SOURCE Blockchain White Paper: Powering the Future of Web 3.0

SOURCE PROTOCOL
15 min readAug 8, 2022

Background

Source Chain $SOURCE is a public, permission-less and interoperable blockchain network for enterprises, developers and individuals to create and use scalable apps, smart contracts and tools for Web 3.0, DeFi, NFTs, and more. $SOURCE is a key component of a much larger ecosystem built by Source Protocol Ltd to fuel the ever-evolving global economy.

Source Protocol is a comprehensive blockchain technology suite for the use and developments of Web 3.0 applications, designed for builders, enterprises, and individuals that wish to easily utilize decentralized technology. Beyond Source Chain $SOURCE, Source Protocol’s ecosystem includes a full DeFi Suite, a members rewards program and white-label integration capabilities with existing online Web 2.0 enterprises:

  • Source Swap — An Interchain DEX & AMM built on Source Chain for permission-less listing of $SOURCE-based tokens, native Cosmos SDK assets, cw-20’s, and wrapped Binance Smart Chain (BEP-20) assets.
  • Source One Market — A peer to peer, non-custodial DeFi marketplace for borrowing, lending, staking, and more. Built on Binance Smart Chain with bridging to Source Chain & native Cosmos SDK assets.
  • Source Token $SRCX (BEP-20) — the first automated liquidity acquisition and DeFi market participation token built on Binance Smart Chain.
  • Source One Token $SRC1 (BEP-20) — a governance and incentivized earnings token that powers Source One Market.
  • Source USX $USX (BEP-20) — Source One Market stablecoin backed and over collateralized by a hierarchy of blue chip crypto assets and stablecoins.
  • Source Launch Pad — Empowering projects to seamlessly distribute tokens and raise liquidity. ERC-20 and BEP-20 capable.
  • Source One Card & Members Rewards Program — users can earn from a robust suite of perks and rewards. In the future, Source One Card will enable users to swipe with their crypto assets online and at retail locations in real time.
  • DeFi-as-a-Service (DaaS) — Seamless white-label integration of Source One Market, Source Swap, Source Launch Pad, and/or Source One Card with existing online banking and financial applications, allowing businesses to bring their customers DeFi capabilities.

The first product of Source Protocol, Source Token (SRCX), was deployed on June 6th, 2022 and is already contributing toward a vision of an ecosystem based on sustainable growth. $SRCX will be integrated with other Source applications like Source One Market, which will open the door to bridge wrapped assets from Binance Smart Chain (BEP-20) to Source Chain (SOURCE) and other Cosmos Hub ecosystems.

Introduction

Existing Blockchain Solutions are Falling Short

  • Majority of protocols are reliant on centralized exchanges for liquidity, limiting their ability to scale independently
  • Slow transactions speeds, high costs, limited scalability, and inability to collaborate and share information with other chains, has created severe limitations in Gen 2 blockchain infrastructure
  • There still exists a level of complexity in blockchain applications that remains a barrier to entry for the average user
  • There is not enough focus on building “bridges” for the enterprise to adopt this new technology easily and quickly

Consumers are eager for a blockchain ecosystem that can securely and sustainably support mass adopted applications.

Summary on Source Chain $SOURCE

Source Chain $SOURCE is a standalone, layer 1, proof-of-stake blockchain, based in the Cosmos Hub IBC ecosystem (the Interchain). $SOURCE has been built with Ignite CLI (formerly Starport), which utilizes the Tendermint BFT consensus mechanism (Ignite) and the Cosmos SDK. This enables interoperable transactions with other layer 1 Cosmos Hub blockchains and creates a developer-friendly platform to build on top of.

With $SOURCE, everyone has access to a highly efficient, scalable and interoperable blockchain network to create apps, smart contracts and tools for the Web 3.0 Economy. Developers, enterprises and individuals can build, integrate and use everything from DeFi apps, NFTs, play-to-earn, metaverse, privacy networks, DeSci, and much more.

Key Components

  • Sustainable Growth model built for enterprise involvement and mass application adoption
  • Guardian Validator Nodes for enhanced network security
  • Integration with Source Protocol’s Binance Smart Chain Ecosystem and Decentralized Money Market, Source One Market
  • Source-Drop (Fair community airdrop and asset distribution for $ATOM and $SRCX holders)
  • Interoperable smart contracts (IBC)
  • High speed transaction finality
  • Affordable gas fees (average of $0.01 per transaction)
  • Highly scalable infrastructure
  • Open-source
  • Permission-less Modular Wasm + (EVM)
  • Secured on-chain governance
  • Ease of use for developers

Implementing Sustainable Growth

Sustainable growth is a concept that is severely lacking in the blockchain space, and even in federally-managed fiat currency. Value-backed global currencies, like a gold-backed dollar, have been absent for decades, for example. The global financial system and its counterpart, the global economy, at their current states are more unstable than ever, with inflation and de-leveraging continually on the rise. Blockchain and smart contract technology has massive potential to emerge as key resolutions to the global fiat currency and economy devaluation and inflationary crisis. However, inherent volatility and speculation with crypto assets and blockchain networks have been pointed to as primary unstable growth factors, hindering mass adoption of Bitcoin and more recently, Web 3.0 application usage.

