Ferrum Network Technical Paper

Abstract

Ferrum Network is a decentralized interoperability network enabling the management, transaction and exchange of any digital asset, without taking custody of user’s assets. Built on a directed-acyclic graph (DAG), Ferrum is faster, less costly and more scalable than traditional blockchains. Ferrum is blockchain agnostic, meaning it can support assets from any network, and is not limited to ERC-20 tokens. Ferrum has built an interoperable decentralized wallet and decentralized exchange on top of the network, with more dApps in development. Users can deposit their digital assets into Ferrum, generating a proxy token of identical value that can be transacted peer-to-peer using the Ferrum Wallet, or exchanged over our user-friendly decentralized exchange. The Ferrum DEX supports advanced features like high frequency trading, short selling and AI driven trading assistance. In addition, Ferrum Network is building fiat gateways, starting with West Africa’s Kudi Exchange, for the fast and inexpensive exchange of fiat currencies and cryptocurrencies. Ferrum Network runs on its native Ferrum Token, the gas of the network. Nominal amounts of the token are spent and burned to execute transactions, import and export value to and from the Network, and to prevent malicious actors from spamming the Network. After engaging in countless fast and inexpensive transactions, users can securely withdraw their tokens back to their original blockchains. Ferrum Network and its line of decentralized products are designed with a singular goal in mind: to empower people with decentralized financial applications.

Introduction and Problem Statement

We live in a multi-token world, with thousands of digital assets residing across hundreds of separate blockchains. Bitcoin, Ethereum, Ripple, IOTA and EOS are all examples of major digital currencies that exist across separate networks, each with their own unique use cases. The ecosystem benefits from a wide variety of networks, tokens, and projects aiming to solve the challenges posed by building an opened and fairer world. However, a fundamental challenge remains – how to enable communication, transaction and exchange across hundreds of separate and distinct networks? In other words, how can we enable the myriad blockchains to interoperate.

The challenge posed by interoperability goes beyond academic theory – it is a fundamental issue that pervades the entire crypto ecosystem and directly impacts all crypto users. It is a primary reason why we have not meaningfully achieved Satoshi Nakamoto’s vision of a “purely peer-to-peer version of electronic cash that allow online payments to be sent directly from one party to another without going through a financial institution”. It is why the vast majorities of currencies are exchanged through traditional, trust-based centralized exchanges, which custody users’ assets and introduce risk, friction and cost.

The current solutions to the challenge of interoperability, such as atomic swaps and decentralized ERC-20 networks are laudable, yet greatly limited in terms of speed, scalability and functionality. To date, a decentralized network enabling the fast, inexpensive and functional exchange of any digital asset across any blockchain has not been successfully implemented. Instead, powerful centralized exchanges have been erected, wielding outsized influence over the ecosystem, introducing third-party risk, and undermining Nakomoto’s original vision. At the same time, many existing offerings of decentralized exchanges are not satisfactory due to a combination of limited token offerings, poor user experience, and slow transaction times.

Figure 1 - Ferrum Network’s Interoperability Diagram

Enter Ferrum Network, enabling the fast and inexpensive peer-to-peer exchange of any digital asset, regardless of originating blockchain. Ferrum is a decentralized platform where users can manage, transact and exchange their digital assets without passing the custody of their assets to a third-party. Built on a directed-acyclic graph (DAG) network , Ferrum has inherent advantages over traditional blockchains in terms of speed, cost and scalability . By utilizing Ferrum’s groundbreaking technology to securely import and export value across chains, users can deposit any asset into Ferrum Network creating a proxy token that can be transacted and exchanged using the Ferrum Wallet or the Ferrum DEX.

The Ferrum Wallet has unique features for sending and receiving transactions that allow users to engage in risk-free and near-instant peer-to-peer exchanges of the following digital assets, with many more being integrated: Bitcoin, Ethereum, Ripple, True USD, Gemini Dollar, NEO, and the Ferrum Token, FRM. Because both parties must authorize a transaction before it is executed, the Ferrum Wallet also enables risk-free, near instant over-the counter (OTC) trading at a fraction of the usual cost.

