Any network needs to be stimulated to get off the ground. A simple marketplace network might require bringing in sellers when there are not enough buyers, or bringing in buyers when there are not enough sellers. All the prominent networks of today – Uber, AirBnB, eBay, Amazon – faced this issue and were able to overcome it by tapping into existing users or providers of similar services, and by creating extra startup incentives for people joining their platforms.
GRAFT is no exception. It is a complex network with many participants – users, miners, full supernode operators, service brokers, proxy supernode operators, merchants, application developers. Having so many players is both a blessing and a challenge.
Miners represent the first layer of the network (settlement), and they are already incentivized through both network transaction fees and block mining rewards, which do not depend on the number of settled transactions and provide a steady income for miners. Beyond the miners, the next group without which the network will not function are the full supernodes which are critical for real-time authorizations (RTA) and the pay-in/pay-out facilitation.
Full supernodes get paid for performing validations for the network and preventing double-spending while processing authorizations in real time. Their income depends exclusively on the number of transactions that they get to work on as well as the total number of full supernodes in the network. Full supernodes are chosen randomly in each block, with two selected from each of the four tiers for a total eight supernodes, which equally split the 0.5% fee of the transaction they authorize. The problem, however, is that a small transaction volume of the brand new payment network would result in low initial full supernode income, and thus little incentive to run full supernodes before the network volume ramps up.
The good news is that there is a fairly easy way to incentivize the full supernode hosts without resorting to simple airdrop-type incentives or block reward sharing. What we will do instead is send enough RTA transactions across the network to provide a healthy transaction volume until the network is fully ramped up. This way we reward full supernodes for the real work they are supposed to do – validating transactions – unlike most other second layer reward models where masternodes receive passive income for just “being there” (which does little to promote network robustness or self-optimization).
The incentive program is designed to maintain a robust daily transaction volume until merchant-generated RTA transactions reach that level on their own. The number and size of stimulus transactions will depend on overall transaction volume and will be reduced gradually as the network gains momentum. We estimate the cost of this program to range between 50 and 100 million GRFT.
As with any new network, especially one with lots of participant types, the GRAFT Network needs to be stimulated to maintain a level of involvement ensuring stability of the network and availability of network services. We believe that the most critical part needing extra stimulation at this early stage is the full supernode layer. To stimulate the network as a whole, however, we are also considering additional groups of participants that may require stimulus going forward. For example, buyers may need to receive cashback incentives (similar to some credit cards) in order to choose GRFT over other methods of payment available at the checkout.
As always, we’re open to other suggestions from the community.
We listened to our community and decided to publish development status updates more often (bi-weekly or even weekly). However, since one week cannot accommodate the same amount of news as one month, don’t expect to receive long updates anymore!
We have completed the first working prototype of a Bitcoin Pay-In Broker, which allows merchants to accept Bitcoin at checkout (both in brick-and-mortar stores and online) using GRAFT mobile point of sale or hardware payment terminal apps. The buyer can pay with any wallet supporting Bitcoin, as designed in the original GRAFT white paper. This is a big milestone for the GRAFT project, along with the ongoing RTA alpha, as the main concept of GRAFT is supporting multiple cryptocurrencies as a method of payment for merchants and buyers.
Some time next week we will place a button on the web site that will allow anyone to try out this workflow on the live network with live brokers and payment gateway!
RTA Alpha
The Dev team is continuing working on RTA alpha issues. Currently, we are focused on communication stability and optimization of RTA communication. We still have several issues with tunnel construction (the base mechanism for RTA communication based on P2P network), and optimizing the amount of messages traveling between the nodes – to provide more lightweight and stable communication.
As a reminder, RTA alpha is closed release to a group of 50 alpha testers selected from the large community of volunteers. Not surprisingly, these people are going to be the first full supernode owners and operators, although we have a much larger group of future supernode owners waiting for the beta release. The plan is to release beta to the mainnet as soon as the alpha is stable and fully featured with the functionality required for RTA transaction processing.
By the way, we have some exciting news for supernode owners coming out this week – we’re formulating an incentive program to stimulate the supernode network as part of ramping up the GRAFT network as a whole. We believe we’ve come up with a very elegant solution for it. More details will be released soon.
