🎬Bitbyte Lightpaper

A decentralized financial aggregation service platform

1 Overview

1.1 Industry background

DeFi, which stands for "Decentralized Finance" and is also known as "Open Finance", is a collective term for a range of financial products and services developed on blockchain. DeFi made its debut in 2019 and continued to grow at a rapid pace until early 2022, peaking in 2020 when the overall TVL (Total Value Locked, a measure of the total amount of liquid assets on the DeFi protocol or platform, often used to measure the total amount of token assets locked in the pool, usually in USD) exceeded USD 2.5 billion. usually measured in USD) exceeds $2.5 billion; total DeFi class assets peak at nearly $110 billion in 2021.

DeFi is more 'open' and 'inclusive' than traditional finance, and is widely recognized for its features: it does not rely on any centralized entity to provide credit intermediation or endorsement, there are no restrictions on access, no third party can stop any transaction, and no transaction can be reversed. DeFi technology is similar to "Lego blocks", enabling the implementation of different smart contracts to "stitch together" the basic financial modules and call them on each other to create new financial functions. DeFi technology is similar to a "Lego block" that enables the implementation and interconnection of basic financial modules using different smart contracts to "piece" together various new financial functions.

At the same time, the underlying public chains in the crypto market have formed a pattern of multiple chains co-existing, led by Ethereum, and many applications were previously built on different isolated ecologies, which made their liquidity inevitably fragmented and brought great inconvenience to users. By now, asset transfer between chains and cross-chain interaction of smart contracts has become an inevitable trend for on-chain activities. A breakdown of common cross-chain tools in the current market mainly focuses on solving asset cross-chain, and there are mainly three ways of asset cross-chain, including centralized exchange (CEX), decentralized cross-chain bridge and multi-chain aggregator.

While centralized exchanges (CEX) complete cross-chain transfers of assets in terms of process and operational experience to meet the needs of novice users, the security risks of centralisation hang over users like the sword of Damocles; cross-chain bridges and multi-chain aggregators are the first choice for cross-chain transfers of assets for those who are focused on on-chain operations. Cross-chain bridges are chain-to-chain bridges that allow users to move crypto assets from one chain to another. When crossing chains, assets are usually implemented as "mapped assets", which require a complex process of "lock + cast + redeem + destroy". Another type of multi-chain aggregator pools the liquidity of assets on different chains to create a pool of cross-chain assets.

1.2 Market Opportunity

Based on the core features of DeFi, Bitbyte.Finance combines the demand for cross-chain assets as demanded by the market and integrates DEX, cross-chain bridges and routing through multi-chain deployment to build multiply decentralized This allows users to directly trade liquidity from other decentralized exchanges without having to establish liquidity on Bitbyte, ensuring liquidity and depth of transactions while meeting users' demands for security and low slippage in cross-chain asset trading.

In addition, Bitbyte launched the NFT marketplace and NFT minting function to support all types of mainstream auctions in the market, and introduced a digital identity system by building a user community network within the platform, which is based on the decentralized, distributed and anonymous nature of blockchain technology, realizing the organic combination of social and finance in the crypto market, forming a "decentralized social graph", providing a complete set of solutions for users entering Web3 and the meta-universe regarding the trust and security of social finance.

By building a multi-chain liquidity aggregator, combined with NFT functionality and a built-in community network mechanism, Bitbyte has formed a "DeFi+NFT+DAO" eco-platform, which is fully defined as a decentralized trading platform (DEX), an opportunity to earn tokens, a non-fungible token (NFT) marketplace, and a decentralized community.

