SECURING ELECTRONIC TRANSACTIONS IN CONTRACTS

Introduction

Electronic payments have among others the impediment of dishonest parties. Particularly, the purchasing party involved in a payment transaction may reverse their payment after the seller views the transaction receipt. In this case, let the seller be the winner of a contract and the buyer be the customer of said contract. To eliminate the need for trust between both parties, HashCoin looks to cryptanalytic solutions to secure the contract payments, hence blockchain and Hashgraph support systems.

A blockchain is an open, distributed ledger whose records are linked through cryptography. Data recorded in these records is unchangeable. Therefore, digital information on a blockchain can be shared but not duplicated, making transactions on said blockchain permanent and verifiable. HashCoin therefore benefits from laying atop a blockchain network. A related example, Ethereum is public blockchain network powered by the digital currency known as Ether, which caters for transactional costs and computational work on the network. A key factor to notice is distribution. There is no centralization of control. Therefore, the parties engaged in the transaction need only know each other’s designation, not their history, which is also the goal of HashCoin.

More recently, Hashgraph technology has come up which is fair, secure and very fast. This challenges blockchain because the speed with which transactions can be processed makes it more scalable, a hitherto limiting factor to blockchain. However, all nodes participating in a Hashgraph gossip are known because they have to be permitted onto the network, whereas blockchain networks are public, therefore not all nodes are known before a transaction starts, which is why Hashgraph is so much faster than a blockchain network such as Ethereum.

HashCoin intends to reap the benefits of transactional durability associated with incorporating blockchain as well as security and scalability from using Hashgraph. It will also employ a smart contract protocol to ensure the credibility of transactions.

Blockchain Proof of Work

Consider a node on the distributed network. Let this node be designated as an actor. Actors compete for the chance to add a block to the blockchain. Whoever wins is considered as the elected leader in consensus and they win by solving a specific mathematical problem. The problem to be solved by leaders is in the form of cryptanalytically secure hash function, which then necessitates that finding a solution to the problem will involve trying all possible combinations. Therefore, probably, the actor who will solve this problem fastest is the one who has the most computing power. The process is commonly referred to as mining and accordingly, actors are miners.

From the procedure, it is obvious that it is hard to find a solution to a particular problem but once that solution is found, it is easily verified. When a miner solves a new block, they accrue some universally acclaimed currency on such networks, which is the principle behind Bitcoin. Additionally, as computing power is limited, miners are given incentive to avoid cheating. As it requires one to split computing power, which is unprofitable. The primary drawback to proof of work is that it requires a lot of computational power and is energy-inefficient.

Ethereum Proof of Stake.

Consider a purely unbiased lottery. The chance of winning the lottery is completely random, but mathematically, the person who has more lottery tickets has a higher chance of winning. Consider these lottery tickets as that person’s stake. Just as in proof of work the actor with higher computing power and more energy has a higher chance mine the next block, in proof of stake, the actor with more stake has a higher probability of being elected to mine the next block. In Ethereum, the stake is the quantity of Ether that the miner is willing to commit to the network for a given amount of time. They then get a directly proportional chance be elected leader and mine the next block.

However, in case of a fork, miners are not discouraged from staking in both blockchains, which leads to a condition known as double spending and eventually may devoid the network of consensus. Attackers can also overpower the whole blockchain without repercussions and cause losses to other miners.

HashCoin uses proof of work to discourage parties from attempting to make changes to contractual commitments.

Hashgraph Gossip About Gossip

Hashgraph is deployed in private networks. Nodes gain access to the network on a permission basis and are therefore known beforehand. Every node can spread signed information on new transactions or transactions it has received from other nodes onto its neighbors. The signed information is known as an event. A node collects information received from other nodes into its own event and spreads this event to randomly selected neighbors, otherwise called gossiping. This collection and relay continue and is repeated, hence “gossip about gossip”, until the whole network is aware of the information created or received at the initial node. Because gossip causes information to converge rapidly on nodes and is optimized, many transactions can be processed very fast.

In public blockchains an actor can initialize attacks to influence the consensus process; given that all nodes are known in Hashgraph, networks are naturally insulated from such attacks. To ensure fairness, transactions undergo consensus timestamping. As such, if a transaction reaches two thirds of the network before any others, it is regarded as the first, making transactions fair. Additionally, Hashgraph is asynchronous Byzantine fault-tolerant. This means that we assume the existence of some malicious nodes in the network, but a transaction will still reach an irreversible consensus nonetheless, making it secure. HashCoin uses a Hashgraph network on top of blockchain to optimize transactions making them scalable.

Zero Knowledge Table

If a party to a contract wants to prove a statement, they would have to know the secret information in that statement. In zero knowledge proof, a verifier will require a statement from the prover which shows that they know the knowledge without revealing the actual information. Therefore, one cannot state a value k of a contract statement but can prove that they know k. This affords the HashCoin system anonymity so that competitors to a contract cannot deduce the information in an ongoing transaction.

