CENTRE White Paper In-depth Table of Contents

CENTRE White Paper In-depth Table of Contents

1. Executive Summary

Overview of the current Internet environment, introduction of crypto assets and blockchain technology, and elaboration of their impact on the future global economy.

1.1 CENTRE Vision

Explanation of the founding philosophy of CENTRE, namely to build an open, shared, and inclusive value exchange Internet, and introduction of CENTRE's components and goals.

1.2 Global Payment Use Cases

Discussion of how CENTRE solves the interoperability problem between global digital wallets and enables seamless payments across applications and currencies.

1.3 Crypto Exchange Use Cases

Explanation of how the stablecoin issued by CENTRE solves the risks of crypto asset transactions, such as providing fiat currency connections, hedging price volatility risks, and providing stable pricing units for investment products.

1.4 Solving Challenges of Crypto Assets and Public Chains

Analyzes the three main challenges currently facing public chains and crypto assets: price volatility, transaction throughput, and lack of independent governance, and details how CENTRE addresses these challenges.

1.5 Service Providers: Compliance, Identity, Fraud, Risk

Describes how CENTRE plans to provide a service provider mechanism to support trust and identity decisions, payment settlement and chargeback rules, and secure exchange of KYC/AML related information to meet compliance obligations.

1.6 Governance and CENTRE Organization

Overview of the structure of the CENTRE organization, governance mechanisms, and its role in CENTRE software implementation, network management, and development.

2. Technology and Network

Introduces CENTRE's technical architecture in depth, including the stablecoin minting and redemption process, inter-wallet transaction process, merchant payment process, cross-chain transaction process, existing technologies, CENTRE nodes, and technical implementation details.

2.1 Stablecoin Minting and Redemption Process

Detailed explanation of how users convert fiat currency to stablecoin through the gateway of CENTRE network members, and how to redeem stablecoins for fiat currency.

2.2 Inter-wallet transaction process

Using Paytm and Vipps wallets as examples, it explains how CENTRE enables fast, secure and compliant value transfers across currencies between different wallet applications.

2.3 Merchant payment process

Using WeChat wallet and Square POS application as examples, it explains how CENTRE facilitates cross-currency payments between consumer wallet applications and merchant POS software, and emphasizes the role of the CENTRE protocol in achieving interoperability.

2.4 Crypto asset cross-chain process

Using Ledger hardware wallet and Poloniex exchange as examples, it shows how CENTRE supports transactions across blockchains and crypto assets, and how to connect crypto assets to fiat currency accounts and wallets.

2.5 Existing technology

Introduces how CENTRE plans to leverage Circle's existing protocol implementation and technology accumulation to accelerate the development and deployment of the CENTRE protocol.

2.6 CENTRE Node

Detailed description of the components, functions and roles of CENTRE nodes in the network, including issuing stablecoins, configuring accepted stablecoins, publishing exchange rates, configuring trust levels, exchanging transaction metadata and ensuring atomic value transfer.

2.7 Technical Implementation Details

In-depth exploration of the details of CENTRE's technical implementation, including stablecoin design, state channel transaction management, state channel links and node modules.

2.7.1 Stablecoin Design

Analyzed four stablecoin strategies: fiat currency collateral, crypto asset collateral, algorithmic non-collateral and hybrid, and explained the reasons, advantages and limitations of CENTRE's choice of fiat currency collateral.

2.7.2 State Channel Transaction Management

Explained the concept of state channels, how they work and how to use them to achieve high-throughput value transfer.

2.7.3 State Channel Links

Introduced how to link multiple state channels through hash time lock contracts (HTLCs) to achieve indirect payments and ensure payment security.

2.7.4 Node Modules

Listed the modules included in the CENTRE node plan, such as distributed ledger and smart contract modules, routing modules, CENTRE protocol modules, CENTRE management modules, exchange rate modules, key management modules, and identity, risk, PII, compliance, authorization and service modules, and briefly described the functions of each module.

3. CENTRE Team and Organization

Introduced the structure, goals, team members of the CENTRE organization and its relationship with Circle.

