Professional Documents
Culture Documents
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NOS mission statement 4
Introducing stablecoins 5
What is a stablecoin? 5
Why do we need stablecoins? 5
Why do we need another stablecoin? 5
What makes you different from the 30 stablecoin projects out there? 5
1. Centralized real world asset backed stablecoins (largely FIAT) pseudonymous, 100%
regulated, compliant and publicly audited 6
2. Decentralized stablecoins 6
3. Privacy stablecoins 7
Stablecoins by NOS 7
Competitive landscape 15
Stabilizing a stablecoin on exchanges 16
Analysis of Tether 16
Stabilizing of NOS stablecoins 16
Business Strategy 33
Business Model 33
Product strategy 34
Advantages of central bank dependency 34
Potential Path to decentralization similar to DAI 34
Adoption Strategy 36
Summary 36
General state of cryptocurrency adoption 36
Step 1: Adoption strategy in the crypto world 37
Use case: Crypto trading 38
Use case: Arbitrage trading 38
Use case: ICO proceed stabilization 38
Use case: Reserve currency for users of dApps 39
Step 2: Bridging the gap between crypto and non-crypto 39
Use case: Vendor payments 39
Use case: E-commerce payments 39
Use case: Crypto-enabled debit card 40
Use case: Investment in various asset classes 40
Step 3: Adoption strategy outside the crypto world 40
Use case: International trade 40
Use case: Cross-border remittance 40
Use case: Plans for world’s fastest & cheapest currency exchange 41
Use case: Inflation protection in emerging markets 41
Use case: E-SDR, a new global reserve currency 41
Use case: Disrupting fiat in emerging markets 41
Mobile payment and regulations in Africa 42
Mobile payment and regulations in Asia 42
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Partnerships 55
Merchant partnerships 55
Development fund 55
Ecosystem investment fund 56
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NOS Mission Statement
As a p2p currency, Bitcoin was created with a great objective. It brings about numerous benefits and
eliminates the challenges associated with fiat and cryptocurrency transactions such as high charges and
the time involved. As a result, we are committed in the advancement and adoption of the blockchain
industry. The following shortcomings will be relicts of the past once NOS reaches a critical mass of
adoption:
● While there must be an initial conversion fee to buy NOS stablecoins e.g. nEURO or USDn, there
will be no any future charges while making transactions on the NOS network.
● Since the invention of the banking system, banks have been overcharging for simple transactions.
● The credit card industry processed a transaction volume of 8437 Billion USD in 2016, charging
between 1.5 and 3.5% on each transaction.
● International wires cost a minimum of 30 USD in addition to currency conversion fees, and the
transaction takes around 2 to 5 business days.
● The remittance industry charges a huge premium for all transactions.
● International wire transfers are slow. Transferring money from Germany to China or from the
United States to India requires a routing bank in addition to potentially very expensive money
conversion fees.
● Currency conversion fees are a popular tool by banks to exploit the wallet of the average person
and SMEs.
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Introduction to Stablecoins
What is a stablecoin?
A stablecoin is a cryptocurrency pegged to a real-world asset which is far less volatile than
cryptocurrencies and project token. Traders primarily use stablecoins for cryptocurrency exchanges that
lack a fiat gateway. There has not been any significant usage of stablecoins for payments, although it can
offer significant advantages over fiat.
Outside of crypto there has not been a lot of stablecoin adoption, but potential cases are:
● International money transfer, especially remittance.
● As a means of payment for merchants who need real-time processing of transactions.
● To curb adverse effects of emerging market currency inflation, for example in Venezuela.
https://en.wikipedia.org/wiki/List_of_countries_by_inflation_rate
● Alternative currency options for daily use in countries which face high inflation rates.
What makes NOS stablecoins different from the 30 stablecoin projects out there?
We believe that there will be many successful stablecoin projects for different types of customers, and
therefore our objective and priority is to make NOS stablecoin unique than the rest. Our first stablecoin
nEURO will be 100% legally compliant with EU e-money regulations and therefore becomes the strictest
regulated stablecoin globally.
Although Tether recently launched an Ethereum based EURO stablecoin, it does not have any significant
traction yet, therefore giving NOS the opportunity to become the leading EURO pegged stablecoin.
NOS stablecoins transactions will always be instant and free. Therefore, NOS stablecoins have a
significant advantage over Tether or TrueUSD, which are Bitcoin and Ethereum based.
In the long run, NOS sees its main market potential outside of the pure crypto world.
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The success of stablecoins is determined by three main factors: backing, technology and regulation.
We chose fiat backings for NOS stablecoins because they command the largest market share and are
comprehensible for an average person. A backing by an ERC20 asset will limit stablecoins mass market
potential.
We chose DAG (Directed Acyclic Graph) because it offers instant and free transactions. Ethereum or
Bitcoin technology will limit mass market potential because of the charges and time involved.
We chose the strictest regulatory framework available to gain trust and long-term sustainability for our
stablecoin. Decentralised (e.g. DAI) and centralised offshore stablecoins (e.g. Tether) are unregulated.
Advantages
● Simple to understand 1 nEURO = 1 redeemable EURO. It will cover a considerable market share
as it will be readily accessible to the average consumer
● Feeling of safety by legally owning a unit that acts as a legal tender for a FIAT currency
Disadvantages
● Dependency on bank partnership (can be solved by obtaining a bank license)
● Potentially more strict regulations to be imposed in the future, making partnerships less
sustainable or more costly
Examples: TrueUSD/TrustToken, Tether, NOS
2. Decentralized stablecoins
Advantages
● Independence from potentially unsustainable banking relationships
Disadvantages
● Regulators will make it difficult for anonymous teams to contribute to their projects
● Decentralized organizations have been shut down by regulators in the past e.g. decentralized
anonymous marketplaces
● Synthetic pegs to stabilize the price at one-dollar (for example Ethereum or all ERC20 compatible
tokens) are difficult to understand for the average consumer and can be perceived as risky.
● Sudden black swan events of price implosions of the assets services as the peg can adversely
affect the stability of the stablecoin, for example Ethereum lost suddenly 95% of its market cap.
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While events like these have a low probability, their impact is significantly higher than a sudden
crash of the Euro, US Dollar or Yuan.
3. Privacy stablecoins
Advantages
● Full anonymity of owners and transactions. Remember Bitcoin is not anonymous, already 30% of
the network can be identified by leading service providers. Bitcoin seems as anonymous as the
Internet in the early days.
Disadvantages
● Anonymous founder teams can leave the project at any time since they do not have any legal
commitments towards the stablecoins owners to maintain and develop the project
● The legal uncertainty limits the acceptance of stablecoins to illegitimate transactions
● Customers may not trust the peg, especially when the network is not decentralized and it could
vanish at any time
Stablecoins by NOS
NOS plans to launch stablecoins for the world’s leading currencies, but will start with a EURO pegged
centralized stablecoin regulated as e-money in the EU called nEURO in this whitepaper, pronounced as
“NEURO” (short for NOS EURO).
We have completed the technological phase for NEURO, and the testnet is available at
https://my.nos.cash/.
Get in touch with our community managers at discord and telegram if you need some test_nEURO to try
out our wallet and send some test_nEURO transactions to friends.
The EU e-money framework provides the most transparent and strict legal framework for offering a
stablecoin. Therefore, it is very safe for investors to hold nEURO stablecoins. nEURO is a rechargeable,
electronically stored monetary value in the form of a claim to Nos Cash as an issuer, which is issued
against payment of a cash amount to carry out a transaction. As a storage medium, NOS Coins are emitted
on a DAG (Directed Acyclic Graph), which is based on the Nano-technology. This is classified as a so-
called software-supported system according to the German Payment Services Supervision Act (ZAG).
