Whitepaper
Created: February 14, 2024
Updated: February 17, 2024
Similar to the Ethereum whitepaper, this whitepaper is intended to be a living document as products and use cases evolve. We also believe that in the years to come, it’s essential for newcomers discovering Stateless to grasp our origins and witness the growth of our protocol and vision.
The problem
Building financial services is complex, expensive and time consuming which our team have experienced first hand. Additionally, fintechs often find themselves constrained by their dependence on traditional banks, which control access to regulatory approvals through sponsorship.This arrangement can lead to conflicts of interest, as banks and fintechs are essentially competitors. With the power to revoke approval at any moment, banks possess the capability to abruptly halt fintech operations, presenting a significant challenge to the growth and autonomy of fintechs.In the finance sector, lending is the predominant revenue generator. However, this model hasn't translated as effectively into the crypto space. Crypto lenders often depend on over-collateralization, or have inadequate risk controls and lack the necessary data for underwriting, resulting in significant losses.Finally, while blockchain has plenty of potential, its developer-centric by design, which results in a learning curve that hampers widespread adoption.
The opportunity
We are entering an era where consumers are increasingly seeking financial solutions within the apps, games and digital experiences that they engage with daily. Drawing inspiration from companies like TikTok and Roblox, we believe that virtual economies when combined with DeFi capabilities, hold the transformative power to supplant traditional economic systems and drive the financial services of tomorrow.
Currency issuance: Enable teams to create virtual currencies with optional, built-in monetary policies including issuance rates, event driven algorithmic adjustments and currency reserves.
DeFi workflows: Integrate DeFi workflows that mimic core financial functions including deposit handling, payments, risk management and exchange.
Smart tokens: Create multi-asset smart tokens that feel like a banking app in a single token that works with wallets that users already use. These tokens should bridge the gap with traditional finance.
Risk management: Streamline hedging with skill-based betting on decentralized exchanges (DEXs) like Uniswap and Jupiter. This feature provides a strategic tool for loss coverage applicable in scenarios such as lending and currency hedging. BTC will be the base currency for trading pairs.
AI and no-code: Utilize conversational and generative AI to deliver a no-code user experience, enabling anyone, regardless of tech experience, to build innovative financial experiences.
Why Bitcoin?
Originally designed for peer-to-peer transactions, Bitcoin has evolved to become more effective as a store of value rather than as daily electronic cash, largely because of scalability challenges and transaction costs that render small, daily transactions impractical for both users and merchants.Its comparison to gold has solidified Bitcoin's reputation as "digital gold" in the public's mind. This shift in use case does not detract from Bitcoin's value, this characterization actually enhances it, highlighting its robustness and its capacity to serve as both a currency standard and a base currency within the Stateless ecosystem.
Potential use cases for Stateless
The goal with the Stateless DeFi operating system is to provide all of the tools needed to make it fast and easy to build financial services or even entire virtual banking systems within gaming and metaverse environments, allowing for real-time transactions and financial interactions that mirror those in the physical world.By delivering the four pillars of finance using workflows (deposits, payments, risk management and exchange), builders could deploy financial applications or features in days.
Smart tokens
We think that multi-asset smart tokens could flip the script on digital finance, making DeFi more user-friendly and bridging the gap with traditional finance. Smart tokens are designed to feel like the user has a banking app in a single token that works with the wallets they already use.
Contactless payments: Smart tokens will contain all of the asset balances connected to Stateless with built-in contactless payment for real-world spending.
Enhanced privacy: Smart tokens will incorporate privacy features akin to Zero-Knowledge Proofs (ZKPs), enabling verification of sufficient funds for transactions or underwriting with a simple "yes" or "no" response, without disclosing the actual balance.
Joint ownership and multi-signature: Smart tokens will support multiple holders and utilize multi-signature (multisig) technology for optional transaction approval including rules on size, adding an extra layer of consensus and security for actions taken with the token.
Recurring and conditional payments: Smart tokens will facilitate automatic recurring payments and conditional payments based on predefined criteria, streamlining complex financial operations.
Liquidity pooling: By aggregating assets within a single token, smart tokens will enhance liquidity, simplifying the trading and utilization of assets across various DeFi platforms.
Developer platform: Offering a "banking-in-a-box" solution, smart tokens will allow developers to innovate and create new financial services, products, and experiences. Workflows enable dynamic interaction with these tokens, broadening the scope of possible applications.
Unified security model: Centralizing assets in one smart token provides users with a consolidated security framework, mitigating the risks associated with managing multiple tokens.