“Burning bug” Patch
There was a bug found in CryptoNote wallet code, the full description of the issue can be found here. The short story is that the bug affected only exchanges and only the wallet – no implications for regular users, and no need (even for exchanges) to update the network node daemon. Since GRAFT is not a direct clone of Monero (unlike some other CryptoNote blockchains), it took some time to adjust the Monero patch to current GRAFT wallet code, which was eventually done successfully last week, and the patch was “silently” released to the exchanges. TradeOgre and STEX updated their wallets immediately and as usual, Cryptopia is behind schedule but communicated to us that they are working on the update and it will be ready “asap” (no ETA provided).
As a side note – such bugs and patches mean that some part of engineering resources had to be diverted, but the impact on RTA timelines should be minimal.
While we’ve been focusing on stabilizing the Full Supernode based RTA (real-time authorizations), part of the team has been diligently working on the other components that are necessary to make the main GRAFT Network use case (paying with any digital currency with your favorite wallet) a reality – namely Payment Gateway and an Pay-in (aka Accept) Broker, and it’s time to show some progress!
Pay-in broker is a type of an exchange broker that provides alt-currency acceptance for the network. It’s a critical piece required to enable any digital currency acceptance at the POS with the wallets of user preference.
Payment Gateway provides a layer between the payment terminal and a network that’s meant to handle business logic and part of the remote wallet functionality.
Electroneum recently announced real-time transactions available as beta on their network.
We wanted to take some time to shed some light on the difference in approaches between solutions like Electroneum and GRAFT.
With their approach, Electroneum is effectively following the centralized model of Bitpay, Coinbase, Coingate, GoUrl.io, and many other centralized crypto payment processing gateways in that they issue an authorization immediately as the transaction enters the transaction pool, without waiting for confirmations on the network. There is little innovation in this approach which is well-known to the industry. With centralized entity in the middle, the buyer and the merchant must rely on trusted party just like with traditional plastic payment processing, which means compromise on privacy, security, and a single point of control.
Unlike Bitpay and other centralized payment gateways, Electroneum shifts the risk of transaction not getting confirmed onto the merchant rather than absorbing it themselves.
The vendor does not get the cryptocurrency instantly, but our system acts as a trusted 3rd party to ensure the ETN or other cryptocurrencies such as Bitcoin is sent (our patent covers ETN, Bitcoin and other cryptos). The vendor knows the payment is sent and will make its way to the blockchain, so they can allow instant checkout – and the customer can walk out of the store with their cup of coffee or checkout online etc. https://electroneum.com/2018/06/12/announcing-instant-payment-beta-vendor-application/
This illustrates the fundamental difference in approach where GRAFT is decentralized and utilizes an independent authorization sample (selected from the distributed network of supernodes) to validate the transaction, and independent exchange brokers to handle off-network (alt currency) acceptance risks when handling real-time payments.
GRAFT’s approach not only minimizes the risk of real-time transaction processing, but distributes to remaining risk (and reward) to the right party. It also allows acceptance of alternative cryptocurrencies, where Electroneum’s current approach is limited to ETN currency.
Finally, but importantly, GRAFT builds a payment network eco-system as opposed to providing a single vendor solution, which is the essence of decentralization that’s at the very core of the blockchain-based cryptocurrencies like Bitcoin.
*** Note that our intent is not to pick on Electroneum with this article – we’re merely trying only to bring some clarity in what sets GRAFT apart from other payment solutions, using Electroneum as one of the better representatives of this class of centralized solutions.
As previously announced, we have released network node version 1.4.2 (“v10”) for a major network update. This update will correct the emission curve by reducing block rewards by 50% starting at block 176,000, which will be reached around September 17, 2018.
The new block reward formula will be as following:
reward = (M – A) * 2^-19 * 10^-10 / 2
Where M is the maximum total supply and A is the current supply.
This correction will not change the maximum supply of GRAFT that will be ever created, it will just stretch the emission curve such that it will take longer to mine the maximum supply. All GRAFT supporters should benefit from the corrected emission formula because it will stabilize the growth of the circulating supply.
