account. This allows you to approve once and then make many trades in the future.. 16 of 33

18 5.1.3) Make a Buy or Sell Order for a TRX20 Pair 1. On -chain: Maker approves the Exchange contract to spend their TRX20 tokens 2. Off-chain: Maker signs a maker offer and shares it with the order matching engine 3. On -chain: Taker approves the Exchange contract to spend their TRX20 tokens 4. Off-chain: Taker selects one or more maker offers from the order matching engine 5. On -chain: The taker submits a transaction for the Exchange contract to execute the trade #1 & 3 can be more than the balance in the account. This allows you to approve once and then make many trades in the future ) TRX10 Tokens At the time of this writing, Tron is working on how TRX10 tokens may interface with smart contracts. If they support the functions approve and transferfrom (which are standard on ERC20s), then the exchange can treat them the same as TRX20 tokens - namely, no deposits required in order to make trades. However, if those features are not available, then we will need to treat TRX10 tokens like TRX and require deposits to trade. We hope that Tron enables these features for the best experience, but are prepared for whatever they decide. 17 of 33

19 5.2) Smart Contracts Core to the decentralized exchange are the smart contracts. Each of our contracts are described below ) Exchange This contract will facilitate trades. It is given approval to spend funds on a user s behalf, or has a user s funds deposited into the contract. Then a maker can sign an offer and a taker can submit a transaction to execute a trade ) Deposit / Withdrawal In order to make an offer with TRX, the TRX must first be deposited into the Exchange contract. All other use cases can be fulfilled without previously committing funds to the trade. When you make a trade receiving TRX, you have the option of either having it sent directly to your account or keeping it in the Exchange contract to be used for future trades ) Fill Order In the smart contract, a market or limit order is executed as a batch order. From the user s perspective, they are placing a standard market or limit order as they would on a centralized exchange. The order matching engine then selects a number of qualified maker offers to be included in the transaction. The user submits the transaction and the smart contract executes each maker offer in the order provided, sorted by price by the order matching engine, until the desired quantity is fulfilled or any remaining funds are returned. When a taker submits a transaction, it includes one or more signed maker offers. The contract processes those offers in the order provided until the taker s desired quantity has been filled. There are a few steps before a maker offer is processed. The maker s signature is verified using ecrecover, the expiration date is checked, previously filled orders are considered, and then the approved balance remaining is confirmed. Then funds are moved to complete the trade: Maker Spending TRX TRX was previously deposited into the Exchange contract in order to create a valid maker offer. The contract sends the appropriate amount of TRX to either the taker s balance in the contract or to their account directly (the taker decides). 18 of 33

20 Maker Spending TRX20 The Exchange contract was previously approved to spend on the maker s behalf. The contract executes a transfer sending funds from the maker to the taker. Taker Spending TRX TRX was either previously deposited into the Exchange contract, included with the transaction, or a combination of the two. The Exchange contract sends the appropriate amount of TRX to either the maker s balance in the contract or to their account directly (the maker decides). Taker Spending TRX20 The Exchange contract was previously approved to spend on the taker s behalf. The contract executes a transfer sending funds from the taker to the maker. Once the transfer completes, a reference to the maker offer is stored along with the quantity filled. If the maker s order was previously filled, it will not be accepted again. If it was partially filled, we only consider what s remaining. When rounding is required, it s done in favor of the maker. The taker is able to simulate this before placing the order to ensure they are still getting a good rate ) Cancel Offer Canceling an offer will record that the offer has been completely consumed, preventing it from being accepted for a trade in the future. All offers include an expiration date and once that time has passed, the offer is no longer valid and there is no need to call cancel ) Cancel All Every maker offer includes a timestamp. The maker may call the Exchange contract in order to invalidate all orders before a specified time. On the front-end, this allows users to cancel all with a single transaction ) Modify an Order In order to modify an order, such as change the offer price, you must cancel the original order (on-chain) and then make a new offer (off-chain). You do not need to wait for the cancel to be processed before issuing a new offer ) Arbitrary Trading Pairs The contract will support trading TRX or any token for any other token. This allows the exchange, or a white label affiliate, to support new pairs in the future. For example, at some point we will have a USD stablecoin available on Tron and people may want to use that to trade tokens for USD, and vice versa. 19 of 33