The value units on the storage medium act as a prepaid bearer instrument. Therefore, the electronic value
units are equivalent to cash.
NOS Coins eliminates the analog character of cash and allows the participants to interact via block lattice,
and can also be extended in perspective by the use of smart cards as a storage medium to a card-based
system.
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The nEURO grants the holder a claim in the amount of the previously paid-in amount (EURO amount),
minus a commission for the initial issue of this coin, administration and operation of the system, against
the Nos Cash .
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NOS Token
The NOS token is a ERC20 utility token with a business concept that has built-in deflation effect in order
to align token investors’ interests with the NOS founders team to build, support and popularize the NOS
stablecoins, payment tools, adoption and ecosystem. The NOS token will grant early access to NOS
products and will serve as a discount voucher on future product fees. A percentage of the NOS token will
be burned once they are used to access NOS products and pay for fees.
In order to finance the development of the NOS protocol, pay for e-money institute coverage fees, and
guarantee financing of growth through exchanges, we plan to raise money through an equity round and
public token sale (ICO).
The primary target in our equity round is to get the support of respected angel, institutional and corporate
investors.
Our main source of funding will be a public sale of NOS tokens. NOS tokens will be a utility token
offering, which mainly will attract a discount on transactions fees for exchanging NOS stablecoins to fiat.
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● Discount on exchange fees for FIAT / EUR
● Discount on KYC / AML fees for sign-ups
● Early access to new stablecoins
● Discount on exchange fees for nEURO / USDn or USDn / RMBn
Initially, we need an LOI to form a partnership for e-money coverage from a respected financial
institution with a full banking license in order to boost credibility for a pre- and the main sale of NOS
tokens. A successful pre- and main sale also confirms the demand and a high interest in the market.
Once our soft cap of 1.5 million Euro is reached, we will have enough liquidity to pay for setup,
transaction and deposit fees of our e-money/bank partner.
We have credible industry leading advisors at NOS who raised on average €35 million in their last 3 ICO
mandates. We hope to raise €10m in a medium outcome and €30m in a best case ICO scenario.
Unfortunately, a lot of companies have been using the ICO hype to raise money at concept stage for
unrealistic or undefined products. According to studies, already 46% of all ICO companies have failed to
deliver on their products and promises.
Even worse another study shows that 80% of all ICOs are scams and only 8% of them reach a trading
exchange.
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Even worse the amount of fraud in the ICO space is incredibly high. This leads to a negative signaling for
companies doing ICOs in general. Generally, the following publicly accepted criteria for ICOs is used to
generate trust for investors:
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● Does the product really require blockchain? → While e-money could be created with a
MySQL database, it would not be compatible with exchanges and merchant tools and could
not offer users access to own their private keys.
● Is there any real world problem the company is solving? → Unaudited and unregulated
stablecoins, high fees and slow transaction times, first EU regulated stablecoin
● Team → Seasoned serial entrepreneurs and crypto enthusiasts since 2012
● Code → Open Source on Github pre-ico launch
● Whitepaper → Easy to understand overview on problems, ideas and technical solutions
● Token Model → Deflationary, the better the product performs, the more valuable the token
becomes
● Is there a business model? → Freemium with paid services such as exchange fees.
NOS plans to fulfill all conditions for a viable product and business model.
Use of funds
The ICO proceeds will be used for several important milestones, which would include the following (not
sorted by priority)
● 225.000 EUR yearly payment for e-money coverage as a service to e-money institute partner in
Malta
● Potential listing fees for several exchanges to push adoption for our stablecoins
● Development fund to invest into companies developing applications for Nano (which would be
very likely compatible with NOS)
● Sign-up with more partner banks
● Global business development team pushing for NOS adoption
● 10.000.000€ for a banking license in the EU, US or ASIA
● Launch of more stablecoins e.g. USDn “NOLLAR”, RMBn “Nuan”, GBPn “Nound”
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● Stablecoin currency conversion tools
● Bank transfer bill payment tools (for example for miners)
In order to generate trust for our ICO investors, the founders team of NOS will only be rewarded with
tokens if certain goals are achieved. Those goals could be written into the smart contract of the ERC20
token via a trustless oracle solution or audited and enforced by an industry trusted auditor. They are
inspired by Elon Musk’s latest agreement with his shareholders to be only rewarded if certain goals are
achieved by him.
● More developers helping to improve the Nano protocol and its ecosystem
● First fiat gateway through a Nano / nEURO trading pair
● Potentially first USD gateway through the launch of USDn
● Less fees and time for Nano customers to stabilize their funds
● Broader customer audience to Nano through insisting to get NOS and Nano listed at the same
time on cryptocurrency exchanges that do not list Nano yet
● Broader network of merchants using Nano compatible technology, we will always offer to help to
integrate Nano as cryptocurrency with our payment partners as well
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● More access to fiat liquidity for Nano
● The NOS development fund will finance all projects that help to popularize the underlying
technology that NOS and Nano are built on. We will also finance projects that do not have any
obvious advantage for NOS, but simply help to popularize Nano, improve its technology and
grow its compatibility
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Competitive Landscape
Tether
The most successful stablecoin is Tether. It is based on omni protocol (formerly mastercoin), the inventor
of ICOs and predecessor of Ethereum. In December 2017, Tether published statements of their auditor
Friedman LP which showed $430mio at a Taiwanese bank account, but currently inaccessible for Tether.
Shortly afterwards, Tether fired its auditor and since then it hasn’t performed any public audit because of
the fear that their banking relationships will be threatened once they make their banking partners public.
Until recently, the FAQ of Tether stated explicitly no legal right to redeem 1 USD for 1 USDT. After
public criticism the clause was deleted.
There are many conspiracy theories but few proven facts around Tether and its relationship with Bitfinex
regarding where Tether is mainly emitted and brought into circulation to other exchanges.
We believe Tether proved a demand and potential for Stablecoins but also pose a significant risk to the
crypto ecosystem due to its unaudited and unregulated nature.
DAI
DAI , the Stablecoin by makerdao, is the most popular Stablecoin for Crypto enthusiasts. Due to its
decentralized backing by ETH, there is a very low probability for DAI to fall in value due to regulations.
The founders / foundation of makerdao isn’t anonymous and therefore has to comply with international
regulations which may be it’s only centralized single point of failure.
TrueUSD
TrueUSD is a centralised stablecoin pegged to the USD and launched by Trusttoken.com. You can buy
TUSD at Upbit, Bittrex, Cointiger and Kuna. Some of the exchanges do not require any KYC. TUSD
offers a legal right to redeem 1 USD for each TUSD. In order to buy or sell them officially via TUSD,
you have to register and go through a KYC/AML process. TrueUSD is based on Ethereum, which makes
it compatible with a broad range of wallets and dapps.
Conclusion: TUSD is the biggest competitor for NOS stablecoins. Their legal setup is less strict than e-
money regulations of nEURO, especially in KYC/AML regulations. When transferring it from MetaMask
to an exchange, we paid around 1.5 USD in gas price for moving 35 TUSD and had to wait for 15
minutes, which makes it unreliable for micro transactions.