Smart Contract

This is a computer protocol that digitally facilitates, verifies and enforces the negotiation and performance of a contract. Owing to the need to eliminate a third party to the contract, that is, a lawyer, HashCoin uses Smart Contracts to facilitate and track the exchange of funds between parties to a contract. Since smart contracts already operate on a blockchain which HashCoin uses anyway, its benefits over traditional systems are already increased.

Transaction speeds in various digital currency systems

It is notable that bitcoin which taxes heavily on computing power is slowest to process at just 7 transactions per second. As such, other digital currencies have opted to move away from the proof of stake principle. It is however still the most secure blockchain digital currency. However, Bitcoin Cash has managed to process up to 277 transactions per second, making it the fastest proof of work digital currency system to date. Ethereum which employs a proof of stake is faster than Bitcoin at 25 transactions per second. HashCoin which uses its Hashgraph consensus protocol along with proof or work, processes much faster than the other systems at 1000 transactions per second.

Overview of the product market

Consider a software solutions firm that needs to procure 20 high end computers for a team of software engineers it has recently employed who need to get to work as soon as possible. The firm would need to declare a tender notice for vendors who can supply that quantity of computers as fast as possible and traceably so that in case one or more fails during an agreed-upon time after deployment, they can be shipped back and replaced. A contract is necessary therefore that is secure, irreversible, has no third parties and is fast. This is a prime example of a market that needs the solutions offered by HashCoin.

HashCoin is a digital currency consisting of digital tokens and a method of securing the token, that is, blockchain, Hashgraph and smart contracts as well as zero knowledge proof. These tokens are digitally signed to prevent double spending. The tokens have some monetary value in the real world and are duly exchangeable for cash at a banking terminal. Customers of a contract trade a cash stake for HashCoin, and a vendor who wins the contract uses proof of work to earn HashCoin as an incentive. The smart contract facilitates this exchange. The vendor to the contract has to verify using zero knowledge proof that they recognize it and transactions are processed on a Hashgraph network.

Incentive

HashCoin is disseminated similar to the Bitcoin strategy. Nodes who are party to a contract are given HashCoin as incentive for proof of work and to encourage them to stay honest. Each node is assigned a wallet to store their coins. When a transaction is initiated, an agreed-upon number of coins is transferred from the customer of a contract to the vendor in the contract and the transaction is finalized. Either party can then proceed to cash out HashCoin at approved financial institutions.

Market Analysis

The purpose of this analysis is to ensure that HashCoin has a significant necessity for deployment. Target customers are any two parties looking to enter into a fast and secure financial contract to facilitate exchange of money. These parties require to have their own communication protocols for the delivery of goods or services and HashCoin is merely the platform on which exchange of funds occurs. Parties to a contract include local and national governments tendering services for institutions to private businesses, private firms doing business with one another and state firms doing business with private citizens or companies. These are the entities which form nodes on the HashCoin blockchain.

Description of the coin project

HashCoin is a digital token currency which is signed and passed between nodes on a block chain network. Each token has the valuation of $50, subject to flux as are all digital currencies. The purpose of using a blockchain is to make sure that the tokens are cryptographically secure and transactions are permanent. Exchanges between nodes are facilitated by smart contracts and are therefore trackable for auditing affordances, while alleviating the cost of a human lawyer.

In order to make sure that nodes are not dishonest, HashCoin is protected using proof of work. Parties to a contract verify their identity using a zero knowledge table, thereby allowing the contract details to remain anonymous. In order for this large overhead to be processed quickly, HashCoin employs a Hashgraph network atop the blockchain. Therefore, it is even more secure, transactions based on it are fair and are fast.

Why Transaction Speeds are Important

The major concern about transaction speeds in various cryptocurrency systems is scalability. It is a requisite that these transactions be secure, therefore how many transactions one can carry out with as little energy costs as possible becomes a matter of profitability. Consider the Bitcoin example in the graph provided. It requires a lot of computational ability to handle the proof of work and the turnover is a mere 7 transactions per second. If one was to employ this as a primary payment system without optimization, a different person or organization using a cheaper system in terms of power and has a higher transaction processing value would dominate the one using bitcoin in a direct competition. Therefore, parties looking to incorporate secure digital currency payment systems will look to other systems such as HashCoin which by contrast is much more scalable.

Government compliance

By using blockchain, HashCoin is already fully decentralized and no government can control it. Therefore, government oversight comes into play. It may be accepted as a bill of exchange for taxable financial transactions in countries whose bank regulators approve HashCoin to be exchanged for cash.

While not an ideal situation for the currency itself, more financial institutions across the world are looking to cryptocurrency to secure their transactions and scale their customer base and it is expected that governments will eventually accept HashCoin among others as a legal tender for trade. Since transactions are trackable however, HashCoin is legal as records of transactions can be produced for auditing in businesses using the service.