3.1 CENTRE Organization

Explanation of the four key goals of the CENTRE organization: provide R&D capabilities, support and maintain CENTRE open source software projects; provide business development, governance and compliance functions; provide optional certification testing, trust authorization services, compliance reviews and due diligence programs; contribute to the underlying distributed ledger infrastructure operated by CENTRE.

3.2 Circle Company Background

Introduces the background of Circle as the creator of CENTRE's core technology and intellectual property and a founding member of the network, including its leadership team, investors, board members, product lines, regulatory and license portfolios, and technology and intellectual property contributions.

3.2.1 Leadership, Investors, and Directors

Introduces the background and experience of Circle's founders and executive team members, as well as its major investors and board members.

3.2.2 Circle Products as Catalysts for CENTRE Applications

Introduces Circle's four main product lines: Circle Pay, Circle Trade, Circle Invest, and Poloniex, and how these products drive the application and development of the CENTRE network.

3.2.3 Regulatory and License Portfolio

An overview of the regulatory licenses and permits obtained by Circle worldwide, such as the Money Services Business (MSB) registration of the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN), the money transmission licenses of 48 U.S. states and territories, the BitLicense of New York State, and the Electronic Money Institution License of the UK Financial Conduct Authority (FCA), and how these licenses support its business operations.

3.2.4 Technology and Intellectual Property Contributions

Introduces the core technologies and intellectual property that Circle has contributed to the CENTRE organization, including its innovations in building a seamless consumer payment experience, using fiat currency on top of the blockchain settlement and integration layer, layering KYC and AML risk decisions into payment networks and transactions, and providing instant liquidity and conversion between fiat currencies and crypto assets.

3.3 Organizational Structure and Advisors

An overview of the structure of the CENTRE organization, including its core team members, advisory board, and relationship with Circle.

4. Other Information and Updates

Explains the update mechanism of the CENTRE white paper and how to obtain the latest information.

5. Glossary

Definitions and explanations of the professional terms used in the CENTRE whitepaper are provided for the convenience of readers.

Detailed briefing on the CENTRE whitepaper

Version: 2.0

Date: May 2018

Document source: "centre-whitepaper.pdf"

1. Topic Overview

This whitepaper introduces CENTRE, a protocol designed to enable an open network for global value exchange. CENTRE consists of price-stable crypto assets, network protocols, and business rules that have been implemented in early form by Circle over the past few years and have supported significant daily transaction volumes.

2. Main content

2.1 Vision of CENTRE

The goal of CENTRE is to create an open network for value exchange similar to the Internet, enabling value to circulate globally as instantly, securely, and cheaply as information.

Just as HTTPS, SMTP, and SIP allow for free information sharing and communication, crypto assets and blockchain technology will allow people to exchange value and conduct transactions in the same way: instantly, globally, securely, and cheaply.

2.2 Global Payment Use Cases

CENTRE aims to solve the problem of interoperability between digital wallets around the world, allowing funds to flow freely between different wallets just like information flows on the Internet.

CENTRE answers the question: "I can instantly text someone who uses a different mobile operator than me, and I don't have to spend money to email someone who uses a different email service than me, so why can't I use Alipay to pay someone who uses Square, someone who uses Paytm in India, someone who uses Facebook Messenger - instantly, for free, anywhere in the world?"

CENTRE also supports seamless exchange between different currencies, such as a wallet using US dollar tokens can pay a wallet using Korean won tokens.

2.3 Crypto Exchange Use Cases

The stablecoins issued by CENTRE can also solve key use cases related to crypto asset trading risks, such as:

Provide fiat currency connections and risk hedging tools for exchanges that do not support fiat currency deposits and withdrawals.

Allow investment products (such as securities and equity tokens) to be priced in fiat currency value rather than cryptocurrency value.

Provide fiat currency deposit and withdrawal channels for exchanges.

2.4 Addressing Challenges of Crypto Assets and Public Chains

CENTRE aims to address three major challenges facing existing public chains and crypto assets:

Price stability: CENTRE addresses price volatility by providing a stablecoin framework involving a reserve of “real world” assets, such as fiat currencies, which are reserved and verified by CENTRE network members.

