Version 2.0 | March 2025

This document presents an updated comprehensive design for implementing a User ID auction system for Reddcoin, now fully integrated with the Namespace Auction system. The system builds upon the existing Reddcoin infrastructure to create a fair, efficient, and economically sustainable mechanism for allocating human-readable identifiers within the Reddcoin ecosystem.

The auction-based approach replaces the initially proposed fixed-fee model with a dynamic market-driven system that:

1. Achieves optimal price discovery for valuable names
2. Prevents squatting through economic disincentives
3. Creates a deflationary pressure on RDD supply
4. Provides sustainable funding for ongoing development
5. Rewards network participants and namespace owners through fee distribution

This updated design incorporates a two-tiered approach where top-level namespaces are auctioned first, and those namespace owners then define rules and parameters for user IDs within their namespace. This creates a hierarchical, market-driven system with aligned incentives throughout.

1. Core System Architecture
2. User ID Auction Mechanics
3. Namespace Integration
4. Blockchain Integration
5. P2P Protocol Extensions
6. Database Schema
7. Economic Model
8. User Interface Design
9. Implementation Plan
10. Potential Refinements
11. Appendices

The User ID Auction system extends the Reddcoin Core protocol to facilitate the registration, transfer, and renewal of human-readable identifiers through competitive bidding, now operating within the rules defined by parent namespaces.

The system consists of the following core components:

1. Auction Manager: Central component handling auction creation, bid processing, and auction finalization

2. Namespace Integration Layer: Interface with the namespace system to validate and enforce namespace-specific rules

3. Storage Layer: Database structures for persistent storage of auction and bid data

4. Blockchain Interface: Mechanisms for writing auction data to the Reddcoin blockchain via OP_RETURN outputs

5. P2P Relay Network: Extension of the Reddcoin P2P protocol to efficiently propagate auction-related messages

6. User Interface: Wallet integration providing auction browsing, bidding, and management functionality

1. User ID Auction Creation:

   • User requests to create an auction for a specific name within a namespace
   • System validates name availability and checks conformance with namespace rules
   • Auction parameters are set based on namespace configuration
   • Auction is recorded on blockchain and propagated via P2P network

2. Bidding Process:

   • User views available auctions and places a bid
   • Bid is validated against auction and namespace requirements
   • Valid bid is recorded on blockchain and propagated
   • Previous high bidder is notified about being outbid

3. Auction Finalization:

   • System detects auction end based on time parameters
   • Highest valid bid is determined as winner
   • Name registration is processed for the winner
   • Auction proceeds are distributed according to namespace revenue model
   • Losing bidders receive deposit refunds

The system supports multiple auction types tailored to different name categories, with parameters now defined by namespace configurations:

1. Standard Auctions: Default auction type for most names

   • Duration defined by namespace (typically 3-7 days)
   • Deposit requirement defined by namespace (typically 10%)
   • Reserve price determined by namespace length-based pricing tiers

2. Premium Auctions: For high-value names (short, dictionary words)

   • Longer duration (typically 7-14 days)
   • Higher deposit requirement (typically 15-20%)
   • Higher reserve prices

3. Renewal Auctions: For names approaching expiration

   • Current owner gets right of first refusal
   • If not renewed, enters public auction
   • Grace period implemented before public auction

The auction system follows a defined state flow:

[Namespace Ready] → [Auction Creation] → [Auction Open] → [Auction Ended] → [Settlement] → [Name Ownership]

Detailed state flow is visualized in the system flow diagram referenced in the appendices.