In addition, GRAFT v10 will drop the mining difficulty algorithm adjustment made in the previous (v9) major network update (LWMA+tweak) and return to a standard LWMA difficulty calculation. The adjustment was originally added in an attempt to make the difficulty drop faster after a network attack, as it was believed that such network attacks were responsible for block delays and network stalls in the turbulent days between the first (v8) and second (v9) major network updates. As it turned out, however, those issues were caused by an unrelated bug inherited from Monero and have been long-since fixed on Graft’s network (the fix did not require a fork).
In retrospect, the v9 algorithm adjustment had the unintended side effect of inducing larger swings in mining difficulty because it made difficulty drop too quickly. Over time, opportunistic miners learned to exploit those difficulty swings by mining on the graft network with huge hashrates whenever difficulty dropped to win a handful of low-difficulty blocks, then leaving the network as soon as difficulty increased again. This would, in turn, result in long block times that would then trigger another difficulty drop, thus repeating the cycle. While such difficulty shifts are unavoidable, the v9 difficulty adjustment made the swings a little worse and are being removed in this fork to help make the mining difficulty more stable.
The major network update means that each GRAFT network node must be updated to the new software version before the specified block/date. Otherwise, any node that isn’t updated will be on the wrong version of the blockchain. The source code and the Linux and Windows binaries are currently available for download. The installation instructions are unchanged.
As another reminder, a major network update means that if you are running the GRAFT network node (graftnoded daemon), you must upgrade it to the current software release as soon as possible. If you do not install the updated node before block 176,000, it will be disconnected from the mainnet after block 176,000.
Note that the users of GRAFT mobile and desktop wallets will not be affected by the upcoming major network update and don’t need to do anything—as long as they are still connected to the default proxy supernodes (if you are connected to your own supernode, however, do not forget to upgrade the underlying network node to stay on the right network).
It’s time for another dev update! It’s no secret that RTAs (real time authorizations) remain the main focus for the GRAFT development team, so let’s start from the alpha review.
RTA Alpha
We are excited to announce that RTA transaction now works end to end for the entire sale workflow – it is stable, and takes just a couple of seconds to get approval on both wallet and point of sale as expected. There is still some work to be done before we move to beta release, and there are many ways to do even more improvements. But here is the most important thing: the first instant payment on a private CryptoNote blockchain is now a reality!
The RTA alpha release contains a full set of components necessary to conduct an end-to-end point of sale transaction in real time:
completely redesigned full supernode, i.e. the supernode that can participate in authorization sample and approve a GRAFT transaction in real time;
completely redesigned wallet and point-of-sale proxy supernodes, i.e. the supernodes that provides an “entry point” to the RTA network and participate in RTA transactions;
mobile and desktop wallet and point of sale apps for iOS and Mac OS X redesigned for RTA.
In addition, there is a special testing environment created for RTA alpha testing – alphanet – a dedicated testnet which contains several seed nodes, a miner, proxy supernode cluster with load balancer, and blockchain explorer.
We managed to assemble a very efficient and quite large team of alpha testers – 50+ active members who are able to run both RTA supernode and iOS/Mac clients (wallet, POS). In addition, we have selected an extra “reserve” group of volunteers (also 50+) that will be able to join the testing once it’s extended to the next phases – additional clients for Android/Windows and then beta release.
People familiar with development release cycle know that alpha releases are usually unstable and may lack some features. RTA alpha was not an exception. Once the RTA functionality was released to the alphanet, we discovered issues that we could not see during regular testing. We are able to simulate the real network very well because the alphanet consists of real participants running on different networks and different hardware or hardware abstractions, rather than artificially cloned nodes and supernodes. We really appreciate the patience and positive attitude of alpha testers team!
So it’s time to learn more about the RTA transaction flow, which you will be able to experience in retail stores soon! It is very simple – a couple of clicks (literally) in the wallet app and a couple of clicks at the point of sale app:
Figure 1: GRAFT RTA Workflow Between Mobile Wallet and Point-of-sale Apps
Payment Gateway for Merchants and Service Providers
As recently described in the Fees and economics update post, one of the important profiles in GRAFT ecosystem is a Merchant Service Provider (MSP). An MSP’s role is to provide and support payment network services to the merchant, ensure the uptime of the network (usually referred to as Service Level agreement or SLA), provide and manage equipment (e.g. payment terminals), provide reporting, etc.
