The Trustchain Consensus

COTI: An end-to-end platform that offers a full solution to create the payment networks of the future.

The newest version of COTI’s whitepaper is now available on our website, and it’s the perfect time to get an explanation from COTI CTO Dr. Nir Haloani about the innovative Trustchain consensus algorithm and Arbitration System.

For cryptocurrencies to change the face of the payments landscape and replace fiat money, they need to be highly usable and convenient. One of the most important shortcomings of all existent cryptocurrencies is lack of volume, speed and scalability. Several blockchain based technologies have been created to tackle the challenges posed by attempting to provide high transaction throughput while remaining inexpensive, but these have been met with little success. Another challenge faced is the lack of trust between unknown parties, which leads to countless chargebacks and transaction cancellations. Moreover, merchants are often classified as ‘high-risk’ or ‘low-risk’ based on their association with a particular industry, rather than on their actual behavior.

COTI, Currency Of The Internet, solves these challenges by using an innovative base-layer protocol in the form of a directed acyclic graph (DAG) ledger, built from transactions connected through time by harnessing trust-based algorithms. Trust is based on a combination of the network participants’ historical behavior data and objective information about them. COTI takes this into consideration when calculating Trust Scores using a unique machine-learning algorithm. Trust is used in the Trustchain Algorithm to validate and confirm transactions faster. Trustchains grow as new transactions attach to two prior transactions which have similar degrees of trust as themselves. This results in an innovative consensus-based confirmation mechanism, where every user is incentivised to engage in trust-building behavior due to the benefits associated with having a high level of trust (i.e. faster confirmation times).

COTI has built mechanisms to monitor, detect and defend against possible attacks to ensure network security. An example of such a mechanism is COTI’s Double Spend Prevention (DSP) Nodes. COTI has also introduced novel protocols to address disputes that may arise when sending transactions, a highly required feature which is not possible with other cryptocurrencies.

Dispute resolution is achieved through the use of an Arbitration Service. This service takes advantage of the principles of game theory to ensure a fair outcome in the case of a dispute and votes to determine which of the two disputing parties is right.

The Base Layer Protocol

DAG-based distributed ledger technologies show signs of being particularly adept at overcoming the scalability limitations inherent in blockchain-based payment networks. While in blockchain-based networks, greater scale has undesirable effects on network usability, in DAG-based networks the reverse is generally true: greater network usage results in improved network scalability. In other words, there is a positive correlation between the number of network users and the rate at which transactions are confirmed.

As a result of the positive correlation between network usage and network scalability, the DAG data structure is ideally suited for the COTI network’s base layer protocol, and will enable it to achieve full decentralisation without compromising COTI’s commitment to scalability, instantaneity and low (or zero) fees. Building on the foundations established by the above-mentioned initiatives, COTI is introducing an innovative DAG-based distributed ledger technology as its base layer protocol, which involves the use of Trust Scores as the key mechanism by which new, unconfirmed transactions select prior transactions to validate. Furthermore, COTI’s DAG-based distributed ledger technology, the Cluster, reaches faster consensus when confirming transactions by using COTI’s Trustchain Algorithm. Eventually, the Cluster will be able to validate and confirm a maximum of hundreds of thousands transactions per second (TPS).

Actors in the COTI network possess their own Trust Score metrics, including Nodes. A Node’s Trust Score, however, is not the same as a Node owner’s Trust Score.

All accounts in the payment network have a Trust Score, which is changed according to a user’s payment statistics and several event types. An account Trust Score is a real number within the range [0,100]. All transactions in the payment network also have a Trust Score. The Trust Score of a transaction is the sender’s Trust Score when the transaction is initiated. The Cumulative Trust Score of transaction A is the sum of all the Trust Scores of all transactions along the heaviest path approving transaction A, including transaction A itself.

The Trust Score Algorithm is designed to ensure the maximal performance of the Trust Score-based Source Selection Algorithm. For example, let the recommended level of trust (cumulative Trust Score) for the transaction be 1000. This means that transactions created by highly trusted network participants (TS~85) need at least 12 confirming transactions in the chain, while transactions from low trusted network participants (TS~12) need at least 84 confirming transactions in the chain.

Trust Score Nodes collect transaction and other statistics to continuously update participants’ Trust Scores as described in the Trust Score Update Algorithm subsection below.