Cross-chain interoperability: Designed with a standardized approach to metadata, smart tokens will ensure compatibility across different blockchain ecosystems, facilitating seamless asset movement and interaction.
Proof of processing (PoP)
Stateless is comprised of three core components: a decentralized transaction handling layer that introduces a novel consensus method, smart tokens, and a blockchain infrastructure designed around micro-sized transactions.At its core is Proof of Processing (PoP), a mechanism that ensures that each transaction on the Stateless blockchain meticulously records its genesis, capturing all data events, executed by AI-driven, automated workflows, leading to its execution.Stateless transactions comprise of original and transformed data alongside an event log. This is because we believe that how a transaction came to be is as important as the transaction itself. These records are accessible for search by their owners or can be made publicly available where records are published.Unlike other blockchains that have addressed transaction speed and cost efficiency by enlarging block size, Stateless has opted for a different strategy that centers on leveraging compression as a fundamental aspect of Proof of Processing (PoP).This approach to compression enables the creation of micro-sized transactions, which not only accelerates transaction speeds but also reduces the hardware demands on nodes. This reduction in hardware requirements means node operators can participate in the Stateless network using devices with lower computational capabilities, such as mobile phones, browser plugins, or cloud-integrated Discord bots.The goal is to increase the number and diversity of nodes, thereby bolstering network security and accessibility.
Network design
The network architecture of Stateless is engineered around three critical node types: Handler, Worker, and Verifier nodes, each fulfilling a unique function within the Stateless ecosystem. This structure ensures efficient, secure, and decentralized operations.(Mario to add a diagram)
Transaction handling
We've designed transaction handling to prioritize speed which is key for finance. This efficiency does not come at the cost of security; Stateless will employ advanced cryptographic techniques during transaction handling, including entropy manipulation and arithmetic coding, to protect data integrity and confidentiality every step of the way.We've also designed transaction handling to incorporate consensus which represents a significant departure from conventional frameworks. Blockchains typically depend on a multitude of nodes to validate a complete block of transactions after their creation. Conversely, Stateless engages multiple nodes in the actual construction of each transaction, embedding consensus within the transaction's formation rather than its conclusion.We've designed Stateless this way because we believe that transactions originated by a single node bear a higher risk compared to those collaboratively assembled by several nodes. By distributing the creation process across multiple participants, we enhance the integrity and security of transactions from the ground up.We achieve this by incorporating parallel processing and a commit-reveal scheme that leverages the collective verification power of the network. By assigning specific roles to Handler, Worker, and Verifier nodes, we facilitate a division of labor that optimizes resource utilization and speeds up transaction processing, capable of meeting the demands of modern finance while introducing a layer of redundancy and verification that enhances the overall security and trustworthiness of the network.Here is how we propose it will work:
Workflow instruction: A Handler node receives transaction instructions from a user-initiated workflow, acting as the starting point for the transaction's journey.
Job segmentation: Upon receiving a transaction request, a Handler node analyzes the required actions. It generates a mandate that outlines the specific tasks needed for the transaction, such as data transformation, encryption and arithmetic compression.
Dynamic Worker node assignment: The Handler node then breaks down the mandate into smaller jobs and distributes them among Worker nodes. This distribution is based on each Worker's availability, past performance, and stake in the network, ensuring that the most capable nodes are chosen for the task. Parallel processing ensures that multiple aspects of the transaction are handled simultaneously, significantly reducing processing time.
Commit-Reveal confirmation: As Worker nodes complete their assigned tasks, they use a commit-reveal scheme to securely indicate job completion. Initially, they submit a cryptographic commit that conceals the work output. Once all tasks are reported as complete, the Worker nodes reveal their outputs for verification.
Job completion check: The Handler node aggregates confirmations from all Worker nodes. Only when all components of the transaction are confirmed as completed does the Handler compile the final transaction.
Verification with expected output comparison: The completed transaction, along with the outputs from Worker nodes, is sent to a Verifier node. This node compares the actual results against an expected outcome predetermined by the workflows logic. If the results match, the Verifier node confirms the transaction's integrity and accuracy and sends the transaction to pre-flight.