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USDC (by foundation ERC20
Circle) unregulated 0 USD / tba Token no $0.50 15 min
daily by ERC20
EURS unregulated 0 EUR KPMG Token no $0.50 15 min
ERC20
True USD unregulated 16 USD unaudited Token no $0.50 15 min
public
smart ERC20
Havven unregulated 0 ether contract Token no $0.50 15 min
ERC20
DGX unregulated 0 gold unaudited Token no $0.50 15 min
public
nEURO by e-money bank
NOS regulated 0 fiat statement Nano yes 0 2 Seconds
Analysis of Tether
According to coinmarketcap.com, Tether has 400 trading pairs and most of them are crypto / USDT pairs.
The most important trading pairs for Tether are pairing USD and USDT available only at Kraken.
Looking at the trading activity on Kraken it seems that Tether is stabilizing USDT by bot driven trading.
There seems to be no fees for the USD/USDT trading pair.
The remaining 399 USDT trading pairs seem to stabilize due to automated arbitrage bots.
NOS stablecoins can be purchased through SEPA transfers for their first stablecoin nEURO / NEURO. In
2018, several banks have agreed to come together and launch SEPA Instant in order to offer SEPA
transfers within 10 minutes. Instant SEPA is similar to “Lightning Network”. Participating banks have to
join and integrate this technology to their online banking services, which will result most likely in higher
fees for account holders. NOS plans to offer SEPA Instant transfers as soon as they are available therefore
giving crypto enthusiasts the option to trade in and out of cryptocurrencies within a few minutes. This
will also create an excellent arbitrage opportunity for traders to stabilize NOS stablecoins to 1:1 because
of its almost instant emittance and redemption.
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NOS Technology
NOS aims to create a simple payment protocol which only needs a limited amount of
information in it’s transactions. DAG technology offers a fast and simple solution for
transactions, therefore NOS can offer free transactions.
Advantages
Disadvantages
● New technology within the crypto context which may face rejection
● Exchange node compatibility (only 6 transactions per second, therefore several layers
have to be implemented to prevent nodes from crashing)
More information about DAG can be found in whitepapers of crypto projects using DAG
technology e.g.
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Payment transactions with smart contracts are expensive and slow. Also, users of ETH based
stablecoins have to hold ETH in their wallet in order to pay for network fees when sending a
token-based stablecoin from wallet A to B in the Ethereum network. At its peak times in
December, the recommended GAS price resulted in prices of around 5 USD per transaction
which would limit the use case of stablecoins to large transactions. The current (May 6, 2018)
average gas price of an Ethereum transaction is at around 0.5 USD still making it impractical for
micro transactions and usage in third world countries, in which a single cent be extremely
valuable.
We plan to build an easy to use NOS transaction oracle which could be used for smart contract
solutions based on Ethereum, EOS, or at some point DAG. We know of at least three projects
working on bringing smart contract on DAG technology, leveraging its speed and lightness and
circumventing its asynchrony.
A classic blockchain used in Bitcoin, Litecoin, etc. has the advantage of large scale popularity
Advantages
Disadvantages
● PoW mining with users paying for transactions does not fit our fee-free model
● Wasteful mining
● Pruning has not been implemented successfully
As long as NOS owns the majority of the voting power of representatives, there will always be
the option of a hard fork.
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As of today (May 6, 2018) we do not have any public knowledge of a successful hack or double
spending attack of any Nano / Raiblocks based cryptocurrencies.
Leveraging the advantages of the DAG architecture implemented by Nano, NOS is a green
currency. Recent studies show that crypto mining is accountable for 0.5% of the world’s energy
usage.
A single transaction on the NOS network amounts to 0.000275 cents.
Energy consumption depends on the overall usage of servers and can be optimized to use less.
It’s our goal to contribute to popularizing energy-friendly technology in the cryptocurrency world.
Mining is a comfortable approach for initial distribution of a new crypto project. It helps to target
valuable crypto insiders that help to popularize ideas and built a community without having to
face the legal uncertainties of an ICO.
Projects like Nano and Banano have shown that faucet, game or airdrop distribution can work to
target a broader audience, which typically does not consist of crypto insiders. Distribution can
work without wasteful mining and a ledger can record irreversible transactions without huge
amounts of energy consumption.
To comply with AML rules and guarantee safety in the network, NOS will reserve the right to
blacklist wallets and emitted stablecoins. Technically, the stablecoins will become unmovable
because they will not be accepted by the official NOS nodes that hold the majority of voting
power in the network. A similar approach has been chosen by the Nano team to remove all
Raiblocks that have not been distributed through their faucet distribution. NOS will establish an
easy to use inquiry process for regulators and keep all e-money AML guidelines will be followed
in their strictest interpretation.
It is our highest priority to establish transparency and trust for our stablecoin products. In
addition to regular auditing reports by one of the big four global auditors, we will implement a
technical solution for a balance check between bank account and stablecoin circulations.
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NOS will show and update the bank account balance publicly on our homepage. NOS triggers
an API call every 15 minutes to check for incoming SEPA transfers. The updated account
balance will be compared to the overall circulation of nEURO. Our emittance process will
automatically be stopped once the bank account balance does not match 100% the bank
account balance. NOS users will receive a public explorer that transparently displays all
stablecoin and fiat transfers. The fiat/stablecoin explorer will also serve as an oracle for
compatibility to dApps and centralized NOS software.
NOS plans a similar path as Nano to decentralize it’s network once there is a growing amount of
masternodes from merchants, community members, and payment providers.
Advantages
● More contribution by merchants and tools offering master nodes to contribute to the
network
● Less centralization generating more trust
Disadvantages
● Centralization of 1:1 value of stablecoins are still the bank accounts of NOS’s banking
partners,
A. Account
An account is the public-key portion of
a digital signature key-pair. The
public-key, also referred to as the
address, is shared with other network
participants while the private-key is
kept secret. A digitally signed packet
of data ensures that the contents were
approved by the private-key holder.
One user may control many accounts,
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but only one public address may exist per account.
B. Block/Transaction
The term “block” and “transaction” are often used interchangeably, where a block contains a
single transaction. Transaction specifically refers to the action while block refers to the digital
encoding of the transaction. Transactions are signed by the private-key belonging to the
account on which the transaction is performed.
C. Ledger
The ledger is the global set of accounts where each account has its own transaction chain
(Figure 2). This is a key design component that falls under the category of replacing a run-time
agreement with a design-time agreement; everyone agrees via signature checking that only an
account owner can modify their own chain. This converts a seemingly shared data structure, a
distributed ledger, in to a set of non-shared ones.
D. Node
A node is a piece of software running on a computer that conforms to the Nano protocol and
participates in the Nano network. The software manages the ledger and any accounts the node
may control, if any. A node may either
store the entire ledger or a pruned
history containing only the last few block
of each account’s blockchain. When
setting up a new node it is recommended
to verify the entire history and prune
locally.
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packet size for being transmitted over the internet. Hardware requirements for nodes are also
minimal, since nodes only have to record and rebroadcast blocks for most transactions (Figure
1).
The system is initiated with a genesis account containing the genesis balance. The genesis
balance is a fixed quantity and can never be increased. The genesis balance is divided and sent
to other accounts via send transactions registered on the genesis account-chain. The sum of
the balances of all accounts will never exceed the initial genesis balance which gives the
system an upper bound on quantity and no ability to increase it. This section will walk through
how different types of transactions are constructed and propagated throughout the network.
A. Transactions
Transferring funds from one account to another requires two transactions: A send deducting the
amount from the sender’s balance and a receive adding the amount to the receiving account’s
balance (Figure 3). Transferring amounts as separate transactions in the sender’s and
receiver’s accounts serves a few important purposes:
1) Sequencing incoming transfers that are inherently asynchronous.