21 ) Affiliates To support white label exchanges and referrals, each signed maker offer and each taker order includes an optional address to receive 50% of the fees. That address will automatically be populated with the account that referred yours to the exchange, or with the address for the white label exchange provider ) Fee Management Trades are subject to a small fee, unless you are trading a TWM pair, which is always free. When calculating fees, the user s discount is applied as described in the Token section. The discount could eliminate fees entirely. Fees are rounded down as needed. Fees are sent directly to the referrer s or white label operator s account (if applicable) when the trade is executed. The remaining fees are then sent to the team s DAO contract ) Purchase Discount on Future Trading Fees To get a discount, the user calls a method in the Exchange contract, sending the appropriate amount of funds to purchase a discount or upgrade their discount to a higher tier. 50% of the fee is burned and the rest is sent to the team s DAO contract ) Approve Trader* You can delegate trading rights to another account, allowing that account to trade on your behalf. The trader has access to any funds deposited into the exchange contract as well as any tokens which you have approved the exchange contract to spend. The trader does have permission to withdraw funds from your account as well. This allows the trader to manage your funds across exchanges. Even if we tried to block withdrawals, allowing someone to trade on your behalf requires trust - they could purposely lose all your money (to another account they manage) ) Utility DApps* Taker orders include fields allowing for an optional forward-money-to-address and call data. The call data is an array of bytes which allow for any method calls to be made on another contract, including any required parameters. An option allows the taker to say the quantity is all-or-nothing. If we are not able to satisfy that requirement, the order is not processed. If the smart contract call fails then the entire transaction fails, rolling back the trade. Therefore, nothing is lost except bandwidth. 20 of 33

22 5.2.2) Listing Manager The Listing Manager contract maintains a list of tokens to be included on the exchange website. This is used to improve discovery; it is not required in order to execute trades. You can trade any token by entering its address directly ) List New Token Any account that owns some quantity of a token can list that token by filling out a form with descriptive information and paying a small fee. 50% of the fee is burned and the rest is sent to the team s DAO contract. Listings made by the team s DAO contract will not be charged a fee. This allows the team, if multiple members approve, to list tokens for free. It would be used to ensure the most credible tokens are supported ) Update Listing Information If the descriptive information provided needs updating, any account can do so if it owns more of the token than the account which originally provided the information ) Stake to Feature* Users may deposit funds into the Listing Manager contract in order to vote on which tokens should be featured. To participate, users select which token they would like featured and then deposit any amount of TWM tokens into the contract to hold securely. Each token deposited counts as 1 vote ) Unstake* At any time users may unstake, and all of their staked funds will be returned. 21 of 33

23 5.2.3) Automated Market Maker (AMM)* Our exchange will automatically be buying TWM tokens from the AMM contract with every trade in order to exchange the fees paid in TRX for TWM tokens. 1. The taker submits a transaction for the Exchange contract to execute the trade 2. The TRX trading fee is sent to the AMM contract to exchange for TWM 3. The AMM contracts returns TWM, using the exchange rate calculated by the smart contract 4. The TronWatch team and any affiliates receive their portion of the fees in TWM instead of TRX This process will drive up the price in the AMM contract. Anyone could then sell TWM back to the contract for the same exchange rate. There are no fees associated with the AMM contract; it is a not-for-profit contract. However anyone, including members of TronWatch, can potentially profit with arbitrage trading, which is necessary in order to keep the price stable. On the front end, users will have the option to buy or sell TWM to the AMM contract (in addition to the usual exchange experience). Before transacting with the AMM, we can estimate the exchange rate; however, it may change before your transaction is accepted, as others are transacting in parallel. Users may include a minimum acceptable exchange rate, in which case any orders that cannot honor that rate would not be accepted. 22 of 33

