We're not in Kansas anymore!

5 months ago
3 Min Read
690 Words

The Bitcoin Whitepaper was the tornado that the lifted our financial houses into OZ. Since then a lot of projects have been built that use old ideas, namely centralization to get things done. These projects are ultimately not on the Yellow Brick Road. Everybody who writes financial pieces now a days beats the decentralization drums.. and for good reason. Projects built across trustless networks will succeed.

I'm currently seeking Hive DAO funding for building a layer 2 protocol with Decentralization in mind. I want to fill in the cryptoverse where I'm currently at with my progress.

DLUX (just as easily any layer 2 token) nodes are now autonomously operating atomic swaps on a decentralized exchange with collateral and enforcement. What this means is that much like ETH or Bitcoin all the nodes are privy to all the same information. When a node comes online it queries the network for the latest state file; It now knows the last agreed upon state and processes a few blocks to catch up to the current Hive block head. These state files are put into IPFS, where if files are the exact same will have the same address name/address/locator... which is sufficient to build consensus. It is now able to automate a few transactions enabling: Trustless swaps from layer 1 tokens to it's layer 2 token with out an intermediary token or centralized liquidity provider. The network of nodes uses it's own layer 2 token to collateralize escrow transactions and transfers, which are autonomously generated and signed.

Let's see how thing's like this work right now.

  • send HIVE to hive-pegged
  • Hive Engine takes a fee and gives you hive pegged tokens on hive engine
  • you buy a token like LEO on HIVE Engine
  • you sell LEO on Hive engine
  • you request your hive-pegged be converted to HIVE
  • HE takes a fee and sends you Hive


  • Send ETH to Blocktrades
  • Recieve Hive from Blocktrades

Additionally in HE you can set up a "scotbot" to allocate tokens based on on chain transactions. All of the above actions have single points of failure, they are not decentralized.

Let's examine how these transactions will look with DLUX

  • See an atomic swap listed on the DEX
  • Buy the DLUX atomic swap buy signing an Escrow Transfer(obscured by the front-end: to 2 DLUX node operators that have enough liquidity to collateralize the swap.)
  • The whole DLUX network adjusts balances and tracks intermediary transactions, your tokens are available immediately

-The other side of the atomic swap-

  • List your DLUX for sell with a custom Json
  • A buyer sends an escrow transfer, the network processes intermediary transactions
  • Roughly three minutes later Hive is deposited into your account

Additionally the Node Software for your layer 2 token can read all blockchain transactions and perform the same functions as scotbot... and more.

In the near future I'll be finishing the protocol for this network of nodes to elect accounts to sign multi-signature transactions. This is necessary to process fee's(as only one node of two currently receives HIVE fees for escrow transactions) and provide additional liquidity which can be used to:

  • Buy layer 2 tokens and increase the safe amount of layer 1 tokens held.
  • Be used to directly buy accounts through Hive burn(full price accounts)
  • Pay for new accounts in HIVE
  • Allow for partial fills of DEX transactions(no longer an atomic swap only protocol)
  • Be a liquidity pool for cross chain swaps.

Cross chain swaps would require some or all of the node operators to ALSO have a blockstream from the other chain. When appropriate actions happen happen in a smart contract(or even just to declared node operator accounts in a similar atomic swap protocol) a consensus can be made that HIVE/HBD/Layer-2 Tokens should be given to appropriate accounts on the HIVE chain and vice-versa.

I hope the picture of what I'm building is becoming more clear. I know it's quite a bit but single points of failure were the old way to make things happen. Let's build the future.

Posted Using LeoFinance Beta