To enable an MSP to do this, another type of server is needed – one that would:
Manage the terminal’s configuration (including wallet address)
Handle the MSP specific fee economics for the MSP (an MSP could choose to handle tiers of service differently or charge different fees for different transaction amounts)
Maintain transaction reporting and analyyics for merchants
In theory, such payment gateway can be designed and implemented by a third party such as traditional payment processor that wants to add cryptocurrency payments to their portfolio of services. However, we decided to create a “reference implementation” to enable faster adoption rate as a part of our go-to-market strategy. Since GRAFT is a decentralized payment network, the payment gateway is multi-tenant, multi-instance, open source app, and everyone can host their own payment gateway and become a service provider on the network.
Payment Gateway is this “fifth element” that is supposed to manage the GRAFT payment apps on hardware payment terminals and GRAFT ecommerce interfaces, and link them with the GRAFT supernodes. Since it has transaction visibility, it is considered part of merchant’s ‘back office’ applications.
Figure 2: GRAFT Payment Gateway, Service Provider Dashboard
Figure 3: GRAFT Payment Gateway, Merchant Dashboard
* Note: With GRAFT network, the merchant can be their own MSP, but would still require the functions of a Gateway in order to manage the terminals setup, reporting, etc.
Upcoming Dev Updates
We’re moving forward with every track on the development roadmap and even pulling some of them forward. An interesting upcoming project, which is currently in design and not even announced yet, is GRAFT ColdPay Supercard. This is a smart card that combines functionality of cold wallet, which can be used with mobile or desktop host app, and payment card, which can be used for making a payment at hardware payment terminals and mobile points of sale. More details about this exciting development will be unleashed very soon. Stay tuned, happy grafting!
Please remember this day – September 6, 2018. After several issues were fixed, GRAFT RTA transaction now works in a point-of-sale workflow, end to end, on alphanet, and it’s stable! It takes just a couple of seconds to process the payment! There is still some work left to be done before we move to beta, but… it works!
We will be publishing a full development update soon shortly.
As the ideas initially set forth in original GRAFT white paper gradually come to fruition, we have to adjust some “game rules” as we get one reality check after another. One of the most important rules in payment processing is the transaction fee structure. Transaction fees are equally important for all players including merchants, buyers, full (RTA) supernode owners, proxy (gateway) supernode owners, exchange brokers, miners, and service providers. After several white paper editions and other adjustments, we propose the following fee structure to be implemented in the GRAFT ecosystem:
Full Supernodes RTA Fee (any RTA Tx): 0.5%
1/8 of this fee, or 0.0625% of the total RTA Tx amount, goes to each supernode participating in the RTA authorization sample.
Proxy Supernodes Fee (any RTA Tx): 0.1%
1/2 of this fee, or 0.05% of the total RTA Tx amount, goes to each supernode in the proxy pair that provides connectivity into the network (wallet and POS proxy supernodes).
This small fee is going to be charged by the wallet proxy supernode to the mobile or desktop sender’s wallet in addition to the existing network fee (miner’s reward).
Exchange Broker Fee (RTA with altcoins): 0.25%
Exchange brokers include pay-in, payout, top-up, and interchange brokers.
Miner Transaction Fee (RTA): variable
Determined by the merchant service provider through the payment gateway, but not lower than 0.1 GRFT.
Figure 1: GRAFT Ecosystem Fees
If a particular RTA transaction is processed via the payment gateway, which will be the case for most hardware payment terminals, the fees are set and calculated by the MSP (merchant service provider). This occurs through the payment gateway plugin to the POS proxy supernode using the information about the pay-in and payout currencies as input, and setting a miner fee commensurate with the service level they are obligated to provide to the merchant.