Consensus
Stateless introduces a novel approach to consensus that distinguishes it from blockchains like Solana and Ethereum. While these networks have made significant strides in blockchain technology, Stateless aims to redefine consensus mechanisms with the financial industry's demand for speed at its core, without sacrificing data integrity.Existing blockchains operate by validating transactions in blocks post-creation, necessitating consensus from numerous nodes on each block. This methodology can lead to increased latency and complexity, particularly as the network expands.In contrast, Stateless integrates consensus directly into the genesis of each transaction. By engaging multiple nodes in the transaction's construction—rather than limiting their role to post-creation validation—we believe that Stateless transactions achieve inherent security superior to those initiated by individual nodes.This paradigm shift towards a distributed creation process employs parallel processing and a commit-reveal scheme to harness the network's collective verification power effectively. Such an approach not only accelerates transaction processing but also embeds essential layers of redundancy and verification from the ground up.By embedding consensus within the transaction creation phase and capitalizing on the synergistic efforts of various nodes, our goal is to align blockchain capabilities more closely with the fast-paced and security-focused requirements of financial applications.
Attacks
Here are some common threats posed by malicious nodes and how we address them leveraging the decentralized design of Stateless transaction handling:
Double spending: To prevent the same digital asset from being spent twice, Stateless integrates consensus directly into the transaction creation process. This involves multiple Worker nodes verifying the uniqueness and validity of each transaction input before finalization. Verifier nodes then cross-reference transactions against the blockchain's current state, serving as a robust barrier against double spending.
Sybil Attack: Similar to other blockchains, Stateless counters Sybil attacks, where an adversary controls multiple nodes to undermine network functionality, with Proof of Stake (PoS). This makes it prohibitively expensive to control a significant network portion. Additionally, Stateless's randomized role assignment for nodes disrupts the predictability necessary for a Sybil attacker to control transaction processing effectively.
51% attacks: In Stateless, the risk of a group controlling more than 50% of network power and manipulating consensus is mitigated by involving multiple nodes in every transaction's creation. This decentralized approach ensures that no single party can dictate transaction terms or ledger inclusion, significantly reducing the feasibility of 51% attacks.
Eclipse attacks: Stateless's strategy against Eclipse attacks, which isolate a node to feed it false information, involves random node selection for transaction validation from a diverse pool. This randomness prevents attackers from isolating a victim and ensures continuous communication with honest nodes.
Denial of Service (DDoS) attacks: Stateless disperses transaction processing and validation across its extensive node network, thwarting attempts to overwhelm the system. Individual nodes include localized rate-limiting to manage incoming request volume.
Transaction censorship: To prevent the exclusion of specific transactions, Stateless's randomized selection process for nodes involved in transaction handling ensures an unpredictable participation in transaction processing, safeguarding against targeted censorship.
Pre-flight
Pre-flight has four steps;
Final safety check: Prior to finalization, we ensure that checks throughout the transaction handling process have yielded no irregularities.
Recording: We log transactions, including all related activities, securely within the Stateless ledger.
Preparation for departure: Transactions intended for external blockchains or systems are readied for launch. Every transaction departing Stateless includes a numeric string encapsulating the original, modified data, and the activity log.
Launch: Transactions depart immediately or, when applicable, batched with others heading to the same blockchain. This strategy ensures cost-effective transaction fees and reduces strain on network resources.
Handler nodes
Handler nodes serve as the orchestrators in the Stateless network, initiating Proof of Processing (PoP) by receiving transaction instructions from user-initiated workflows. These nodes set the stage for the transaction's journey and ensure the assembly of transactions once Worker nodes have verifiably completed their assigned tasks.
Worker nodes
Worker nodes are the powerhouse of the Stateless network and the operational backbone, tasked with executing a variety of operations critical to the processing of transactions. Worker nodes are directed by Handler nodes to perform tasks including data transformation, validation, keyword extraction, entropy manipulation, arithmetic coding and timestamp integration. Worker nodes also actively check for anomalies while creating transactions.
Verifier nodes
Once the Worker nodes have completed their assigned tasks and the Handler has assembled the transaction, the Verifier's role is to meticulously review the work done, appending their computed signatures to the transaction as a form of confirmation before moving the transaction to a Handler for pre-flight processing.
Workflows
Within the Stateless ecosystem, automated workflows, also known as smart contracts, play a crucial role in the transaction handling layer. These workflows are designed to enable users to create complex data use cases, including those requiring conditional logic and loops, without writing traditional code.Stateless workflows utilize conversational AI, pre-built elements and custom logic to represent programming constructs, making workflow creation and configuration accessible to people without formal programming skills. Despite the absence of conventional code, workflows are designed to be Turing complete.Data exchange within the Stateless ecosystem is facilitated through APIs and pre-built integrations, secured with OAuth authentication.(Mario to add more about workflows and error handling amd state management?).
