Whitepaper - adambyte/gobyte GitHub Wiki

Gobyte: A Payments-Focused Cryptocurrency

Abstract. Gobyte A cryptocurrency based on Bitcoin & Dash, the work of Satoshi Nakamoto, with various improvements such as a two-tier incentivized network, known as the masternode network. Included are other improvements such as PrivateSend, for increasing fungibility, and InstantSend, which allows instant transaction confirmation without a centralized authority.

1 Introduction
Bitcoin 1 is a cryptocurrency that has emerged as a popular medium of exchange and is the first digital currency that has attracted a substantial number of users 2. Since its inception in 2009, Bitcoin has been rapidly growing in mainstream adoption and merchant usage 3. A main issue with the acceptance of Bitcoin in point-of-sale (POS) situations is the time required to wait for the network to confirm the transaction made is valid. Some payment processors have created methods to allow vendors to take zero-confirmation transactions, but these solutions utilize a trusted counterparty to mediate the transaction outside of the protocol.

Bitcoin provides pseudonymous transactions in a public ledger, with a one-to-one relationship between sender and receiver. This provides a permanent record of all transactions that have ever taken place on the network 5. Bitcoin is widely known in academic circles to provide a low level of privacy, although with this limitation many people still entrust their financial history to its blockchain.

Gobyte is the first cryptocurrency based on the work of Satoshi Nakamoto & Dash with built-in privacy functions. In this paper we propose a series of improvements to Bitcoin resulting in a decentralized, strongly anonymous cryptocurrency, with tamper-proof instant transactions and a secondary peer-to-peer (P2P) network incentivized to provide services to the Gobyte Network.

2 Masternode Network
Full nodes are servers running on a P2P network that allow peers to use them to receive updates about the events on the network. These nodes utilize significant amounts of traffic and other resources that incur a substantial cost. As a result, a steady decrease in the amount of these nodes has been observed for some time on the Bitcoin network 7 and as a result, block propagation times have been upwards of 40 seconds 14. Many solutions have been proposed such as a new reward scheme by Microsoft Research 4 and the Bitnodes incentive program 6

These nodes are very important to the health of the network. They provide clients with the ability to synchronize and facilitate quick propagation of messages throughout the network. We propose adding a secondary network, known as the Gobyte masternode network. These nodes will have high availability and provide a required level of service to the network in order to take part in the Masternode Reward Program.

2.1 Masternode Reward Program – Cost and Payments
Much of the reason for the decrease of full nodes on the Bitcoin network is the lack of incentive to run one. Over time, the cost of running a full node increases as the network gets used more, creating more bandwidth and costing the operator more money. As the cost rises, operators consolidate their services to be cheaper to run, or run a light client which does not help the network at all.

Masternodes are full nodes, just like in the Bitcoin network, except they must provide a level of service to the network and have a bond of collateral to participate. The collateral is never forfeit and is safe while the masternode is operating. This permits masternode operators to provide a service to the network, earn payment for their services and reduce the volatility of the currency.

To run a masternode, the operator must demonstrate control over 1,000 Gobyte. When active, masternodes provide services to clients on the network, and in return receive regular payment from the block reward. Like miners, masternodes are all paid from the block reward, 70% of which is dedicated to this program.

Due to the fact that the masternode rewards program is a fixed percentage and the masternode network nodes are fluctuating, expected masternode rewards will vary according to the current total count of active masternodes. Payments for a standard day for running a masternode can be calculated by using the following formula:

(n/t)* rba

Where:
n is the number of masternodes an operator controls
t is the total number of masternodes
r is the current block reward (presently averaging about 12.375 Gobyte)
b is blocks in an average day. For the Gobyte network this usually is 576.
a is the average masternode payment (70% of the average block reward)

The cost associated with running a masternode creates a hard and soft limit of active nodes on the network. Currently with 5.2 million Gobyte in circulation, only 5,200 nodes could possibly be running on the network. The soft limit is imposed by the price it costs to acquire a node and the limited liquidity on exchanges due to usage of Dash as a currency and not merely an investment.

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