Here’s a table-form summary of various fees in combination with various workflows:
1
2
3
Regular P2P Transfer
RTA Tx (GRFT)
RTA Tx with altcoin exchange broker (i.e. bitcoin acceptance)
Total Fee Amount paid by the Tx sender (buyer in RTA)
a1 + d1
0
0 *****
Total fee amount paid by the Tx recipient (merchant in RTA)
0
a2 + b2*8 + d2 + e2
a3 + b3*8 + c3 + d3 + e3
Total amount charged to the Tx sender
Tx amt + a1 + d1
Tx amt
Tx amt
Total funds available to the Tx recipient
Tx amt
Tx amt – (a2 + b2*8 + d2 + e2)
Tx amt – (a3 + b3*8 + c3 + d3 + e3)
Table 1: GRAFT Transaction Fees/Rewards Structure
* wallet proxy supernode can be a proprietary server or a public cluster hosted by a service provider. You can run and use your own proprietary proxy supernode to avoid the proxy fee altogether. The supernode must have a stake in order to be able to charge the fee.
** stake is required for full supernode or exchange broker in order to participate in RTA Tx processing and receive this reward
*** set by the merchant service provider or the owner of the POS proxy supernode
**** POS proxy supernode can be a proprietary standalone server, a part of the merchant infrastructure, or a part of a payment terminal or/and ecommerce gateway maintained by the merchant service provider. POS supernode must have a stake in order to be able to receive this reward
***** does not include the altcoin network fee
You can see that the new fees have been introduced on proxy supernodes—both wallet proxy and point-of-sale/payment gateway (a1, a2, a3, e2, and e3 in Table 1). Those changes will achieve increased decentralization of the infrastructure, which means no more complaints about GRAFT wallet downtime or delays! If you don’t like the proxy supernode cluster hosted by GRAFT, there will be alternative providers ready to serve your wallet or POS. In order to receive the reward, the proxy supernode must demonstrate the unique stake wallet linked to the supernode’s public IP address. The amount of proxy stake is 250,000 GRFT.
Unlike an authorization sample supernode, the proxy supernode will still be operational even without the stake, however an unstaked proxy supernode won’t be able to charge the fee. This option is reserved for proprietary proxy supernodes, so the users with elevated privacy needs can host their own entry points to the network. Without the stake, the proxy reward will be sent to the GRAFT community donation wallet address. This way the total transaction fee, which is assembled from several components, always remains consistent regardless of the status of the proxy supernodes.
Another major change, which was partially proposed earlier, is the flat fee paid to the miner for RTA transaction settlements (d2, d3). The miner’s fee is traditionally calculated based on transaction record size in KB (d1). With RTAs, however, we cannot make the miner fee variable as it would make the total fee paid by the merchant inconsistent and unpredictable, which is unacceptable in most situations. Additionally, we cannot make this fee proportional to the value of the transaction (similar to the supernode fees) because miner fees are visible on the blockchain, meaning the transaction amount could be calculated from a proportional fee (although we may fix this in the future). Therefore, we made it a simple configurable flat fee, with a minimum amount of 0.1 GRFT.
The fees associated with RTA transaction with exchange brokers are the same as RTA fees (column 2) with an extra 0.25% taken by the broker (and paid also by the merchant).
Merchant Fees and Service Providers
The MSP sets a fee schedule that’s consistent with their business model and fees could be structured in tiers with options, for example:
Transactions below $10: 2%
Transactions above $10: 1%
Min transaction amount: $1
Miner: 0.1 GRFT
Transactions in altcoins: + 0.25%
Instant payouts in altcoin or fiat: + 0.25%
Below is an example of a sample $20 altcoin transaction and the associated fees given a reference Merchant Service Provider fee schedule.
Figure 2: Example of GRAFT RTA Altcoin Tx Fees and Rewards with Service Provider
When you take a look at whattomine, mining GRAFT is as profitable as mining Monero. At first glance, this seems like a good situation for everyone who cares about GRAFT, especially for the miners. But let’s compare Monero and GRAFT market capitalization (the dollar price of one GRFT multiplied by the number of tokens in current circulation): $1.68 billion (Monero) vs. $3.76 million (GRAFT). There is a huge difference between these two market caps, but they have the same mining profitability (actually GRAFT is even higher).