2) Keeping transactions small to fit in UDP packets.
3) Facilitating ledger pruning by minimizing the data footprint.
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4) Isolating settled transactions from unsettled ones. More than one account transferring to the
same destination account is an asynchronous operation; network latency and the sending
accounts not necessarily being in communication with each other means there is no universally
agreeable way to know which transaction happened first. Since addition is associative, the order
the inputs are sequenced does not matter, and hence we simply need a global agreement. This
is a key design component that converts a run-time agreement in to a design-time agreement.
The receiving account has control over deciding which transfer arrived first and is expressed by
the signed order of the incoming blocks. If an account wants to make a large transfer that was
received as a set of many small transfers, we want to represent this in a way that fits within a
UDP packet. When a receiving account sequences input transfers, it keeps a running total of its
account balance so that at any time it has the ability to transfer any amount with a fixed size
transaction. This differs from the input/output transaction model used by Bitcoin and other
cryptocurrencies. Some nodes are uninterested in expending resources to store an account’s
full transaction history; they are only
interested in each account’s current
balance. When an account makes a
transaction, it encodes its accumulated
balance and these nodes only need to
keep track of the latest block, which
allows them to discard historical data
while maintaining correctness. Even
with a focus on design-time
agreements, there is a delay window
when validating transactions due to
identifying and handling bad actors in the network. Since agreements in Nano are reached
quickly, on the order of milliseconds to seconds, we can present the user with two familiar
categories of incoming transactions: settled and unsettled. Settled transactions are transactions
where an account has generated receive blocks. Unsettled transactions have not yet been
incorporated in to the receiver’s cumulative balance. This is a replacement for the more complex
and unfamiliar confirmations metric in other cryptocurrencies.
B. Creating an Account
To create an account, you need to issue an open transaction (Figure 4). An open transaction is
always the first transaction of every account-chain and can be created upon the first receipt of
funds. The account field stores the public-key (address) derived from the private-key that is
used for signing. The source field contains the hash of the transaction that sent the funds. On
account creation, a representative must be chosen to vote on your behalf; this can be changed
later (Section IV-F). The account can declare itself as its own representative.
C. Account Balance
The account balance is recorded within the ledger itself. Rather than recording the amount of a
transaction, verification (Section IV-I) requires checking the difference between the balance at
the send block and the balance of the preceding block. The receiving account may then
increment the previous balance as measured into the final balance given in the new receive
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block. This is done to improve processing speed when downloading high volumes of blocks.
When requesting account history, amounts are already given.
E. Receiving a Transaction
To complete a transaction, the recipient of sent funds must create a receive block on their own
account-chain (Figure 6). The source field references the hash of the associated send
transaction. Once this block is created and broadcasted, the accounts balance is updated and
the funds have officially moved into their account.
F. Assigning a Representative
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power to vote on an account’s behalf relaxes this requirement. Account holders have the ability
to reassign consensus to any account at any time. A change transaction changes the
representative of an account by subtracting the vote weight from the old representative and
adding the weight to the new representative (Figure 7). No funds are moved in this transaction,
and the representative does not have spending power of the account’s funds. G. Forks and
Voting A fork occurs when j signed blocks b1, b2, . . . , bj claim the same block as their
predecessor (Figure 8). These blocks change { previous: DC04354B1...AE8FA2661B2,
representative: xrb_1anrz...posrs, work: 0000000000000000, type: change, signature:
83B0...006433265C7B204 } Fig. 7. Anatomy of a change transaction cause a conflicting view on
the status of an account and must be resolved. Only the account’s owner has the ability to sign
blocks into their account-chain, so a fork must be the result of poor programming or malicious
intent (double-spend) by the account’s owner.
Upon detection, a representative will create a vote referencing the block ˆbi in its ledger and
broadcast it to the network. The weight of a node’s vote, wi , is the sum of the balances of all
accounts that have named it as its representative. The node will observe incoming votes from
the other M online representatives and keep a cumulative tally for 4 voting periods, 1 minute
total, and confirm the winning block (Equation 1).
The most popular block b ∗ will have the majority of the votes and will be retained in the node’s
ledger (Equation 2). The block(s) that lose the vote are discarded. If a representative replaces a
block in its ledger, it will create a new vote with a higher sequence number and broadcast the
new vote to the network. This is the only scenario where representatives vote. In some
circumstances, brief network connectivity issues may cause a broadcasted block to not be
accepted by all peers. Any subsequent block on this account will be ignored as invalid by peers
that did not see the initial broadcast. A rebroadcast of this block will be accepted by the
remaining peers and subsequent blocks will be retrieved automatically. Even when a fork or
missing block occurs, only the accounts referenced in the transaction are affected; the rest of
the network proceeds with processing transactions for all other accounts. 5
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H. Proof of Work
All four transaction types have a work field that must be correctly populated. The work field
allows the transaction creator to compute a nonce such that the hash of the nonce
concatenated with the previous field in receive/send/change transactions or the account field in
an open transaction is below a certain threshold value. Unlike Bitcoin, the PoW in Nano is
simply used as an anti-spam tool, similar to Hashcash, and can be computed on the order of
seconds [9]. Once a transaction is sent, the PoW for the subsequent block can be precomputed
since the previous block field is known; this will make transactions appear instantaneous to an
end-user so long as the time between transactions is greater than the time required to compute
the PoW.
I. Transaction Verification
V. ATTACK VECTORS
Nano, like all decentralized cryptocurrencies, may be attacked by malicious parties for
attempted financial gain or system demise. In this section we outline a few possible attack
scenarios, the consequences of such an attack, and how Nano’s protocol takes preventative
measures.
A. Block Gap Synchronization In Section IV-G, we discussed the scenario where a block may
not be properly broadcasted, causing the network to ignore subsequent blocks. If a node
observes a block that does not have the referenced previous block, it has two options:
1) Ignore the block as it might be a malicious garbage block.
2) Request a resync with another node. In the case of a resync, a TCP connection must be
formed with a bootstrapping node to facilitate the increased amount of traffic a resync requires.
However, if the block was actually a bad block, then the resync was unnecessary and
needlessly increased traffic on the network. This is a Network Amplification Attack and results in
a denial-of-service. To avoid unnecessary resyncing, nodes will wait until a certain threshold of
votes have been observed for a potentially malicious block before initiating a connection to a
bootstrap node to synchronize. If a block doesn’t receive enough votes it can be assumed to be
junk data.
B. Transaction Flooding
A malicious entity could send many unnecessary but valid transactions between accounts under
its control in an attempt to saturate the network. With no transaction fees they are able to
continue this attack indefinitely. However, the PoW required for each transaction limits the
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transaction rate the malicious entity could generate without significantly investing in
computational resources. Even under such an attack in an attempt to inflate the ledger, nodes
that are not full historical nodes are able to prune old transactions from their chain; this clamps
the storage usage from this type of attack for almost all users. C. Sybil Attack An entity could
create hundreds of Nano nodes on a single machine; however, since the voting system is
weighted based on account balance, adding extra nodes in to the network will not gain an
attacker extra votes. Therefore there is no advantage to be gained via a Sybil attack.