Transaction throughput: CENTRE addresses slow transaction speeds by providing a protocol that uses state channels, which allows wallets to conduct high-speed transactions without writing all transactions to the blockchain.

Lack of independent governance: CENTRE addresses the lack of independent governance of stablecoin providers by separating the CENTRE organization from its issuing network members. CENTRE, as an independent network manager, is responsible for enforcing network rules to ensure stability and consumer protection.

2.5 Technology and Network

The CENTRE network consists of CENTRE nodes, which are operated by participants such as wallet providers, service providers, and financial institutions. Nodes allow participants to:

Issue new fiat tokens.

Configure the fiat tokens to be accepted.

Publish the exchange rate of fiat tokens.

Configure trust levels and rules.

Exchange metadata about transactions before any value is transferred.

Ensure that value transfers are executed quickly and atomically through state channels.

2.6 Stablecoin Design

CENTRE issues stablecoins in a fiat-collateralized manner, with each stablecoin token corresponding to an equivalent fiat currency reserved by the issuing network member and audited by CENTRE. CENTRE allows multiple issuing members to join the network, thereby providing multiple sources of reserves and liquidity to reduce risk.

2.7 State Channel Transaction Management

State channels allow participants to securely update shared states without writing all transactions to the blockchain, thereby achieving higher transaction throughput.

State channels are a way for two or more participants to securely update shared states between each other without executing transactions on a distributed ledger, in addition to creating and finalizing the state channel on the ledger.

2.8 CENTRE Team and Organization

The CENTRE organization was created by Circle, the original developer of CENTRE technology. The CENTRE organization will be responsible for the research and development of the CENTRE software project, network governance and compliance, certification and support, and contributions to the underlying blockchain infrastructure.

3. Conclusion

The CENTRE protocol provides a promising solution for achieving an open network for global value exchange. It solves the challenges faced by existing public chains and crypto assets through price-stable crypto assets, efficient transaction protocols, and strong governance mechanisms. Backed by Circle's technology and experience, CENTRE has the potential to revolutionize the global payment and financial industries.

Key Quotes

“Just as HTTPS, SMTP, and SIP allowed for the free sharing of information and communication, crypto assets and blockchain technology will allow people to exchange value and transact in the same way: instantly, globally, securely, and at low cost.”

“CENTRE answers the question: ‘I can instantly text someone who uses a different mobile carrier than me, and I don’t have to pay to email someone who uses a different email service than me, so why can’t I pay someone who uses Square using Alipay, someone who uses Paytm in India, someone who uses Facebook Messenger — instantly, for free, anywhere in the world?’”

“A state channel is a method for two or more participants to securely update a shared state between each other without executing transactions on a distributed ledger other than creating and finalizing the state channel on the ledger.”

Glossary

AML (Anti-Money Laundering): A set of procedures, laws, or regulations designed to prevent the generation of income through illegal conduct.

API (Application Programming Interface): A set of routines, protocols, and tools used to build software applications.

Bitcoin: A network that uses cryptography to regulate the generation of currency units and verify the transfer of funds.

CENTRE: A protocol for digital wallet interoperability across currencies and borders, across different software implementations, and across multiple blockchains, ledgers, and settlement rails.

CENTRE Network: An interconnected network of CENTRE nodes operated by participants such as wallet providers, service providers, and financial institutions.

Chained State Channel: A mechanism that allows two state channels that are not directly connected to be connected indirectly and securely using an intermediate connection to other state channels.

Circle: Circle Internet Financial is a company that created the initial implementation of the protocol and will help guide CENTRE development through IP contributions and licensing.

Crypto Assets: Encrypted units of data and software code that have tradable asset value.

Ethereum: An open source, public, blockchain-based distributed computing platform with smart contract scripting capabilities.

Hash Time Lock Contract (HTLC): A class of smart contracts that require the recipient of a payment to pay a deposit at a certain time.

IOU: Cryptographically signed data acknowledging a debt.

Implementation: A specific implementation of a protocol or other software abstraction in the form of specific software code.

Know Your Customer (KYC): The rules and processes by which a business identifies and verifies the identity of its customers.