The current GRAFT block reward (the proof-of-work fee that the miners receive when they “solve” the block and successfully add it to the blockchain) today is approximately 1,420 GRFT, so every day the GRAFT circulation grows by more than 1 million (!) GRFT. Unfortunately, many miners use the high profitability of GRAFT to immediately sell their mining rewards on exchanges, which keeps bringing the price down as the demand cannot keep up with such a rapidly growing supply. Even growing demand cannot catch up to the emission rate because the project is too young.
Although the block reward is designed to decrease with every block, the current rate by which emissions are decreasing is not significant enough to counteract the overall supply increase rate from miners dumping. It will be significantly lower in, let’s say, one or two years, but the GRAFT team and supporters (including miners) cannot wait that long. We all need the economics to stabilize in the near term in order for the project to regain its footing and bring things into balance.
It is hard to anticipate these imbalances ahead of time as we’re trail blazing in a lot of respects. The only thing we can do is react quickly and adjust things whenever we see the “go off the rails” potential.
Note that ERC20 token-based projects do not have the problem described above because they don’t have a real blockchain. Their token supply remains the same (actually, it is even reduced with every exchange transaction), so they just need to make sure their demand at least remains the same in order to constantly pump the price and the market cap.
With that said, in order to rebalance the network economics, we have decided to correct the emission by reducing the block reward by 50%, so the new block reward formula will be as following:
reward = (M – A) * 2^-19 * 10^-10 / 2
Where M is max total supply and A is current supply.
As you can see, the correction will not change the total maximum amount of GRAFT that will be ever created, it will just stretch the emission curve such that it will take longer to mine the total supply (see the existing and the new emission curves on the diagrams below).
All GRAFT supporters should benefit from the corrected emission formula because it is supposed to limit the daily increase in circulating supply, which will reduce the overall supply growth rate and stabilize the price. Long-term miners will benefit from the reduced emission for two reasons: 1) the price will go up so they will receive the same, or even better, revenue, and 2) the emission curve will be stretch, so they will get a more steady income over the extra years without the need to rely on transaction fees.
The emission reduction change requires a major network update (aka “hard fork”), which will be scheduled for block 176,000 (September 17, 2018). The major network update means that each GRAFT network node must be updated to the new software version before that block/date. Otherwise, the node that wasn’t updated is going to be on the wrong version of the blockchain. The new release will be available for download on September 10, 2018.
As another reminder, a major network update means that if you are running the GRAFT network node (graftnoded daemon), you must upgrade it to the current software release as soon as possible. If you do not install the updated node before the block 176,000, it will be disconnected from the mainnet after block 176,000.
Note that the users of mobile and desktop wallets will not be affected by the upcoming major network update and don’t need to do anything—as long as they are still connected to the default proxy supernodes (if you are connected to your own supernode, however, do not forget to upgrade the underlying network node to stay on the right network).
We’re very excited about this development as it completely validates the approach we’ve taken with the GRAFT blockchain!
Another important question one might ask is “Will GRAFT project be impacted by this development”?
We will be studying Square patent further and any action we might want to take, but we wanted to provide a brief summary of our initial thoughts on the subject:
Square’s provisional application was dated later than GRAFT published its first white paper (July 15, 2017), providing GRAFT an excellent basis for prior art argument should this ever come to a head.
There are enough substantial differences in GRAFT and Square’s approaches starting with Square’s emphasis on a private, closed system, while GRAFT’s being on an open, decentralized approach
Decentralized open source projects are extremely resistant to outdated IP prosecution practices as there’s not single central commercial entity to go after
Square is not known for predatory IP behavior, which could be the case if the patent was issued or sold to a patent troll. We believe that Square filed the patent to ensure their own “freedom to operate”.
Additionally, the fact that the patent was granted proves that there was little known prior art (GRAFT nonwithstanding) before July 2017 which is when GRAFT white paper was published and Square provisional application filed.
Finally, patent doesn’t equal product. Square and its competitors will be considering whether to develop these systems in-house or to use an existing public network like GRAFT.
All in all, we view this development as a very positive one both for the industry and for GRAFT.
With that said, we would like to ask for our community’s help in raising the visibility of the fact that GRAFT implementing the system that Square has attempted to patent – this is a very opportune time to do this building on the attention this patent has generated. Please help bring this up on the appropriate social media and discussion threads.
Square has made the news recently with a patent on 