1. Minimum Increment: New bids must exceed the current highest bid by a percentage defined by the namespace (typically 5%)
2. Deposit Requirement: Bidders must include a deposit defined by the namespace (typically 10-20% of bid amount)
3. Anti-Sniping: Auctions extend according to namespace rules if a bid is placed near the end
4. Validation: Bids must include proof of funds and be cryptographically signed

1. Once auction time elapses, the auction enters the finalization phase
2. The highest valid bid is identified as the winner
3. The winner's full bid amount is processed
4. Auction proceeds are distributed according to the namespace's revenue model:
   • Namespace owner receives their configured percentage (5-10%)
   • Burn pool receives the largest portion (50-80%)
   • Node operators receive their share (5-25%)
   • Development fund receives its allocation (5-15%)
5. Deposits from losing bidders are refunded (minus processing fees)
6. The name is registered to the winner's address within the namespace
7. All participants are notified of the auction outcome

The User ID system now functions within a hierarchical namespace structure:

1. Format: User IDs are expressed as name.namespace (e.g., alice.redd, bob.crypto)
2. Validation Chain: All user ID operations must be validated against parent namespace rules
3. Rule Inheritance: User IDs inherit character rules, economic parameters, and auction settings from their namespace

When processing user ID operations, the system performs namespace-specific validation:

1. Character Set Validation:

   • Checks that the name only contains characters allowed by the namespace
   • Letters (a-z) are always allowed
   • Numbers, hyphens, and underscores are conditionally allowed based on namespace configuration

2. Length Validation:

   • Verifies name length against namespace minimum and maximum requirements
   • Different namespaces can have different length requirements

3. Auction Parameter Validation:

   • Ensures auction parameters (duration, reserve price, etc.) meet namespace minimums
   • Applies namespace-specific pricing tiers based on name length

User ID auctions inherit several key configurations from their parent namespace:

1. Pricing Tiers: Minimum reserve prices based on name length
2. Auction Duration: Minimum and maximum auction periods
3. Bidding Rules: Minimum increment percentages and deposit requirements
4. Revenue Model: How auction proceeds are distributed
5. Renewal Parameters: When and how names must be renewed

Namespace owners have certain rights regarding user IDs in their namespace:

1. Revenue Share: Receive a percentage of all user ID auction proceeds
2. Rule Setting: Define rules for all IDs within their namespace
3. Priority Registration: Option for reserved names within their namespace
4. Dispute Resolution: First-level resolution for name disputes

The system uses Reddcoin's OP_RETURN capability to record user ID auction data on-chain, with specialized formats for different auction operations:

0     2  3                             39  
|----|--|-----------------------------|  
magic op   name.namespace_id (37 bytes)

0     2  3          7    8       16    17    25
|-----|--|----------|----|---------|----|-----|
magic op  auctionId hash bidAmount time

0     2  3                             39  
|----|--|-----------------------------|  
magic op   name.namespace_id (37 bytes)

0     2  3                             39  
|----|--|-----------------------------|  
magic op   name.namespace_id (37 bytes)

The system defines the following operation codes:

New consensus rules are implemented to enforce:

• Validity of auction operations
• Namespace rule compliance
• Correct sequence of state transitions
• Appropriate fee payments
• Authorization of operations

The P2P protocol is extended with new message types to support the auction system:

Additional message fields have been added to include namespace information:

1. Namespace Identifier: All auction messages include the parent namespace
2. Rule Validation: Auction messages include a validation hash to verify compliance with namespace rules
3. Owner Notification: Special notification messages for namespace owners about activity in their namespace

The protocol implements intelligent message relay to:

• Filter messages by namespace
• Prioritize time-sensitive messages
• Allow subscription to specific namespaces
• Validate messages against namespace rules before relaying

The system uses a comprehensive database structure with these primary tables:

Stores information about all auctions in the system.

Stores information about all bids placed.

Additional tables support namespace integration:

Maps registered user IDs to their namespace and ownership information.

Stores additional metadata for user IDs.