Node: A software package that operates and manages network participation on behalf of network participants, including providing protocol and API implementations.

Payment Channel: Specific to Bitcoin, micropayment channels or payment channels are a class of technology designed to allow multiple transactions without all of them being submitted to the blockchain.

Protocol: A set of rules and guidelines for communication.

Service Provider: A CENTRE network participant that provides services to the network to support financial transactions.

Settlement: The delivery of an obligation to fulfill an IOU that may have been traded between network members.

Smart Contract: A computer protocol designed to facilitate, verify, or enforce the negotiation or performance of an agreement.

Stablecoin: A term used to describe crypto assets that are pegged to an underlying reserve asset and/or governed by software algorithms to enforce price stability.

State Channel: A discussion channel between network participants that is capable of updating internal data (state) without printing each such data change to the underlying blockchain.

Token: A smart contract used to gain access to and use the network and that identifies the holder as a network participant and whose value implicitly increases in proportion to the usefulness of the network it unlocks.

Transaction: In CENTRE, a transaction is the transfer of an IOU from one network participant to another.

Trust Level: A numerical indicator of the level of trust and authentication of a network participant, determined by that participant's permission profile and its behavior over time.

CENTRE Network Study Guide

Glossary of Key Terms

Anti-Money Laundering Rules (AML): A set of procedures, laws, or regulations designed to discourage practices that generate income through illegal behavior.

Application Programming Interface (API): A set of routines, protocols, and tools used to build software applications. An API specifies how software components should interact. In general, it is a set of well-defined communication methods between various software components.

Bitcoin: A network that uses cryptography to regulate the generation of currency units and verify the transfer of funds (when lowercase, the term also refers to the currency unit rather than the network).

CENTRE: A digital wallet interoperability protocol that spans currencies and borders, different software implementations, and multiple blockchains, ledgers, and settlement rails.

CENTRE Network: An interconnected network of CENTRE nodes operated by participants such as wallet providers, service providers, and financial institutions.

Chained State Channel: A mechanism that allows two state channels that are not directly connected to be connected indirectly and securely using an intermediate connection to other state channels.

Circle: A company that created the initial implementation of the protocol, which will help CENTRE development through IP contributions and licenses.

Crypto Asset: A unit of encrypted data and software code that has the value of a tradable asset.

Ethereum: An open source, public, blockchain-based distributed computing platform with smart contract scripting capabilities.

Hashed Timelock Contract (HTLC): A class of smart contracts that requires the recipient of a payment to confirm receipt of the payment by a deadline by generating a cryptographic proof of the payment, or to waive the right to claim the payment and return it to the payer.

IOU: Cryptographically signed data that confirms an obligation.

Implementation: A specific implementation of a protocol or other software abstraction in a specific form in specific software code. In layman's terms, a blueprint is to a house what a protocol specification is to an implementation.

Know Your Customer (KYC): The rules and processes by which a business identifies and verifies the identity of its customers. The term is also used to refer to banking and anti-money laundering regulations that govern these activities.

Node: A software package that operates and manages network participation on behalf of network participants, including providing protocol and API implementations.

Payment Channel: Specific to Bitcoin, micropayment channels or payment channels are a class of technologies designed to allow multiple transactions without all of those transactions being submitted to the blockchain. In a typical payment channel, only two transactions are added to the blockchain, but unlimited or nearly unlimited payments can be made between participants. Payment channels are a class of state channels.

Protocol: A set of rules and guidelines for communication. Defines rules for each step and process of communication between two or more nodes that the nodes must follow in order to successfully transfer data. A single protocol can be implemented with different implementations in different programming languages ​​and runtimes on different blockchains or other infrastructures.

Service Provider: A CENTRE network participant that provides services to the network to support financial transactions. Service providers can provide compliance, KYC, identity, data storage, fraud detection, or other services of interest to network participants by charging token fees.

Settlement: Delivery of an obligation to fulfill an IOU that may be traded between network members.

Smart Contract: A computer protocol designed to facilitate, verify, or enforce the negotiation or performance of an agreement.