D. Penny-Spend Attack
Since the owner of an account will be the only entity adding blocks to the account-chain,
sequential blocks can be computed, along with their PoW, before being broadcasted to the
network. Here the attacker generates a myriad of sequential blocks, each of minimal value, over
an extended period of time. At a certain point, the attacker performs a Denial of Service (DoS)
by flooding the network with lots of valid transactions, which other nodes will process and echo
as quickly as possible. This is an advanced version of the transaction flooding described in
Section V-B. Such an attack would only work briefly, but could be used in conjunction with other
attacks, such as a >50% Attack (Section V-F) to increase effectiveness. Transaction rate-
limiting and other techniques are currently being investigated to mitigate attacks.
F. >50% Attack
The metric of consensus for Nano is a balance weighted voting system. If an attacker is able to
gain over 50% of 6 the voting strength, they can cause the network to oscillate consensus
rendering the system broken. An attacker is able to lower the amount of balance they must
forfeit by preventing good nodes from voting through a network DoS. Nano takes the following
measures to prevent such an attack:
1) The primary defense against this type of attack is voting weight being tied to investment in
the system. An account holder is inherently incentivized to maintain the honesty of the system to
protect their investment. Attempting to flip the ledger would be destructive to the system as a
whole which would destroy their investment.
2) The cost of this attack is proportional to the market capitalization of Nano. In PoW systems,
technology can be invented that gives disproportionate control compared to monetary
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investment and if the attack is successful, this technology could be repurposed after the attack
is complete. With Nano the cost of attacking the system scales with the system itself and if an
attack were to be successful the investment in the attack cannot be recovered.
3) In order to maintain the maximum quorum of voters, the next line of defense is representative
voting. Account holders who are unable to reliably participate in voting for connectivity reasons
can name a representative who can vote with the weight of their balance. Maximizing the
number and diversity of representatives increases network resiliency.
4) Forks in Nano are never accidental, so nodes can make policy decisions on how to interact
with forked blocks. The only time non-attacker accounts are vulnerable to block forks is if they
receive a balance from an attacking account. Accounts wanting to be secure from block forks
can wait a little or a lot longer before receiving from an account who generated forks or opt to
never receive at all. Receivers could also generate separate accounts to use when receiving
funds from dubious accounts in order to insulate other accounts.
5) A final line of defense that has not yet been implemented is block cementing. Nano goes to
great lengths to settle block forks quickly via voting. Nodes could be configured to cement
blocks, which would prevent them from being rolled back after a certain period of time. The
network is sufficiently secured through focusing on fast settling time to prevent ambiguous forks.
A more sophisticated version of a > 50% attack is detailed in Figure 9. “Offline” is the
percentage of representatives who have been named but are not online to vote. “Stake” is the
amount of investment the attacker is voting with. “Active” is representatives that are online and
voting according to the protocol. An attacker can offset the amount of stake they must forfeit by
knocking other voters offline via a network DoS attack. If this attack can be sustained, the
representatives being attacked will become unsynchronized and this is demonstrated by
“Unsync.” Finally, an attacker can gain a short burst in relative voting strength by switching their
Denial of Service attack to a new set of representatives while the old set is resynchronizing their
ledger, this is demonstrated by “Attack.” Offline Unsync Attack Active Stake
G. Bootstrap Poisoning
The longer an attacker is able to hold an old private-key with a balance, the higher the
probability that balances that existed at that time will not have participating representatives
because their balances or representatives have transferred to newer accounts. This means if a
node is bootstrapped to an old representation of the network where the attacker has a quorum
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of voting stake compared to representatives at that point in time, they would be able to oscillate
voting decisions to that node. If this new user wanted to interact with anyone besides the
attacking node all of their transactions would be denied since they have different head blocks.
The net result is nodes can waste the time of new nodes in the network by feeding them bad
information. To prevent this, nodes can be paired with an initial database of accounts and
known good block heads; this is a replacement for downloading the database all the way back
to the genesis block. The closer the download is to being current, the higher the probability of
accurately defending against this attack. In the end, this attack is probably no worse than
feeding junk data to nodes while bootstrapping, since they wouldn’t be able to transact with
anyone who has a contemporary database.
VI. IMPLEMENTATION
Currently the reference implementation is implemented in C++ and has been producing
releases since 2014 on Github [10].
A. Design Features
The Nano implementation adheres to the architecture standard outlined in this paper. Additional
specifications are described here.
1) Signing Algorithm: Nano uses a modified ED25519 elliptic curve algorithm with Blake2b
hashing for all digital signatures [11]. ED25519 was chosen for fast signing, fast verification, and
high security.
2) Hashing Algorithm: Since the hashing algorithm is only used to prevent network spam, the
algorithm choice is less important when compared to mining-based cryptocurrencies. Our
implementation uses Blake2b as a digest algorithm against block contents [12]. 7
3) Key Derivation Function: In the reference wallet, keys are encrypted by a password and the
password is fed through a key derivation function to protect against ASIC cracking attempts.
Presently Argon2 [13] is the winner of the only public competition aimed at creating a resilient
key derivation function.
4) Block Interval: Since each account has its own blockchain, updates can be performed
asynchronous to the state of network. Therefore there are no block intervals and transactions
can be published instantly.
5) UDP Message Protocol: Our system is designed to operate indefinitely using the minimum
amount of computing resources as possible. All messages in the system were designed to be
stateless and fit within a single UDP packet. This also makes it easier for lite peers with
intermittent connectivity to participate in the network without reestablishing short-term TCP
connections. TCP is used only for new peers when they want to bootstrap the block chains in a
bulk fashion. Nodes can be sure their transaction was received by the network by observing
transaction broadcast traffic from other nodes as it should see several copies echoed back to
itself.
Building on top of connection-less UDP allows future implementations to use IPv6 multicast as a
replacement for traditional transaction flooding and vote broadcast. This will reduce network
bandwidth consumption and give more policy flexibility to nodes going forward.
30
C. Performance
At the time of this writing, 4.2 million transactions have been processed by the Nano network,
yielding a blockchain size of 1.7GB. Transaction times are measured on the order of seconds. A
current reference implementation operating on commodity SSDs can process over 10,000
transactions per second being primarily IO bound.
This is an overview of resources used by a Nano node. Additionally, we go over ideas for
reducing resource usage for specific use cases. Reduced nodes are typically called light,
pruned, or simplified payment verification (SPV) nodes.
A. Network The network activity of a node is dependent on how much the node contributes
towards the health of a network.
1) Representative: A representative node requires maximum network resources as it observes
vote traffic from other representatives and publishes its own votes.
2) Trustless: A trustless node is similar to a representative node but is only an observer, it
doesn’t contain a representative account private key and does not publish votes of its own.
3) Trusting: A trusting node observes vote traffic from one representative it trusts to correctly
perform consensus. This cuts down on the amount of inbound vote traffic from representatives
going to this node. 4) Light: A light node is also a trusting node that only observes traffic for
accounts in which it is interested allowing minimal network usage.
5) Bootstrap: A bootstrap node serves up parts or all of the ledger for nodes that are bringing
themselves online. This is done over a TCP connection rather than UDP since it involves a large
amount of data that requires advanced flow control.
B. Disk Capacity Depending on the user demands, different node configurations require
different storage requirements.
1) Historical: A node interested in keeping a full historical record of all transactions will require
the maximum amount of storage.
2) Current: Due to the design of keeping accumulated balances with blocks, nodes only need to
keep the latest or head blocks for each account in order to participate in consensus. If a node is
uninterested in keeping a full history it can opt to keep only the head blocks.
3) Light: A light node keeps no local ledger data and only participates in the network to observe
activity on accounts in which it is interested or optionally create new transactions with private
keys it holds.