IFE (If and Else)
Central to Stateless workflows is the IFE (If and Else) logic framework. This goes beyond the simplicity of IFTTT by offering a nuanced conditional logic system. With IFE, workflows delineate not just actions triggered by specific conditions (If) but also outline alternative actions if those conditions are not met (Else). This approach can be further refined with "else if" statements to accommodate a spectrum of conditions, much like deciding to drive the car if it's raining, or otherwise, opting to walk.This IFE framework grants users enhanced control over the outcome of their workflows, catering to complex scenarios with varying conditions. It's instrumental for deploying workflows where precise logic is crucial for dictating varied outcomes.
Parallel processing
To navigate around performance limitations typically associated with no-code workflows, Stateless leverages parallel processing. This strategy involves multiple network nodes concurrently tackling discrete segments of work as dictated by the workflow's requirements. Parallel processing significantly accelerates task execution across the network, optimizing performance by distributing the computational load.
Data scrambling
Before compression, data undergoes an entropy manipulation process. This step increases the data's entropy, effectively obscuring any identifiable patterns or regularities, thereby enhancing its security. Such preprocessing complicates the task for unauthorized individuals attempting to decode the original content, as they must navigate both decompression and the reversal of the entropy manipulation.Crucially, this method is designed to retain the data's compressibility. By ensuring the added entropy does not excessively randomize the data to a point beyond the efficient compression capabilities of arithmetic coding, the process remains effective. (Stateless employs arithmetic coding using proprietary models for compression).This balance is crucial for leveraging the strengths of arithmetic coding while adding a security layer.
Compression
Compression is pivotal in Stateless's strategy to improve upon traditional blockchain approaches of merely increasing block size to boost transactions per second (TPS).Instead, Stateless aims to meet the performance expectations of the finance industry through the utilization of micro-sized transactions and compressed node communications, facilitated by advanced data compression techniques. These techniques drastically reduce the size of transactions and the volume of stored data, which, in turn, enhances transmission speeds, diminishes storage demands, and cuts down on bandwidth consumption.This approach also minimizes the hardware and computational demands on nodes, fostering greater participation and thereby strengthening network security.At the heart of Stateless's compression strategy is the use of arithmetic coding, underpinned by proprietary models. Arithmetic coding is a sophisticated form of entropy encoding utilized in lossless data compression, which distinguishes itself from conventional encoding methods by compressing the entire message into a single fractional number between 0 and 1.
Process of arithmetic coding
Symbol probabilities: It begins with calculating the likelihood of each symbol's occurrence in the message, based on frequency.
Interval subdivision: The total interval between 0 and 1 is successively subdivided as each symbol is processed, with each symbol's probability narrowing down the interval to a specific subrange.
Encoding the message: The cumulative process concludes with the selection of a number within the final interval, uniquely representing the complete message for efficient storage or transmission.
Decoding: Reversing the encoding process, utilizing the known probabilities and encoded number to reconstruct the original sequence of symbols.
Application of arithmetic coding in stateless
Efficiency: Compressing transaction data and node communications allows Stateless to optimize data processing and transmission, conserving bandwidth and expediting transaction verifications.
Scalability: Reduced transaction sizes alleviate the storage load on nodes, facilitating network growth by supporting more transactions without a corresponding spike in resource consumption.
Security: The integration of entropy manipulation before compression introduces an additional security layer, safeguarding against analysis and attacks by obscuring data patterns.
Node inclusivity: Lower data size requirements decrease the barriers for node participation, allowing devices with varying computational capacities to contribute to the network's robustness and decentralization.
With the implementation of arithmetic coding within Proof of Processing (PoP), this technique is not merely about optimizing data compression for efficiency. It's also about significantly enhancing transaction security and network scalability.
Role of time
Stateless utilizes timestamps as a strategic component in its data processing and blockchain operations, serving dual purposes of further scrambling data for security and ensuring accurate timekeeping across the network.
Scrambling data with timestamps
Integration into entropy manipulation: Before compression, data undergoes entropy manipulation, where timestamps are incorporated into the data itself. This process not only increases the randomness of the data, making it more secure against pattern recognition and unauthorized decryption attempts but also embeds a unique time-based element into each dataset.
Dynamic encoding: By integrating timestamps, Stateless can adjust the entropy manipulation process based on the exact time of data creation or transaction initiation. This temporal variability adds another layer of complexity to the data, complicating reverse-engineering attempts.
Ensuring Time Accuracy
Blockchain consistency: In the Stateless blockchain, each block and transaction is tagged with a timestamp, ensuring a consistent and tamper-evident record of when events occurred. This is crucial for maintaining the integrity of the blockchain, resolving conflicts that may arise from differing node times.