2 Introduction to the platform

2.1 Platform Features

l Permission-free and censorship-resistant: anyone in any environment can access it without permission and without any KYC review.

l Liquidity aggregation: users can access multiple heads DEX liquidities on the corresponding network directly at once through a decentralized wallet, to obtain the best quality and efficient trading prices.

l Cross-chain trading: Build cross-chain trading pools based on mature and promising cross-chain solutions in the market, enabling users' assets to be freely traded and transferred between multiple chains.

l NFT Casting and Auction: Based on the NFT auction market, it provides both NFT casting functions and derivatives market functions to unlock NFT liquidity.

l Community-driven: Based on the innovative design of Bitbyte.Finance's various functional invitation mechanisms, decentralized governance and community-driven development will ultimately be achieved.

2.2 Platform Structure

The Bitbyte platform is structured by "DeFi + NFT + DAO", with features around the DeFi element including Swap, pledged mining, liquidity pools, IDO crowdfunding, airdrops, and NFT element including NFT trading market, NFT minting, NFT derivatives market, etc. The platform has built-in community network invitation mechanisms into each of the features, building community networks around the users themselves and sinking social value into them.

Bitbyte will also introduce a digital identity system, which will further open up the value network of social finance. Combining the decentralised, distributed and anonymous nature of the underlying blockchain, the scalability and composability of DeFi, and the uniqueness of NFT and the explosive nature of the community network, the Bitbyte.Finance platform will be an important bridge for users to enter the world of the Internet of Value, Web3 and the metaverse.

Bitbyte can ensures the integrity and validity of information on digital assets within the platform through a four-layer structure, providing users with a secure and efficient trading environment.

l Networks: The network layer is the foundation of Bitbyte and includes public chain networks such as BSC, Heco and the potential Layer 2 network.

l Settlement Layer: Users connect to the transaction pool via Bitbyte, sign and authorize the transaction based on the wallet, and settle the transaction through a smart contract. On the other hand, cross-chain protocols and cross-chain pools help users to convert and settle assets across chains.

l Market Liquidity: Bitbyte deploys aggregation protocols across different chains to connect and aggregate liquidity across multiple high-quality DEXs, recommending the best price and trade path for users.

l Application Layer: encapsulates the corresponding functional services and smart contracts into a unified creation process for developers, and also provides a more convenient and easy-to-use front-end interface for Bitbyte users to trade and earn coins.

3 Product Description

Bitbyte is a decentralized exchange(DEX) product suite that includes smart aggregated trading, new liquidity pools, IDO crowdfunding pools/new asset liquidity issuance, airdrop pools, capital pools and mining for tokens (including liquidity mining, pledge mining and wealth mining, etc.) Bitbyte's NFT scenario features an NFT auction market and an NFT derivatives market, and Bitbyte integrates mainstream wallet applications on top of DEX, through which users can interact with various functions on the platform.

l Intelligent aggregated trading.

Bitbyte not only enables trading between two arbitrary tokens on the same network through multi-chain deployment, but also the construction of liquidity exchanges for inter-chain tokens. This enables intelligent routing of orders from liquidity sources to provide traders with the best price and lowest slippage. In addition, users can also set their own trading slippage and time limits. (The platform defaults to a slippage spread of 1.5% and a trade length of 20 minutes.)

l Adding liquidity to market making.

Bitbyte gives liquidity providers the flexibility to create their own liquidity markets through liquidity pools. It is a completely license-free, non-hosted process throughout, allowing users to configure the parameters of their own pools and to build liquidity pools to mine for coins by acquiring LP tokens through the creation of liquidity pools.

l Participation in IDO crowdfunding and pool building.

Crowdfunding to build pools is a way to fairly distribute tokens and start a liquid market. Inspired by the common market mechanism of a new hit, equal opportunity ensures that there are no scientists to jump the gun and bots to interfere. With the additional security provided by the liquidity protection period, users can participate in the liquidity offering with peace of mind and support their favorite projects.

l Participation in airdrops and airdrop pool building.

The airdrop pool is a feature provided by projects to build community buzz and grow the number of addresses they hold. Projects participating in the pools can create their own pools on the platform and set their own parameters for the pools; users can participate in the pools of relevant projects to build the community and get tokens at a low cost.

l Pool pledging and mining for tokens.