Stablecoin: A term used to describe crypto assets that are pegged to an underlying reserve asset and/or governed by a software algorithm to enforce price stability.

State Channel: A discussion channel between network participants that is capable of updating internal data (state) without printing each such data change to the underlying blockchain. A superclass of a payment channel.

Token: A smart contract used to gain access to and use the network that identifies the holder as a network participant and whose value implicitly increases in proportion to the usefulness of the network it unlocks.

Transaction: In CENTRE, a transaction is the transfer of an IOU from one network participant to another.

Trust Level: A numerical indicator of the level of trust and authentication of a network participant determined by the participant's permission profile and their behavior over time.

Short Answer Questions

What is CENTRE's vision? How does it relate to the open internet?

What challenges in global payments does CENTRE aim to solve?

How does CENTRE address the issue of price volatility in crypto asset trading?

Explain how CENTRE uses state channels to increase transaction throughput.

What challenges related to governance and accountability do CENTRE network members face? How does CENTRE address these challenges?

Describe the general process of stablecoin minting and redemption.

How does CENTRE facilitate transactions between wallets in different currencies?

What role do service providers play in the CENTRE network?

What existing technology and expertise from Circle does CENTRE leverage?

Explain how CENTRE uses state channels to enable cross-blockchain transactions.

Short Answer Questions

CENTRE's vision is to create an open internet for value exchange, similar to the open internet for information sharing. Its goal is to allow people and businesses to transact in an instant, global, secure, and low-cost manner. CENTRE aims to achieve this by providing a decentralized and interoperable platform that allows seamless value transfers between different digital wallets and blockchains.

CENTRE aims to solve several challenges that exist in global payments, including lack of interoperability, high transaction fees, slow speeds, and low transparency. CENTRE addresses these issues by providing a standardized platform based on stablecoins and state channels to enable fast, cheap and secure cross-border payments.

CENTRE addresses price volatility issues in crypto asset trading by providing a stablecoin framework that involves a reserve of “real world” assets. Each stablecoin token corresponds to a real-world asset held by a CENTRE issuing network member and verified and audited by CENTRE. This peg is designed to stabilize the value of the token, making it a more reliable medium of exchange in crypto asset trading.

CENTRE increases transaction throughput by leveraging state channels, which allow transactions to be executed off-chain. By moving most transactions off the Ethereum blockchain, CENTRE can achieve faster transaction speeds and lower fees because participants do not need to pay gas fees for each transaction.

CENTRE network members face challenges related to governance, accountability and consumer protection. To address these issues, CENTRE operates as an independent organization responsible for network governance, compliance and auditing of members. This decentralized governance structure is designed to ensure stability, transparency and accountability of the network.

The stablecoin minting process begins with a customer depositing fiat currency into the account of a CENTRE issuing member. The issuer then sends a request to the CENTRE network to mint stablecoins pegged to the value of the deposited funds. These tokens are then credited to the customer’s account, where they can trade with them or redeem them for fiat currency. The redemption process follows the reverse steps, with the customer requesting the issuer to redeem their tokens, the issuer destroying the tokens from circulation and returning the corresponding fiat currency to the customer.

CENTRE facilitates transactions between wallets in different currencies by leveraging stablecoins and state channels. When a user initiates a cross-currency transaction, the CENTRE network automatically converts the sent currency into the recipient’s currency, using a pre-determined exchange rate. The use of state channels ensures that these transactions are executed quickly and at low cost.

Service providers play a vital role in the CENTRE network, providing a variety of services to support financial transactions. These services may include compliance and KYC/AML checks, identity verification, fraud detection, and risk assessment. By leveraging service providers, the CENTRE network aims to enhance security, trust, and overall user experience.

CENTRE leverages Circle’s existing technology and expertise in building consumer payment experiences and blockchain technology. Circle has developed core technologies for stablecoins, state channels, and compliance infrastructure that form the foundation of the CENTRE network. In addition, Circle’s experience in the fintech space and regulatory expertise have contributed to the development of CENTRE.