C. CPU
1) Transaction Generating: A node interested in creating new transactions must produce a Proof
of Work nonce in order to pass Nano’s throttling mechanism. Computation of various hardware
is benchmarked in Appendix A.
2) Representative: A representative must verify signatures for blocks, votes, and also produce
its own signatures to participate in consensus. The amount of CPU resources for a
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representative node is significantly less than transaction generating and should work with any
single CPU in a contemporary computer.
3) Observer: An observer node doesn’t generate its own votes. Since signature generation
overhead is minimal, the CPU requirements are almost identical to running a representative
node.
VIII. CONCLUSION
In this paper we presented the framework for a trustless, feeless, low-latency cryptocurrency
that utilizes a novel blocklattice structure and delegated Proof of Stake voting. The network
requires minimal resources, no high-power mining hardware, and can process high transaction
throughput. All of this is achieved by having individual blockchains for each account, eliminating
access issues and inefficiencies of a global data-structure. We identified possible attack vectors
on the system and presented arguments on how Nano is resistant to these forms of attacks.
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Business Strategy
Business Model
The most successful business model of our present time is “freemium.” To accelerate adoption and
revenue growth, NOS will offer a large offering of free services and a targeted selection of paid premium
services.
Free services
● Free transactions of NOS stablecoins nEURO, USDn, etc. from A to B e.g. transfer from
exchange A to exchange B or payment of merchant A with mobile wallet
● Purchase of nEURO via SEPA transfer
● KYC / AML sign-up of a natural person
NOS supply is driven by cash-in from exchanges, e-commerce partner shops, and OTAs.
Revenue is driven by cash-out from e-commerce shops and OTAs that want to cash-out to fiat.
Our main adoption channel will be crypto exchanges that do not trust current stablecoin solutions.
E-commerce partner shops will have the largest incentive to use NOS stablecoins in order to lower fees
for payments.
OTAs are currently one of the largest crypto adoption categories, and usually get a commission of 6 to
8%. NOS could help to increase their EBITDA by 30%
While there is a potential chance to raise 20 million or more in an initial capital building mechanism
through a token sale, NOS could reach profitability with 3 million EUR in initial capital.
The worst case for the NOS ICO would be to raise less than 1.5 million EUR which could prevent the
token sale from triggering the smart contract. Only if 1.5 Mio EUR is raised in the ICO main sale, the
NOS token will be distributed. Otherwise, the ETH will be sent back automatically to the investors.
There is no financial risk for NOS bank partners since the main sale will be cancelled if the minimum
amount will not be raised to finance set-up, transfer and KYC fees.
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Product strategy
NOS will develop set of wallets, mobile apps, oracle tools and APIs.
Bitcoin has proven that a p2p electronic cash system can indeed work and transfer payments without a
central bank intervention. However, cryptocurrencies are still abstract concepts for the general public.
Their accessibility and usability lack mainstream adoption features, and high levels of volatility have
potential to disrupt economic stability. On the other hand, the concept of a 1:1 backed stablecoin is easy
to understand and brings mainstream adoption potential, as it combines the strengths of cryptocurrencies
with the convenience and relative stability of major fiat currencies.
For a stablecoin where the peg is maintained by a certain amount of collateral in another cryptocurrency
(e.g. ETH) promising the stablecoin holders an ETH amount close to 1 USD may have superior regulation
independency. This is still only a guarantee of a cryptocurrency instead of a real-world fiat asset like
EURO or USD. Therefore, this will lead to the issue of such pegs either being very unstable or requiring
large amounts of over-collateralization to maintain the peg when under stress.
Decentralised stablecoins like makerdao offer an ethereum backed stablecoin with DAI, which prevents
banking relationship dependency.
Nano has not been built for smart contracts, although it recently announced projects like taxara.io, teg.one
and a few others in stealth mode which are working on block-lattice based smart contracts, which may be
compatible with NOS.
Once a NOS compatible smart contract solution is established, it would be an applicable option to switch
to a makerdao conceptually similar approach.
34
Instead of ETH, there could be the option of trading excess collateral debt positions with Nano as a
collateral.
35
Adoption Strategy
Summary
In order to maximize the growth potential for NOS, we will focus on the crypto exclusive world in the
first step, targeting businesses and individuals that have 99% of their assets and costs in crypto. The
second step will be bridging the gap between crypto and non-crypto businesses, popularizing the
advantages of adopting crypto in general. After successful growth, NOS aims to target use cases outside
of the crypto world, challenging the status quo of how people and businesses make transactions and the
charges involved.
There is little information about the actual adoption of cryptocurrencies outside of speculation.
The website https://dapptrack.com/ tracks daily volume of transactions on the ethereum network, which
regularly range between 0.5 and 1 Mio USD, mostly led by gambling websites like Etheroll or dapp based
collection concepts like Crypto Kitties.
Bitcoin and Monero have traditionally been used a lot on darknet marketplaces. Wikipedia states:
“The size of the darknet markets economy can be problematic to estimate. A study based on a
combination of listing scrapes and feedback to estimate sales volume by researchers at Carnegie Mellon
University captured some of the best data. A reviewed 2013 analysis put the Silk Road grossing $300,000
a day, extrapolating to over $100 million over a year. Subsequent data from later markets has significant
gaps as well as complexities associated with analysing multiple marketplaces.”
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Looking at the pure transaction rate of bitcoin since mid 2017 there seems to be a correlation with the
bitcoin price, which leads to the conclusion that the majority of bitcoin transactions are trading related.
Before July 2017, the transaction rate does not correlate with the bitcoin price.
Apparently, one of the popular arguments that crypto is an even larger bubble than the internet around
1999 is certainly true: crypto products have a far smaller adoption rate and usefulness for people than the
internet in its early days. We hope to contribute positively to change that fact by solving three
fundamental crypto problems: volatility, transaction speed and transaction time.
The biggest challenge will be the adoption and growth of our NOS stablecoins. Until now, there is not a
single cryptocurrency that has deeply penetrated to the market for other uses except speculation and
trading of illicit goods.
As a company policy, NOS will be paying its team, partners and leadership exclusively in NOS
stablecoins in order to incentivize adoption.
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Our main adoption and distribution strategy will be to target partners that have a majority of their cost
structure accepting digital payment e.g. distributed teams, digital products, virtual products. This, too,
includes cryptocurrency exchanges and the introduction of trading pairs with NOS based stablecoins as an
attractive alternative to Tether.
The main advantage of a stablecoin is to stabilize cryptocurrency trading gains. Only a fraction of
cryptocurrency exchanges have a fiat gateway. Most of them offer USDT (Tether) trading pairings, which
are not popular because of rumours about Tethers insolvency.
Unfortunately, most cryptocurrencies are traded in BTC which leads to leverage its position as the lead
asset upon which crypto markets prices are depended upon. Usually if the price of BTC drops
significantly, most altcoins turn red at a rate of 2,5x the decrease of BTC. If BTC gains in value, altcoins
usually increase by 2,5x of BTCs growth. If BTC trades siteways, its price usually means growth for
altcoins. Similar effects can be observed in most asset markets that have a lead asset e.g. gold and silver.
We hope that more stablecoin pairings will help to reduce Bitcoin dependency for crypto assets.