In addition to the liquidity mining mentioned above, the platform already has single coin pledge mining pools, single coin lock-in pledge mining pools and wealth management mining pools, users can choose different mining pools to participate in pledging to earn coins according to their needs; pool creators can use the creation function provided by the platform to reward users holding their own tokens for mining and enhance community participation.

l NFT auctions and NFT minting.

Bitbyte's NFT auction marketplace offers mainstream pricing models, including priced deals, English auctions, Dutch auctions and more, allowing users to participate in auctions based on the requirements of different NFT projects. In addition, the NFT minting feature allows NFT creators to seamlessly create their own NFT sets with the ability to set their own parameters, which can be auctioned directly to the NFT marketplace after successful creation.

l NFT Derivatives Market.

Bitbyte's original NFT derivatives market, by combining the mechanisms of NFT and community network, greatly solves the drawback of NFT liquidity and token liquidity being disconnected from the project community network, providing a new way of thinking to activate the liquidity of NFT projects.

l Cross-link bridges and toolsets.

Bitbyte provides a cross-chain bridge function that enables token flow across chains, transferring digital assets from different chains and facilitating users to manage their digital assets efficiently and conveniently. Other utilities include bulk wallet generation, bulk Token sending, bulk Token aggregation, and arbitrage trading bots.

l Community networks and digital identity systems.

The features already available on the Bitbyte platform support users to build a community network around themselves as they interact with the platform, and to sink the value of the community network through an invitation mechanism. In the process of building a user-centric community network, the platform will create a complete on-chain digital identity system, which will completely open the door to an internet of value around the users themselves, so stay tuned for more details on the features.

4 Technical principles

4.1 Mobility Aggregation

l Liquidity Trading Routing

Bitbyte trade routing calculates the optimal trade path for the user by aggregating the liquidity of the head exchanges on the chain; it supports splitting between different protocols and also different market depths within the same protocol. Once the path is obtained, a smart contract on the chain will execute the trade action for the user. The security verification in the smart contract ensures the safety of the user's funds and the validity of the quote.

There are two strategies within self-built routing, one is linear routing and one is split single routing.

l Linear routing

Linear routing means that in the process of finding a transaction path, a transaction pair passes through only one pool, based on the path with the best offer for the target token found, similar to the routing algorithm of Uniswap V2. This algorithm has low complexity, fast computation, less interaction with the contract, and the least amount of gas. For example, if a user needs to trade ETH-USDC, the optimal path found by linear routing may be ETH-USDT-USDC, with the final path passing through only two pools; these two pools may be from different protocols, for example, ETH-USDT is a pool of Uniswap V3 and USDT-USDC is a pool of DODO. The linear routing algorithm collects information from each protocol on the entire pool of input tokens, target tokens and generic intermediate tokens combined, and then recursively finds the optimal path.

l Unbundled Routing

Split-order routing means that in the process of finding a transaction path, a transaction pair may pass through different pools and the user's funds are allocated to different pools for exchange in the optimal proportion to make the target token offer optimal. The algorithm is complex, less computationally fast than linear routing, and the paths interact more with the contract, so the gas expense becomes higher, but the offer is better than linear routing.

Again taking the ETH-USDC transaction as an example, the coins that the transaction path passes through may be ETH-USDT-USDC, the ETH and USDT transaction pair may pass through two pools, 30% of the user's ETH is converted to USDT via Uniswap v3 and 70% of the user's ETH is converted to USDT via DODO V2 for the next transaction pair USDT-USDC When converting, the initial USDT is the sum of the above two USDT, which is then used to find the optimal split of USDT-USDC. To control the gas and increase the success rate of the transaction, no more than three pools are passed through for each pair exchange.