Synchronized communications: For network communications, timestamps serve as a standard reference point, synchronizing interactions across the network. This ensures that messages, transactions, and blocks are processed in the correct order, preserving the causality of events and the overall coherence of the blockchain.
Secret sharing
In Stateless, the use of keys for critical functions such as search, decompression, or unscrambling of data is safeguarded by the technique of secret sharing. Secret sharing involves dividing a secret, in this case, the keys necessary for data operations, into multiple parts and distributing these parts among various nodes within the network. Here’s an overview of how this process enhances security and functionality in Stateless.
Fragmentation of keys
Principle: Each key is divided into distinct portions, ensuring no single fragment by itself can reveal the secret.
Benefit: Enhances security by necessitating multiple fragments to reconstruct the original key, thereby reducing the risk of single-point compromises.
Distributed storage
Principle: The fragmented pieces of the key are stored across different nodes within the Stateless network.
Benefit: Protects against data loss and increases the complexity for potential attackers, as accessing the full key requires compromising multiple nodes.
Threshold scheme
Principle: A predetermined threshold is established, indicating the minimum number of fragments needed to reassemble the key.
Benefit: Ensures that only a collective effort from multiple nodes can reconstruct the key, fostering collaboration and adding a layer of security.
Secure collaboration
Principle: When a legitimate request necessitates the key's usage, nodes collaborate, pooling their key fragments to reconstruct the full key.
Benefit: Allows for the secure execution of sensitive functions, maintaining the confidentiality and integrity of the data.
Enhanced network security
Principle: By leveraging the decentralized nature of the network and distributing key fragments among nodes, Stateless significantly mitigates risks associated with centralized key storage.
Benefit: Makes the system resilient against attacks targeting key information, as acquiring enough fragments to unlock the data poses a considerable challenge for potential attackers.
Functional enablement
Principle: Once reassembled, the key is utilized to perform the required operations, such as decrypting data for search queries or decompressing information for user access.
Benefit: Ensures that data is accessible and manipulable only through authorized and secure means, preserving user privacy and data integrity.
Node participation
Principle: This secret sharing approach incentivizes broad participation by nodes, distributing responsibility and engagement across the network.
Benefit: Enhances the overall security and robustness of Stateless by capitalizing on the distributed ledger technology's inherent advantages.
Through secret sharing, Stateless not only secures the operations critical to our functionality but also leverages the collective strength of the network, ensuring that data operations are both secure and efficient.
Data anchoring (DA)
The Stateless protocol integrates Data Anchoring (DA), a mechanism involving the pinning of random transactions across the network, fortifying defenses against ledger tampering and ensuring storage integrity.This provides a dual advantage in terms of security because DA eliminates the necessity for full copies of the Stateless blockchain. This not only elevates network performance and security by reducing hardware requirements for nodes but also amplifies the scalability and resilience of the network, fostering a more decentralized and robust environment.
Search
Search capabilities often present challenges in other blockchain environments, but precise and efficient search is a requirement of finance. To facilitate search within Stateless, data compiled through workflows will undergo a keyword extraction process. This process is designed to exclude any personally identifying information, ensuring privacy and compliance with data protection standards.Keyword datasets are scrambled, compressed and linked to the corresponding transaction and recorded in a keyword log that is associated with the user's account. For transactions designated as public, the processed keywords are deposited into a public search repository, making them accessible for broader search operations.This approach ensures users can quickly and accurately retrieve transaction information, mirroring the efficiency of traditional web searches but within the decentralized and secure context of the Stateless platform. Search will be available via API or input.
Conclusion
Firstly, thank you for your interest in Stateless. Whether you're discovering us during our initial concept phase, at our official launch, or at any point in the future, we're thrilled to have you embark on this journey with us.The Stateless protocol is designed to push the boundaries of blockchain technology, informed by our experience in the financial services sector. We believe that DeFi must evolve to meet the real needs and expectations of users and enterprises alike.We're incredibly optimistic about the future of finance, especially the potential that merging DeFi with virtual economies holds. Our goal is to enable builders to integrate these technologies into the apps and games where users already spend their time, while not losing sight of that fact that as of February 2024, traditional finance remains a cornerstone of daily life.
Legal disclaimer
This White Paper is shared for feedback and comments and is not an offer to sell any tokens. It outlines Stateless's current plans, which are flexible and may change. The project's success depends on many external factors, including market conditions and industry developments, over which we have no control. Predictions about future events are speculative, based on our analysis, and are not guaranteed to be accurate.
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