For each successful user ID auction, the proceeds are distributed according to the parent namespace configuration:

Names are categorized by desirability, with pricing tiers defined by the namespace:

1. Length-Based Pricing: Shorter names typically have higher minimum prices
2. Character-Based Pricing: Names with only letters may have different pricing than those with numbers/symbols
3. Custom Tiers: Namespace owners can define custom pricing tiers for their namespace

The renewal model is designed to discourage squatting while providing stability for legitimate users:

1. Renewal Period: Defined by namespace (typically 365 days)
2. Grace Period: Defined by namespace (typically 30 days after expiration)
3. Renewal Pricing: Based on namespace configuration:
   • Standard renewal: Percentage of equivalent auction price (typically 50%)
   • Grace period renewal: Higher percentage (typically 75-100%)
   • Usage discounts: Reduced fees for actively used IDs

Several mechanisms discourage name squatting, configurable by namespace:

1. Usage Requirements: Activity-based renewal discounts
2. Progressive Penalties: Increasing costs for bulk ownership
3. Reclamation Auctions: Expired names enter public auction
4. Activity Metrics: Transaction counts affect renewal costs

The Namespace auction browser provides a clear view of available namespaces:

Key features include:

• Primary organization by namespace
• Filtering by auction type and status
• Search functionality for specific names
• Clear display of namespace rules and requirements
• One-click access to bidding interface

The auction browser provides a clear view of available names, now organized by namespace:

Key features include:

• Primary organization by namespace
• Filtering by auction type and status within namespace
• Search functionality for specific names across namespaces
• Clear display of namespace rules and requirements
• One-click access to bidding interface

The bid interface guides users through the bidding process:

Key elements include:

• Namespace rule information
• Current highest bid information
• Minimum bid requirement calculation based on namespace rules
• Deposit amount calculation
• Confirmation controls

The dashboard provides users with personalized information:

Key features include:

• Organization of owned IDs by namespace
• Active bids tracking across namespaces
• Auction watchlist with namespace filtering
• Notification center with namespace-specific alerts
• Renewal reminders grouped by namespace

The mobile experience maintains the namespace organization:

Key aspects include:

• Namespace-based navigation
• Streamlined bidding process
• Clear rule presentation by namespace
• Push notifications for auction events within watched namespaces

With the addition of namespace integration, the implementation plan has been updated:

The implementation now follows a dependency-based approach:

1. Namespace First: Namespace system must be implemented before user ID auctions
2. Phased Testing: Namespace auctions tested first, then user ID auctions within test namespaces
3. Parallel Development: Some components can be developed in parallel with clear interfaces
4. Migration Path: Strategy for existing names if any need to be incorporated

With namespace integration, additional risks have been identified:

Several advanced features could further enhance the integrated system:

• State Channel Implementation: Layer-2 solution for rapid bidding within namespaces
• Merkle Tree Auction Proofs: Efficient on-chain storage with namespace-specific trees
• Zero-Knowledge Auction Mechanisms: Enhanced privacy and security for bids

• Dynamic Reserve Pricing Algorithm: Machine learning-based price adjustment per namespace
• Community Staking For Governance: Stake-weighted voting on namespace and system parameters
• Inter-Namespace Markets: Mechanisms for transferring IDs between namespaces

• Namespace-Specific Analytics Dashboard: Historical data and predictive guidance by namespace
• Reputation and Trust System: Bidder reputation tracking across namespaces
• Multi-Platform Integration: Mobile and browser extensions with namespace organization

• Namespace-Centric Services: Specialized services built around specific namespaces
• Cross-Chain Namespace Resolution: Interoperability with other blockchain naming systems
• Value-Added Services: Integration of messaging, profiles, and directories by namespace

• System Architecture Diagram
• Auction System Flow Chart
• Database Entity Relationship Diagram
• P2P Protocol Message Flow
• Namespace Integration Diagram

• Auction Browser Interface
• Bid Placement Interface
• User Dashboard
• Mobile Interface Concepts

• Revenue Distribution Analysis
• Price Discovery Simulation
• Anti-Squatting Effectiveness Model
• Namespace Economic Impact Study

• Detailed Code Samples
• API Specifications
• Testing Frameworks
• Namespace Integration Guide