4.2 Cross-Chain Asset Pooling

Bitbyte's asset cross-chain functionality consists of a cross-chain asset pool and a cross-chain protocol using Curve's StableSwap constant variable, which can optimize the performance of the algorithm by providing liquidity to stablecoins. The advantage is that it provides very low price slippage for liquidity providers and significantly reduces unearned losses. In terms of implementation, users can simply exchange mainstream assets across chains; liquidity providers can deposit single or multiple assets into cross-chain pools and pledge LPs to receive liquidity pool rewards. These designs allow users to redeem cross-chain assets without having to access assets, significantly reducing the operational barriers for users.

4.3 Trading Market Mechanisms

l AMM Automated Market Maker Model

Bitbyte's liquidity pool and liquidity exchange are based on Uniswap's "x*y =k" Constant Product Market Maker Model (CPMM), a model that ensures decentralized exchanges can generate continuous liquidity.

The constant product market maker formula introduced by Uniswap is to ensure constant liquidity for token transactions on the underlying blockchain. The formula is as follows.

where Rx and Ry are the reserves of each token, f is the transaction fee, and k is a constant. Or, more simply written.

where x is token 1, y is token 2 and k is a constant.

Essentially, Uniswap combines two assets that are being traded into a liquidity pool. the objective of Uniswap is to ensure that the size of the liquidity pool will remain constant regardless of the size of the transaction. Assume that asset x is an A token and asset y is a B token. x (A token) and y (B token) can only move against each other to keep k constant. When a user buys an A token, it simultaneously increases y (when the user adds a B token to the liquidity pool) and decreases x (when the user removes an A token from the liquidity pool). Eventually, the pool becomes unbalanced and tilted in favour of the assets that the user has exchanged into the pool. At this point, arbitrageurs come in and quickly rebalance it in exchange for a profit margin.

l Building a liquidity pool

Based on this, the liquidity pool is built with the user as the LP (liquidity provider), giving Token A and Token B that they want to form a trading pair into the contract, and whenever liquidity is deposited into the pool, liquidity tokens are minted to the user (LP), and the amount obtained is calculated based on the proportion of the total pool volume provided, and these tokens represent the LP's contribution to the pool, and the LP These tokens represent the LP's contribution to the pool, and the LP receives 0.03% (as set natively by Uniswap) of the transaction process from others as a commission share.

l Swap Exchange

Once the liquidity pool is constructed, when any token is withdrawn (purchased), another token must be deposited (sold) in "proportion" to keep the total amount constant, this proportion being the exchange rate at K equal to X and Y.

K is theoretically constant, but each transaction incurs a fee, meaning that K increases slowly as Token A and B are exchanged.

For example, if there are already A and B Token pairs: A Token - 1200, B Token - 400, the current exchange rate is 3. The user transfers 3 Token A into the contract and pays an additional fee, and the smart contract returns one Token B after the exchange. At this point the new exchange rate changes to 3.015 due to a change in the total number of tokens in the entire system pool.

Bitbyte follows this time-tested and effective exchange mechanism.

4.4 Digital Identity DID Verification Technology

The core components of DID technology include the DID, DID Document and Verifiable Data Registry.

A DID is a type of Uniform Resource Identifier URI, a permanent immutable string that exists for two reasons: firstly, to mark any target object (DID Subject) which can be a person, a commodity, a machine or an animal, etc.; secondly, a DID is a unique identifier associated with a document (DID Document, or DID Doc) describing the target object via a DID URL. Secondly, the DID is the unique identifier of the document (DID Document or DID Doc for short) that describes the subject, i.e. the DID enables a specific DID Doc to be searched in the database.

The DID Document (DID Doc) contains all the information related to the DID Subject, and the authentication methods for the identity information (including encrypted public keys, associated addresses, etc.) in the Doc. It provides a set of mechanisms that enable the DID controller to prove that it corresponds to the DID control.