CENTRE’s state channel implementation allows transactions across blockchains by using hashed timelock contracts (HTLCs). HTLCs act as intermediaries between two different blockchains, ensuring that funds are only transferred from the sender to the receiver if all predefined conditions are met. This mechanism allows users to send and receive crypto assets on different blockchains without relying on centralized exchanges, thereby promoting interoperability and wider crypto asset adoption.

Paper Title

Discuss the strengths and weaknesses of stablecoins in the CENTRE network. Analyze their viability as a global payment solution.

Examine the governance structure of the CENTRE network. Assess its degree of decentralization and its impact on network security and sustainability.

Evaluate the role of state channels in the CENTRE network. How do they enhance scalability and transaction speed? Discuss potential challenges and limitations of state channel implementations.

Analyze the potential impact of the CENTRE network on traditional financial institutions. Will it disrupt existing payment systems or promote inclusion?

Investigate potential challenges and opportunities for adoption of the CENTRE network. Can it successfully create an open and interconnected global payments network? Discuss factors that may influence its success or failure.

FAQs about CENTRE

1. What is CENTRE?

CENTRE is a protocol designed to enable interoperability of digital wallets across currencies, geographies, software, and multiple blockchains, ledgers, and settlement rails. It strives to create an open Internet of value exchange where money can flow freely between wallets, just as information flows between web browsers and servers, emails flow between mail services, and SMS flows between SMS providers.

2. How does CENTRE address challenges facing crypto assets and public chains?

Currently, public chains and crypto assets face three major challenges: price volatility, transaction throughput, and lack of independent governance for standards and network participants. CENTRE addresses these challenges by:

**Price stability:** CENTRE provides a stablecoin framework that involves a reserve of "real world" assets. Each stablecoin corresponds to a real-world asset reserved by a member of the CENTRE issuing network and verified and audited by CENTRE. This ensures that the price of the stablecoin is pegged to its underlying asset, reducing price volatility.

**Transaction throughput: **CENTRE provides a protocol for wallets to transact at a higher speed using state channels. This approach only writes the initial and final settlement states of interactions (such as account balances) to the underlying blockchain, while intermediate transactions are not written to the blockchain, thereby increasing transaction speed.

**Governance: **CENTRE is a network manager and technology provider independent of its issuing network members. CENTRE imposes strict audit, compliance and capital adequacy requirements on its members to ensure stability, accountability and consumer protection.

3. What are the main use cases of CENTRE?

CENTRE has two main use cases:

**Global payments: **CENTRE allows instant and secure cross-border payments between users with different digital wallets and different currencies. For example, users using WeChat Wallet can use CENTRE to pay USD to merchants using Square.

**Cryptocurrency exchanges: **CENTRE-issued stablecoins can be used to hedge risks on cryptocurrency exchanges and provide fiat connectivity on exchanges that do not support traditional fiat deposits and withdrawals.

4. How does the CENTRE network work?

The CENTRE network consists of CENTRE nodes, which are operated by participants such as wallet providers, service providers, and financial institutions. Nodes allow participants to issue stablecoins, configure the types of stablecoins accepted, publish exchange rates, perform compliance checks, and conduct fast and secure value transfers through state channels.

5. What are CENTRE stablecoins?

CENTRE stablecoins are tokens backed by real-world assets such as USD, EUR, or RMB. Each stablecoin is pegged 1:1 to the corresponding fiat currency held by the issuing member and is audited regularly by CENTRE to ensure its price stability.

6. What are state channels? How are they used in CENTRE?

State channels are a technology that allows participants to conduct multiple transactions without submitting all transactions to the blockchain. In CENTRE, state channels are used to enable fast and secure off-chain transactions, thereby increasing transaction throughput and reducing transaction costs.

7. What role does Circle play in CENTRE?

Circle is the original developer of CENTRE technology and helped initiate the development of CENTRE through intellectual property contributions and licensing. Circle is also a CENTRECENTRE is a founding member of the CENTRE network and plans to integrate its products (such as Circle Pay and Poloniex) with CENTRE.

8. How do I participate in CENTRE?

You can participate in CENTRE by running a CENTRE node, developing a wallet or service compatible with CENTRE, or joining the CENTRE community. For more information about CENTRE, please visit the CENTRE website: http://centre.io.