Arbitrage is one of the most attractive business models within the crypto industry. Traders take advantage
of price differences between trading pairs on different exchanges. The main challenge for arbitrage is the
time needed for withdrawals and deposits. The less the transaction time required to take out crypto from a
cold wallet into a hot wallet (and vice versa), the more attractive the arbitrage opportunity gets. Again,
transaction times of the used cryptocurrency plays a crucial rule. Due to the instantaneous nature of NOS
stablecoins, they will become the leading currency utilized for arbitrage between exchanges, removing
price uncertainty, minute long transaction times, and fees for the transaction itself. NOS hopes to
contribute to the growing maturity of the trading industry with more balanced orders books and less
slippages between trading pairs.
Once ICOs reach their soft cap, they face the challenge on how to stabilize their proceeds for secure
planning of their business agenda. If ICO proceeds are directly routed to NOS compatible exchanges, they
can be securely stored and switched back into crypto at any time.
ICOs can serve as an attractive vertical both for the investors and companies since both struggle with
uncertainty in the private and public token sale periods. There are numerous examples in which the entire
token value increase of the ICO was beaten by the value increase of Ethereum. The other way around the
same uncertainty applies and ICO proceeds have suddenly far less value due to falling ethereum prices.
NOS aims to work with third-party tools and develop its own tool (e.g. transaction oracle for ethereum
smart contracts) to prevent uncertainty and price complexity on both sides of the ICO process.
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Use case: Reserve currency for users of dApps
At first, nEURO will not be compatible with Ethereum based dApps. We therefore aim to build an oracle
which could help to integrate NOS stablecoins as an alternative reserve currency for dApps. While many
dApp developers prefer synthetic stablecoins (e.g. ETH as a peg), we are committed to offer a useful
alternative to mainstream users feeling more comfortable with a 100% instantly legally redeemable Euro
or US Dollar for one of our stablecoins.
Large enterprise clients that want to become users of dApps (e.g. IPFS, Storj, etc.) are unlikely to be
willing to hold a large balance in a volatile currency such as BTC or the dApp token. Simultaneously, it is
unlikely that they will make frequent ad-hoc purchase to satisfy their demand for tokens. Therefore, it is
likely that they will need to have a balance in a stablecoin such as NOS stablecoins to be able to use
dApps. Given the strong regulatory framework of our stablecoins, we are ideally positioned to satisfy this
demand.
When the total crypto market cap peaked in 2018 at almost 800 billion, a new class of millionaires was
created. These newly rich prefer to keep their gains in crypto assets instead of converting back to
traditional fiat.
Similar to electricity bills, miners have to pay for expensive mining hardware. At the moment, most e-
commerce shops offer bitcoin payment for mining hardware, putting the buyer and seller at a currency
risk, which has to be balanced by converting bitcoin immediately into fiat by services like coinbase or
bitpay.
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Use case: Crypto-enabled debit card
Nano is compatible with smart cards, which are compatible with all common POS hardware systems and
only require a software update. The pin of the physical card will confirm a transaction between a user
wallet and a merchant wallet. The card could be a sub-wallet within an existing NOS wallet, which would
have to be pre-credited like a common debit or EC card.
Such a system would be far superior to current crypto credit card and general credit card solutions.
NOS plans to partner with the ETF-coin company HOS. Currently in stealth, HOS plans to tokenize ETFs
and portfolios of ETFs to offer a more flexible alternative to a share depot.
NOS could lead to a much faster payment confirmation, less fees, faster production and more trust in
international trade.
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fees do not offer any advantages over existing remittance services like Western Union or Moneygram.
NOS would likely have to partner with local currency exchange partners in emerging market in order to
compete with current offerings. The long-term goal of NOS is to popularize the usage of our stablecoins
to make any offline currency conversion unnecessary. Although it will take significant time and effort,
once the stablecoins are a popular currency in migrants origins, the entire remittance industry could be
disrupted by lowering remittance fees to almost 0%.
Use case: Plans for world’s fastest & cheapest currency exchange
Specialized Nano exchanges like Nanex offer the fastest transaction speed at lowest market rates for Nano
related trading pairs. Once USD stablecoins are launched, we can offer a unique gateway to convert
USDn to nEURO within seconds at the lowest rates available on the market.
People in emerging markets have long been pulled back through high transaction costs imposed on them.
Most of the business people give up because of poor infrastructure and unstable political institutions with
often questionable economic policies. As a result, the local fiat currency constantly devalues. Moreover, a
high percentage of the population lack access to modern financial instruments. Unfortunately, the
minority have access to a bank account with a digital version of the local fiat currency. NOS will be in a
prime position to provide people in these countries easy access to stable and more universal accepted
41
currencies with low barriers of entry. Due to their zero transaction cost, instant transaction and high
security, NOS’s stablecoins can be widely accepted in these countries and make high volumes of
transactions with positive impact to their economy.
Many African nations have a higher mobile payment adoption rate than western countries. This is mostly
due to the high percentage of unbanked population. Mobile payment is done via SMS (sim card credits) or
e-money. It’s mostly dominated by large telecommunication providers that have the infrastructure for pre-
installing payment solutions and offering currency conversion shops. The only challenge is the high
transaction fees many telecoms charge up to 20% per transaction.
In many African nations, the USD is more valued than the national currency. Although not legally
accepted, even government employees prefer it as the medium of exchange for high-cost transactions, for
example, trading cars or real estate.
In those countries, the “NOLLAR” USDn has a big potential to become the primary currency of
exchange.
In some nations, it can be done under the umbrella of existing e-money regulations and in some, it may
only be possible to operate within workarounds (e.g. redeemability in nations that have a high overlap of
immigration of family members).
Tencent became one of the most successful companies in China by introducing WeChat pay. Within
WeChat, people can send e-money RMB equivalent to a maximum of 200 USD in value. The payment
method is widely popular for small transactions and gifting money on special holidays. The USA and
Europe are far behind when it comes to the adoption rate of easy to use mobile payment solutions
integrated into messaging systems like WhatsApp, Facebook messenger or telegram. NOS hopes to
integrate its stablecoin into the most popular instant messaging services in a similar way as a market-
leading example in India. They use the WhatsApp API to trigger transactions from their e-money system
and record the debits by customers phone numbers. NOS will create an automatic seed creation for all
mobile phone numbers and allow easy transaction without complicated KYC processes for example for
nEURO nEURO transactions up to 100 EUR per wallet.
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Regulatory Framework for NEURO
The following is an e-money concept with a German based white-labeling bank, that classifies a
stablecoin as e-money. This will give us the option to launch of stablecoin being 100% compliant with
German regulations. We received an offer / LOI from the banking partner, which serves as an e-money
institute and bank account partner in this example. While this gives us the option to launch through them
we will not limit our EUR based stablecoin to a single jurisdiction within the European Union, although
regulations apply to all members of the EU.
Liability- side
Liabilities versus Customer
Disposition Daily
Currency EURO
USD & more on a later stage
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✓ Preparation of transactions via EBICS with B-
Authorization
Customer groups
So far, the following use cases have been discussed and agreed with our e-money banking partner:
Users of decentralized apps WEF experts estimate that 10% of global GDP will be
handled on a blockchain basis.
The registration level should be made simple for a user to get started. With registration, a NOS Wallet is
created for the user so that he is able to receive NOS coins. The acquisition of NOS-Coins (conversion
EUR-NOS), the sale (Exchange NOS- EUR) and the sending of NOS coins (transport) is only possible
after processing the identification.
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System of traceability of transactions
Since the NOS e-money system uses a DAG built on Nano-technology as a medium of storage, the
transactions are traceable at all times. The traceability of transactions should be clarified in the following
scheme:
45
As long as the NOS coins are stored on an Identified Wallet, we know exactly who holds those coins.