24 This approach was inspired by the Bancor Protocol, and we will be using their proven pricing model for the AMM contract ) Decentralized Autonomous Organization (DAO) A DAO contract will be created for the team to manage funds. All fees collected by the team will be sent to this contract for redistribution to cover company expenses and pay team members. The contract will have a minimum reserve. Team members will not be able to withdraw any funds until the minimum is reached. Once over the minimum, team members may withdraw their share of the funds at any time. Using multi-sig approval, funds stored by the DAO may be transferred to another account or smart contract (even if it requires spending from the reserve). This would be used to cover company expenses, including monthly server costs. 23 of 33

25 5.3) Order Matching Engine Entering an order on our exchange will be presented as a market or limit order, similar to the experience users are familiar with on centralized exchanges. The order matching engine makes this possible by matching the request against one or more maker offers, which can then be processed all together in a single transaction. If there are no offers available for the desired price point, a new maker offer is created for the user to sign. We may also present a combination of the two in order to help the user fill their desired quantity. 1. Makers sign offers and share them with the order matching engine. 2. Takers request order matching be performed given specific terms, including the max price they are willing to pay. 3. The order matching engine creates a list of eligible orders, sorted by price. When doing this, the order matching engine first confirms the maker s remaining balance at the moment. 4. The taker submits a transaction for the Exchange contract to execute the trade ) Full Node We need to know which transactions have been accepted onto the blockchain. The more promptly we collect this information, the sooner we can remove offers that have already been consumed. 24 of 33

26 If the data we collect from a node is lagged behind or invalid in some way, we may present users offers which the Exchange contract would reject. This might result in a less-than-ideal user experience, but it will not result in the loss of funds. We will run a full node for Tron, collecting event information relevant to the exchange. By operating our own full node, we have some additional confidence in the data collected ) Database A local database will store the following information: Maker Offers Maker offers are signed messages defining the terms for a trade. This information is not sent to the blockchain until a taker submits a transaction to execute the trade. Events The smart contracts involved will emit events which will be collected into our database. These allow us to remove consumed maker offers or lower the quantity remaining as appropriate. Referrals There are no accounts, just public keys. When a user clicks a referral link, their public key is stored as being referred by another user s public key. This information is leveraged when creating maker offer messages and taker order transactions in order to pay the referrer a portion of the trading fees. Transaction History The transaction history for a user s public address may be cached so that it may appear in the website. Note that this is all public information available directly from the blockchain, with the exception of unprocessed maker offers. Those offers will be public as well, and will be on the blockchain once a taker accepts the trade. No personally identifiable information other than your Tron public address and its associated trades will be collected or stored ) Cancel Offer When an order is canceled, the order matching engine will remove the maker offer from consideration immediately. The cancel is also broadcasted on-chain just in case someone else has already created a transaction (or otherwise obtained the maker s signed order message). This prevents the maker s offer from being processed by a taker in the future. 25 of 33

27 5.3.4) Auto-cancels* When you cancel an offer, there may be users who have a cached version of that offer. In order to ensure that an offer is not accepted, it must be canceled in the Exchange contract. When an order is canceled, we will automatically bundle that request with the next taker order submitted through our exchange. Once the transaction completes, we can prove that the order was canceled so the maker can rest easy. The taker gets an additional 25% off the trading fees for that order as a thanks for including the cancel message. Otherwise, the only impact to the taker is a small increase in the bandwidth required. Users waiting for a cancel to be confirmed will have the option to submit the cancel on chain themselves, ensuring it s stopped promptly. 5.4) Website The website front-end will be created using the JavaScript framework React. It will interface with the Tron Network by way of TronLink (a Tron Chrome extension) and use our public APIs to read and write offer information. There are no logins or passwords required. All we need is your public address, which is automatically obtained via Tron Web (a Web3.js implementation for Tron) when you have TronLink installed. TronLink also allows you to use a paper or JSON wallet, and may include hardware wallet support in the future. The website will allow users to enter any token address directly for trading and display tokens added to the Listing Manager contract. Listed tokens with no recent volume will not appear on the website until volume returns. This is to ensure that we do not include irrelevant options for users. A token that has been delisted due to volume will return when a user navigates to the token s address directly and executes a trade. The website may be saved and run locally for additional security. Information, such as the order books, will be retrieved using the public APIs described below ) Export Reports* When tax time rolls around, we could all use some help. We will create several export options in order to make uploading your trade data to tax preparation software or your accountant easy to do. 26 of 33

