Immutable, Decentralized Governance, Risk, and Compliance Data

At the root of XDEX is its own protocol-based, distributed ledger blockchain network. 

XDEX Network is presently powered by the MIT-licensed Delegated Proof of Stake (DPoS) consensus protocol. DPoS consensus has been used to power the underlying consensus mechanisms for a large percentage of blockchain projects including EOS.

The core protocol features a well-defined governance structure for management of the network, as well as incentives for block production by participating node operators.

XDEX is a permissioned system, meaning that all participating XDEX Network node operators are known and documented. Additionally, user accounts must be verified and approved by a certified registrar authority.

The XDEX Network uses state channels that perform blockchain operations and connect to any Layer 1 public blockchain or distributed ledger smart contract environment.

XDEX defines the “state” as the consensus about user data (accounts, balances etc.) Unlike Bitcoin derivatives, user state exists on all nodes as in memory data and it can be freely accessed.

The state is maintained through XDEX Network consensus by following the longest available chain of blocks. Nodes can replay that longest path by applying each recorded transaction in order and reach the current state (or the state at the time of any block in the past).

Since user state is regularly accessed and modified by the node application it cannot be stored in an encrypted format on disk. The data must reside in RAM for performance reasons, making access control far more difficult.

The role of a Primary Node in the XDEX blockchain is similar to that of “miners” on other blockchain protocols. A Primary Node runs a specialized server with software that authenticates on the XDEX Network blockchain. The Primary Node collects transactions that are broadcast to the network through connected software application. These transactions are initiated by end users within XDEX-based applications. An XDEX Primary Node bundles the transactions into a block of data, signs the block and broadcasts the block to the network for confirmation and proof.

For each successfully constructed block, a Primary Node mints XDX tokens. The pay at a rate that is defined as part of the XDEX Network governance. XDEX stakeholders vote to delegate Primary Node roles.

By maintaining the core blockchain, Primary Nodes are essentially the backbone of the XDEX Network ecosystem.

Primary Node authority is represented with cryptographic keys. This means that each XDEX Primary Node must have registered its public key and will sign each block with its private key during the time of block production. Therefore, as XDEX continues to decentralize operations, it will be possible to hold any one particular Primary Node operator accountable for its actions.

Within the XDEX ecosystem, XDEX Oracle Authorities are entities who provide authentication of information and/or data external to the XDEX platform itself. Oracle Authorities provide a 3rd party validation as a means of assurance the information being true and trustworthy.

For example, a law firm may be delegated as an Oracle Authority as a representative to assure the XDEX ecosystem of the legal status and validity of a particular asset.

Also, a bank or broker dealer firm could be delegated as an Oracle Authority to assure the validity of a corporation’s existence and status.

There are many different applications of Oracle Authorities, and the Executive Committee will establish the need and approval of Oracle Authority status through the proposal and voting process.

The XDEX Network blockchain enables a democratically elected governing board called the Executive Committee to regulate the parameters of the XDEX Network. The XDEX Executive Committee will be comprised of members elected by the Primary Nodes. The role of the Executive Committee is to:

  1. Propose and modify blockchain parameters to support the normal functioning and growth of the network.
  2. Delegate certain executive roles to certain chain executives (such as issuing licenses and authenticating said licenses).
  3. To act as a check on the power of said executives by having the ability to terminate their access to the network.

The Executive Committee itself has no control on the state of the database or the construction of the XDEX Network and is programmatically prevented from making any changes to it. Since the XDEX network itself manages and maintains the state and the transaction ledger, the only way to make any undesired change is to subvert the majority of Primary Nodes.

Executive Committee

The Executive Committee is consisting of seven individual Directors, each of whom is bestowed with full voting privileges. Generally, each Director serves for a 6-year term. However initial Directors will be serving staggered terms (of 2-6 years) to ensure continuity of experience. A minimum of 3 Directors are required for the governance of the XDEX Network ecosystem, and as many as 9 may serve on the Executive Committee.

Ombudsman

In addition to the Executive Directors, there is an Ombudsman member of the Executive Committee, who does not vote and does not hold any responsibilities within the Executive Committee, but who attends all Executive Committee meetings — and who provides a degree of independence and transparency to the Executive Committee’s governance process.