In addition, users can trade their assets over Ferrum’s user-friendly yet sophisticated decentralized exchange, the Ferrum DEX. The Ferrum DEX has advanced features such as decentralized risk-free high frequency trading, margin smart contracts for short selling assets, and an AI trading assistant; features that exist nowhere else in the DEX space. Users can engage in countless fast and inexpensive transactions over the Ferrum Network, and at any time they can securely withdraw their assets back to their original blockchains.

Ferrum runs on its native utility token, the Ferrum Token. Spending the Ferrum Token is necessary to prevent malicious actors from spamming the network. It is also used to execute transactions, import/export value, increase transaction speeds, and enable use of the Ferrum Sub Zero Wallet – the simplest and most secure way for users to store their digital assets. Spending Ferrum Token burns the token, so the system inherently limits the supply.

Ferrum is also building a decentralized line of fiat gateway applications that will enable the exchange of cryptocurrencies and digital fiat currencies, including a fiat gateway integration using Ripple XRP, and through Ferrum’s forthcoming West African fiat gateway, the Kudi.Exchange. Ferrum provides the decentralized ecosystem for most major financial applications. To further our vision of cryptocurrencies being used for day-to-day needs, we realized we could not ignore the problem of storing private keys for the wallet. Therefore, we proposed and built the Ferrum Sub Zero wallet. The Ferrum Sub Zero wallet is arguably the most secure, mobile and most accessible cold wallet in the world. Welcome to Ferrum Network– empowering people with decentralized financial applications.

The Background and Introduction to Ferrum Network

When Satoshi Nakamoto developed the Bitcoin network in 2008, no one could have predicted the proliferation of thousands of other digital assets, each with their own special use case, value proposition and network. We view the pace of innovation and proliferation of utility tokens as a net positive, but one that poses unique challenges. Blockchain technology, the distributed, consensus-based ledger underpinning most decentralized networks, does not readily lend itself to cross-chain communication. In practical terms this means that a holder of bitcoin cannot conduct a peer-to-peer exchange with a counterparty that holds only Ethereum. The existing solutions to this seemingly simple problem have proven costly, risky, ineffective and slow, or involve moving the transactions completely off-chain .

The simplest (and most costly) means of exchanging digital assets that reside on separate blockchains is through a centralized exchange. However, since these institutions hold user’s assets, they are the antithesis of Nakamoto’s vision of “a purely peer-to-peer version of electronic cash allow online payments… without going through a financial institution”. Moreover, the security flaws inherent in centralized custody solutions has been repeatedly demonstrated, from the Mt. Gox hack in 2014 to the Coincheck hack in 2018 , and many in between. And the absence of privacy imposed by centralized exchanges is contrary to the open and free financial system that the crypto ecosystem is striving for. While their ease-of-use, advanced trading features, and ability to act as a fiat onramp suggests that centralized exchanges will continue to play a key role in the ecosystem, their value is limited due to custodial risks, lack of privacy and exorbitant fees. The world of cryptocurrencies deserves a decentralized alternative to the present situation.

Recognizing the limitations of centralized exchanges, numerous decentralized or semi-decentralized exchanges (DEXs) have arisen, which purportedly enable the peer-to-peer exchange of digital assets. However, none of the existing DEX solutions satisfy the needs of the market. First, the vast majority of DEXs are not interoperable; meaning they are limited to ERC-20 tokens only. Traders of top digital assets including Bitcoin, Litecoin, EOS, IOTA, NEO Stellar, Ripple, etc. are effectively excluded. Second, many DEXs leave users wanting in terms of user experience, functionality, and transaction speeds. Alternative technologies that attempt to solve the problem of interoperability, such as atomic swaps, are inherently slow and have not been meaningfully implemented.

Ferrum Network has solved these problems by building a blockchain agnostic network from the ground up. Utilizing breakthrough cryptography techniques for secret sharing without a trusted dealer, and innovative techniques based on quorums, Ferrum enables the fast and inexpensive exchange of nearly any token, regardless of the originating blockchain. Because all transactions occur within Ferru