28 5.4.2) White Label Starter Package* White label exchanges would help to expand our reach and improve liquidity for our exchange and our partners. The white label starter package is intended to make it easier for new experiences to launch quickly. It is an open-source and well-documented implementation of the exchange, making it easy for other companies to rebrand and otherwise customize the experience in order to launch their own exchange while sharing liquidity with ours. 5.5) API All information needed for price discovery and for executing trades will be exposed through a public API, and anyone will be able to submit signed maker offers to be included. A white label exchange needs an API in order to share liquidity with ours. Technically, this would be optional, as a white label exchange could maintain separate order books. However, that s not in the best interest of either exchange, because liquidity for a DEX is always lacking. White label exchanges could cache the maker offers or replicate and mirror the information, which may improve performance on their end as well as add a layer of redundancy and decentralization for the community ) Add Maker Offer A maker offer is a signed message defining terms for a trade. That signed message can be created by any wallet and then shared with our servers to be matched with takers ) Match Taker Order Given terms for a trade, the API will use the order matching engine to select applicable maker offers for a trade. The information returned can be used to create a transaction for the user to approve in any wallet ) Get Maker Offers Maker offers do not include any private information. We will make all offers available, giving flexibility for white label experiences to create something more than a skinned version of our site. 27 of 33

29 6) Conclusion TronWatch Market will offer a unique and compelling experience. Our DEX will keep maker offers off-chain for a fast experience, it will limit the need to deposit funds where possible, and it will allow users to interact with the exchange in a manner very similar to the centralized exchanges they are already familiar with. We want to see Tron, and projects that build on Tron, succeed. We believe we have a good plan and a great team, and with your help we will create the awesome decentralized exchange. 28 of 33

30 7) Appendices 7.1) Types of Decentralized Exchanges There are several different models for running a decentralized exchange, each with their own trade-offs to consider. Here, we review the most common models and the reason we do or do not do something comparable ) Order Book on the Blockchain Example:. Oasis An exchange could put all offers on the blockchain so that the entire order book can be managed by a smart contract. This means that both makers and takers are creating transactions on the blockchain, and the entire process can be completed by interfacing with the contract directly. The benefit is that there is no risk that the aggregator of maker offers may attempt to censor transactions. However, to ensure a faster, cheaper experience, TronWatch Market will not put maker offers on the blockchain. We do address the issue of censorship in a later section ) Direct Order Matching Example: ForkDelta / EtherDelta An exchange could store maker offers off-chain, allowing takers to select an order of interest, adjust the quantity to be less than or equal to the amount offered by the maker, and then submit the transaction to the blockchain. The benefit is a faster, cheaper experience for users than an order book on the blockchain. However, this approach can result in a poor user experience for several reasons: Direct order matching does not exist on centralized exchanges; it is not intuitive. The order may fail because someone filled an order before you. So do you choose the cheapest, or pay more to ensure it happens? If you want a certain quantity, you either have to place multiple orders or pay a premium in order to select a maker with a large enough offer. 29 of 33

31 TronWatch Market will keep maker offers off-chain. However, instead of direct order matching, we will allow users to enter orders as limit orders. This will select a prioritized list of eligible maker offers and create a single transaction to fill the order ) Managed Order Book Example: Idex An exchange could deploy a smart contract for trading, and then limit the ability to submit trades so only the owner of the exchange may do so. To ensure the trade was authorized, the smart contract confirms a valid signature defining the terms of the agreement from both the maker and taker. The benefit is that the exchange operator can rapidly sequence transactions so that the experience feels instant for users, comparable to a centralized exchange. Then behind the scenes, they settle up the trade on the blockchain on the user s behalf sometime in the future. However, this model does not offer the same promises other decentralized exchanges do. For example: They may start requiring KYC at any time. Accounts can be frozen. Downtime may apply for maintenance or other issues. Therefore, TronWatch Market will not be utilizing this approach ) Automated Market Maker (AMM) Example: Bancor An automated market maker is a smart contract that holds funds and is always available to buy or sell more. An exchange using this model could offer any token by seeding the contract with some funds. The price for tokens sold by the AMM contract is automatically adjusted based on the current supply and demand. Arbitrage traders help to ensure that the price remains stable and consistent with the price on other exchanges. The benefit of this approach is simplicity. Buy or sell without looking at an order book, worrying about the spread, or giving much consideration to the liquidity available. TronWatch Market will not be using AMM contracts for trading because they are limiting for the user. You can only choose to accept the price as quoted; there is no ability to express interest in another price point as you could on an exchange by creating a maker offer. We do, however, intend to use this technology for paying fees, as discussed above. 30 of 33