Managing Director

Finally, there is a Managing Director who works for the Executive Committee and is responsible for ensuring that all of its decisions and initiatives are enacted and enforced. The Managing Director attends all Executive Committee meetings but is not permitted to vote. The Managing Director is responsible for directly overseeing all XDEX activities.

Below are the User Types of stakeholders who will interact with the chain and participate in some form of governance or value adding activity. User Types are the categories of users of the XDEX Network who create and distribute applications, smart contracts, and perform operations using XDEX.

XDEX Users include the following:

  • Executive Committee — A member of the XDEX Network governance board elected through democratic vote of all XDEX ecosystem members
    • Executive Director — Oversees operation of the XDEX Network ecosystem under the direction of the Executive Committee
    • Ombudsman — A non-voting, non-authoritative member of the Executive Committee who attends all meetings and provides 3rd-party transparency to Executive Committee operations
  • Witness — Operator of XDEX Network ledger authority
    • Primary Node — Node operators who are authorized to write transactions to the production XDEX Network
    • Validator Node — Node operators who are authorized to aggregate transactions for forwarding to Primary Nodes, as well as audit the blockchain transactions on the ledger
  • Oracle — A type of user who is authorized to provide and verify external data and information outside of the XDEX Network
    • Identity Validator — An entity who is authorized to maintain and verify a user’s legal identity, as well as validate that identity based upon user request and permission.
  • Service Provider — An entity who provides services directly to the XDEX Network ecosystem through democratic vote of approval for proposals by the XDEX user members
  • Enterprise Provider — An entity who connects their own applications through XDEX Enterprise as a provider to their end users
  • Developer — XDEX developers who create applications for end users (client side) and develop new smart contract templates that interact with the system used by XDEX users to initiate transactions. They also write code to enable the blockchain to interact with legacy applications
  • Administrators — XDEX administrators perform administrative activities related to the XDEX Network and applications such as deployment and configuration of the XDEX Network or applications
  • Operators — XDEX operators are responsible for defining, creating, managing, and monitoring the XDEX Network and applications
  • Auditor Authority — XDEX auditors are part of the business network and are responsible for reviewing the transactions or access control lists and validating the integrity of those transactions from a business, legal, audit and compliance perspective
  • Business Users — Business users operate within the XDEX Network and interact with the blockchain using the XDEX Platform Wallet, as well as any other extended XDEX-based applications
  • Platform Wallet User — The direct end user account at the XDEX Network level
  • Enterprise Application User — A user of any extended XDEX Enterprise Cloud application that ties directly to a Platform Wallet User account within that external system

All blockchain transaction-level data and encrypted hash values on the ledger itself is public to authorized users of the XDEX Network ecosystem. User accounts (and thus the balances that are linked to account IDs) do not store personally identifiable information. All user-specific private data is stored on separate, privately authenticated servers in a form of encrypted traditional data. These servers are operated by XDEX Network Oracle Authorities

Consequently, only the users themselves know the actual ID of their account — thus keep their extended data private from outside observers.

To achieve transparency of XDEX operation, the XDEX Network must be partially opened across a consortium or association view. This is essential to the auditability of the ledger and requires that the block explorer show unfiltered blocks with all the data from transactions. Authorized users are able to deploy their own XDEX Network Nodes to observe the XDEX ledger and query the state (balances, accounts, and other data).

For example, the authentication server can reveal user data for KYC validation purposes to comply with legal regulation. The users can be made aware of that fact (and ultimately the necessity to comply with the law).

Within this privacy model, trust must be placed in the authentication service of the XDEX Network. The end users still have a reasonable expectation of privacy in the system as their transactions, accounts, and balances are not known to external parties. KYC information is also provided in the current cryptocurrency exchange systems by legal requirement. The authentication service has a strong incentive not to divulge the private information to outside parties because it would ultimately harm the overall value of the network. It also reduces the amount of trust the user must place in the network. Since all transactions and hash values are public to the network members, there is no possibility for manipulation of balances and user state, which become the basis of the single source of truth for transactions in the ledger.

The only requirement is that the authentication servers are kept secure from intrusions. This however is a much easier task then securing the entire XDEX Network because the attack surface is much smaller — so access control can be tightly regulated. If identity and other extended data is properly secured and shared, a potential intrusion does not necessitate a total loss of privacy as the attacker only gains a certain amount of private data.