A system that can support the recording of DID data and provide the data when a DID Doc is generated is a Verifiable Data Registry (VDR), which includes a distributed ledger, distributed file system, P2P network or other trusted channel.

The most common approach to DID verification is zero-knowledge proof, which allows for anonymous verification of the "identity-proof-authentication" process in a distributed identifier solution at reduced verification costs.

5 Governance

Bitbyte.finance currently has no plans for token offering, which motivates the team to focus on building the infrastructure and ecology without being distracted from market aspects such as market cap management. The team will actively explore the governance model and look for the right time to gradually transition Bitbyte.finance to full DAO governance.

The Bitbyte.finance consensus is managed by an authoritative body participating in the DAO. As the business and technology evolve, the project will be progressively decentralized and upgraded until it is fully decentralized and community-based, while ensuring security and ease of use.

6 OUR Team

The legal entity of Bitbyte.Finance is BITBYTE FOUNDATION LTD. which is registered in Singapore.

The majority of Bitbyte.finance's core development team is from Singapore. They include blockchain technology experts from the Nanyang Technological University's Fintech Research Centre, as well as technology gurus from TomoChain, the industry's leading public chain team, and Enjin, the head meta-universe project. The team currently focuses on asset cross-chain security technology, NFT derivatives and digital identity systems. Based on its deep technical experience in the industry, the team provides professional and reliable technical security and services to Bitbyte.

7 Audit Reports

Bitbyte.Finance passed a security audit by leading blockchain security firm CertiK in April 2022. The audit included a thorough examination of the Bitbyte contract using verification-based techniques, the identification of specific risk vectors, a comprehensive analysis of issues identified by the Bitbyte development team and complete fixes. All issues identified during the audit were rigorously verified by the auditors and have been fully resolved.

The Bitbyte.finance smart contract has been security audited by CertiK and the audit report can be viewed at the following link:

Bitbyte - CertiK Security Leaderboard

8 References

[1] Vitalik Buterin. “Improving Front Running Resistance of X*y=k Market Makers.” Https://Ethresear.Ch/, 2 Mar. 2018, https://ethresear.ch/t/improving-front-running-resistance-of-x-y-k-market-makers/1281.

[2] “A Framework for Web3 Infrastructure.” Https://Mirror.Xyz/Ericyhu.Eth, 5 Aug. 2022,https://mirror.xyz/ericyhu.eth/CGvbcLNZNkZMm-bYMCcyKA8_BAbeXBzfIfbw8RXRV2w.

[3] Haseeb Qureshi. “What Explains the Rise of AMMs?” Https://Medium.Com/Dragonfly-Research, 22 July 2020, https://medium.com/dragonfly-research/what-explains-the-rise-of-amms-7d008af1c399.

[4] Hasu. “Understanding Automated Market-Makers.” Https://Www.Paradigm.Xyz/, 19 Apr. 2021, https://research.paradigm.xyz/amm-price-impact.

[5] “How Uniswap Works.” Https://Docs.Uniswap.Org/, https://docs.uniswap.org/protocol/V2/concepts/protocol-overview/how-uniswap-works.

[6] Leo Lau. “A Mathematical View of Automated Market Maker (AMM) Algorithms and Its Future.” Https://Medium.Com/@leo-Lau, 2 Sept. 2021, https://medium.com/anchordao-lab/automated-market-maker-amm-algorithms-and-its-future-f2d5e6cc624a.

[7] Miles Jennings. “Decentralization for Web3 Builders: Principles, Models, How.” Https://Future.Com/, 7 Apr. 2022, https://future.com/web3-decentralization-models-framework-principles-how-to.

[8] “Multi-Chain Mobility Aggregation.” Https://Docs.Routerprotocol.Com/Whitepaper, https://docs.routerprotocol.com/whitepaper/introducing-router-protocol/architecture.

[9] Thomas Stackpole. “What Is Web3?” Harvard Business Review, May 2022. https://hbr.org/2022/05/what-is-web3.