32 7.2) Threat Model It s important to acknowledge what may go wrong, and what we are doing to mitigate those concerns. Some of the steps we will be taking to minimize threats are: Releasing all of our code open-source Going through beta testing prior to a mainnet launch Hiring a third party to audit our contracts Funding bug bounties prior to launch Below, we discuss a few of the most significant concerns ) Smart Contract Bugs A bug in one of our smart contracts has the potential to result in a loss of user funds, and therefore we treat this as the most significant threat. We will have unit tests for each contract with 100% code coverage. Additionally, the code audit and bug bounties will focus on the smart contracts ) Overflow Bugs Overflow bugs and similar common pitfalls for smart contract development will be explicitly tested for and a focal point of the code audits ) Hash Collisions Hash collisions are incredibly rare, but possible. If the maker offer s hash is not unique, we would incorrectly consider a previous order before approving a trade. This would effectively reduce the amount tradable on the impacted order (possibly to zero). Therefore, the worst case is a trade does not go through and no money trades hands. This is a problem, but much lesser severity than allowing an unauthorized trade to occur ) Server Breach or Failure A server-side bug, failure, or breach is also important to mitigate, but would not lead to a catastrophic scenario like a smart contract bug could as we can correct the problem, and would do so promptly ) DNS Hijacking Our greatest concern is attackers targeting TronWatch Market s users. It s extremely difficult to prevent DNS hijacking or malicious entities standing up similar-looking domains. An attacker could present an exchange experience that appears legitimate, but in reality, the transactions users approve are not using TronWatch Market s smart contracts. 31 of 33

33 Even some of the best and largest companies are occasionally victims (e.g. Binance ). To minimize the impacts of this kind of threat, we plan to be diligent in our security practices, as well as active on social media to communicate any potential issues and actions needed to our users as quickly and efficiently as possible. Those looking for additional security should use a local version of our website ) TronWatch Dissolution If our company dissolves and the front-end, API, and/or order matching engine are no longer available, another could be stood up by the community (similar to the way one might create a white label experience). Either way, no funds would be lost by a sudden disappearance of TronWatch or its members, as users can always fall back to interacting with the contracts directly (possibly to make one last withdrawal) ) Censorship Technically, TronWatch could censor maker offers from being added to our database or available through our APIs. However, since the information stored is made publicly available with our APIs, someone could prove to the community that this was happening if it were to occur. Another entity could then stand up a fully compatible alternative, and users would not hesitate to make the switch. It is not possible to stop an account from interacting with the smart contracts, meaning it is always possible to place taker orders or withdraw your funds. 32 of 33

34 7.3) Definitions Term Automated Market Maker (AMM) TRX10 Token Technical Definition A smart contract which buys and sells a token automatically, adjusting price based on the supply and demand. A Tron standard offering a native implementation for tokens to use. Decentralized Exchange (DEX) Decentralized Autonomous Organization (DAO) Maker Offer Taker Order Token Burn TRX20 Token A decentralized platform enabling peer-to-peer trades facilitated by a smart contract. A smart contract which allows the team to vote, enabling decisions without depending on a single leader. Offer created by the maker defining terms for the trade. One or more maker offers selected by the taker in order to execute a trade. Removing tokens from circulation permanently, lowering the overall supply. Equivalent to the Ethereum ERC20 token standard, but transacted on the Tron network. Disclaimer: this whitepaper is for informational purposes only. This does not constitute investment, legal, or other professional advice. It is neither an offer nor an advertisement. 33 of 33