Depending on the owner of an identified wallet, there can be two kinds of clients:
Owner = Natural person: Coins belong to the owner of the NOS Wallet.
Owner = Wallet provider: Here, an external wallet provider holds the NOS Coins fiduciary for a
large number of clients. The external wallet provider then visualizes the value of NOS coins on an
individual basis for his customers. Depending on the compliance policy of the respective wallet
provider, identification of customers might not be necessary at this point.
46
Traceability is not an issue since the wallet provider's customers cannot exchange these NOS
coins for EUR. To do this, these customers would have to register at Nos Cash , transfer the coins
from the external wallet provider to their own NOS wallet, and identify themselves. Only then the
coins can be exchanged for EUR.
Therefore, Nos Cash is able to flag and track individual NOS transactions until a payout is made. At this
stage, there is the opportunity to ask the user and to clarify unclear, and suspicious transactions.
1. Identified NOS user sends 100 coins to a recipient at an external wallet provider.
2. The External wallet provider can not identify his customers like NOS. That’s why the recipient is
known as “Mickey Mouse” at this stage.
a. For the Nos Cash , the COINS are not stored on the wallet of "Mickey Mouse", but on a
collection wallet of the identified wallet provider.
3. "Mickey Mouse" could now send these coins to another person ("Anonymous-1") at the same
wallet provider.
a. For the Nos Cash , the coins do not leave the wallet of the identified wallet provider.
b. This is just an internal transfer posting in the fiduciary list of the wallet provider from
"Mickey Mouse" to "Anonymous-1"
4. For example, if "Anonymous-2" wants to exchange some of the coins received by "Mickey
Mouse" into EUR, he has to identify himself with Nos Cash .
a. Here it comes to who actually hides behind the alias "Anonymous-2".
b. Since "Anonymous-2" has received the coins from "Mickey Mouse", it can be assumed
that he knows the background of this transaction.
Regulatory classification
The Nos Cash executes customer identification within a significant outsourcing according to § 25b of the
German Banking Act (KWG) for the partner bank. It provides the license for the issue, disposition and
exchange of electronic money as a so-called reliable third party (“zuverlässiger Dritter”) according to § 7
of the German Money Laundering Act (GwG).
Nos Cash provides the partner bank with a frontend supported reporting system. The partner bank uses
this system to identify the relevant NOS users and associate personal data, the activation level
(registered/identified) and the legitimacy documentation, if necessary. The requirements for this system
can be evaluated and implemented together with the partner bank.
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In accordance with Nos Cash , the requirements of the partner bank will meet the requirements for
reliable third parties (“zuverlässige Dritte”).
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Process: Purchase of nEURO
49
Description: Purchase NOS Coins
50
Process: Sale NOS Coins
51
1. An individual wants to sell 500 nEURO and receive EURO
2. NOS checks if there is already a fully KYC’ed account (including bank details) and starts KYC
process if the individual is unknown
3. Once the individual is identified, he receives a wallet hash to deposit the nEURO
4. After a few seconds, the nEURO are confirmed and NOS will initiate a SEPA bank transfer from
the partner banks trust account to the customers bank account.
5. 0.9% in fees will be deducted and sent from the trustee account of the partner bank to NOS’ bank
account
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Account type No. Account Owner
Business transaction:
1. Issuing of e-money / emergence of a new claim
2. Cash receipt on the clearing account
3. Resolution of the claim
4. Redemption of e-money / emergence of a new liability
5. Balancing the interim Account: NOS- issuing
6. Cash out to customers 100% less 1% fee
7. Transfer commissions to Nos Cash account
Receivables against customers exist only for a legal second in this business model. The posting logic uses
this procedure for accounts balancing. The accounts created for this setup are posted on a daily basis, and
there is always an order to create and an order to compensate this receivable, all in one payment
information. For this reason, the receivables of Nos Cash are always set to 0.00 EUR at the end of the
day. GromiKV reporting is not necessary here.
Liabilities against customers are paid out on a daily basis by SEPA transfer.
Risk analysis
1 Interest-rate risk X
2 Counterparty risk X
3 Market price risk X
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4 Liquidity risk X
5 Operating risk X
6 Legal Risk X
7 Credit risk X
8 Operational risks X
Interest-rate risk
Description: Interest rate risk is a financial risk that is as a result of an interest bearing financial
product adversely deviating from the market rate due to future market
developments.
For Nos Cash , the negative deposit rates that accrue on daily maturing funds are
especially associated with this risk.
Dealing: NOS should bring an adequate number of merchants on board who will regularly
exchange their nEURO into EURO
Operating risk
Description: The inherent risk of a business, without regard to financial risks. The risk that
arises from leveraging activities. Also referred to as business risk.
The Risk that Nos Cash can go bankrupt.
Dealing: In case of a NOS bankruptcy, all customers funds are still available and
untouched. The legal right to receive 1 EURO for 1 nEURO is not affected by a
potential bankruptcy of NOS.
Legal risk
Description: The risk that current jurisdiction will develop against the current business model.
Dealing: Usually lawmakers have long proposal, voting and execution cycles of law. Any
fundamental changes to e-money regulation would have to offer a fade-out phase
for NOS and it’s customers in order to find a more crypto friendly jurisdiction.
Operational risk
Description: The risk that errors can be generated in operative, manual work activities.
Dealing: The operational risk is to be prevented by automation and process efficiency. The
NOS system is regularly subject to a technical examination and internal stress
tests.
Once a year, there is the opportunity to make an IT revision at Nos Cash
executed by the partner bank or an external provider.
Reputational risk
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Description: The risk that after a successfully completed pre-/ and main sale, the operators
behind NOS will collect the money and stop the development of the NOS or
fraudulently engage in this fundraising.
Dealing: The pre-/ main sale cash flow runs exclusively via an account at the partner bank.
Additionally all ether or cryptofunds in general can be received by a multisig
wallet to which the partner bank could hold a key to prevent any unauthorized
transactions
Partnerships
Merchant partnerships
To get an understanding of merchant needs for integration, conversion rate and safety, NOS has partnered
up with a number of small and medium-sized companies which have an annualized payment processing
volume of 250 million USD. While many of our merchant partners do not provide the perfect user
intersection with the crypto world, it helped us to get invaluable insights to understand how future
payment tools would need to look like in order to gain mainstream adoption.
Development fund
5% of all ICO proceeds will be invested into NOS related projects, helping to fuel compatibility of Nano
with exchanges and tools. Since NOS stablecoins are based on Nano, we aim to make all Nano
compatible tools (nanotools.org) with NOS stablecoins, therefore serving as a fiat gateway for the Nano
ecosystem. We will decide on a case by case basis to give out NOS token to projects we feel excited
about.
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Ecosystem investment fund
After completion of the introductory phase of NOS and establishment of our main infrastructure, we will
start to look for new and existing third parties that are able to substantially increase the attractiveness of
our stablecoin solution to strategic target groups and provide us with better market access and exposure to
them. In order to incentivise such developments, we plan to use ICO funds as well as funds that will be
raised specifically for such purpose.
FAQs
Technically the coins already exist, but legally are only a valid asset-debt obligation (e-money)
once send from our hot wallet to the buyer. So decentralization could technically happen within
the network, but legal emittance would still be a fiat bank transfer centralised process.
Representatives for circulating supply can easily be decentralized once the coin is established. If
the minting reserve is not participating in voting, only circulating PoS counts. You need to treat
the network part separated from the mintage.
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