With smart contracts, we can lock-in sustainable value on-chain. They allow for transaction fee accrual and automated processes that can be strategically programmed into economic models that can achieve enduring success. Source Token $SRCX, Source Protocol’s smart contract utility token with automation fees for passive DeFi yield market participation, has already begun to demonstrate how a model like this can be used.

If growth mechanisms like the above were to be successfully integrated into a blockchain economy like Source Chain $SOURCE, it would play a significant factor toward improving security, trust and mass adoption. This, combined with fast transaction speeds, low network fees, secured governance modeling, highly scalable infrastructure, and interoperable IBC capable smart contracts, will provide a massive competitive advantage over current top-tier protocols.

It is time for a blockchain ecosystem to push beyond the status quo and introduce a sustainable growth model that will help to unleash the power behind this great technology. This is what we are building with Source Protocol and the introduction of Source Chain $SOURCE.

$SOURCE Key Features

Interoperability (IBC)

The interoperability and IBC Transfer function of the Cosmos Hub ecosystem (the Interchain) allows for sovereign layer 1 chains like $SOURCE to communicate and transfer tokens in an efficient and secure manner without requiring a bridge. While bridging is a great tool for chains to transfer value, many bridges are plagued with hacks, security exploits and vulnerabilities. The IBC transfer capability of the Interchain simplifies value transfer and provides a more secure and scalable environment for users to participate in.

The Cosmos HUB has a horizontal scaling advantage for blockchains built within its ecosystem (known as the Interchain) due to the capability of IBC Transfers. A simple metaphor to understand this would be to look at Ethereum as a two lane highway where transactions are like vehicles that are limited from being able to change lanes. There is only one path which is very limiting. This causes network congestion, higher fees, and slower transaction finality. In contrast, the IBC capability of SOURCE and all other Cosmos Hub built blockchains.

Not only is IBC functionality a massive advantage for $SOURCE, it also provides additional security for many token holders that participate in the Interchain ecosystem as it eliminates the need for bridging. With all the attacks and hacks on bridges in 2022, the IBC model is proving itself to be a much more future proof and scalable solution.

This model will be secured even further with the Interchain Security upgrade scheduled for the Cosmos HUB in 2022. This upgrade allows validator node operators to provide security to multiple chains simultaneously and receive additional incentives for doing so. For example, once this upgrade is live $ATOM delegators will be able to receive $ATOM, $OSMO, $EVMOS, $JUNO and $SOURCE all from staking their $ATOM to validator nodes that should choose to participate. This promotes further decentralization and makes it easier to further secure newly built blockchains in the Interchain.

CosmWasm

$SOURCE enables Rust smart contract capability with CosmWasm and features a minting system that mints and releases new tokens over a predetermined inflation schedule. Rust is widely-used outside of blockchain technology and is a highly scalable language for smart contracts, making $SOURCE an attractive blockchain for developers and enterprises looking to utilize the power of Web 3.0 technology. On top of that, CosmWasm allows IBC-capable smart contracts between chains, creating an extremely effective mechanism for cross-chain collaboration, value and data sharing. This is considerably important, as the need for information to be shared in an effective and secure way across networks is vital in order for decentralized applications to garner mass adoption.

Throughput & Affordable Gas Fees

$SOURCE has a throughput starting at 2,500 transactions per second (TPS), scalable up to 10,000 TPS, and an average block confirmation time of 7 seconds. Combined, these are significant increases from Bitcoin’s TPS of 7 and average confirmation time of 30+ minutes, and Ethereum’s TPS of 25 and average confirmation time of 6+ minutes. For further perspective, VISA handles about 1,700 to 4,000 transactions per second.

Transaction fees (otherwise known as ‘gas’) on $SOURCE are extremely affordable at approximately $0.01 to $0.07 per transaction. This is significant for developers that wish to deploy various apps, marketplaces, metaverses, etc., as they do not want to be bottlenecked by high network congestion, downtime or high fees that slow user adoption and limit product scalability. Affordable transaction fees are imperative for enterprises, many of whom wish to utilize blockchain solutions for more efficient on-chain data storage via micro transactions.

Decentralization Model

Security for any blockchain is top priority. Without it, the network can be quickly halted or rendered useless, affecting all users, applications and services. $SOURCE has a unique approach towards decentralization with an emphasis on security first.

Fully decentralized governance models have evident limitations in security. For just one example, a malicious on-chain governance proposal could be submitted under the guise of a well-designed narrative that appeals to the community, but in reality would be harmful to the network and its participants if passed. Unfortunately, governance hacks like this are common, and have happened as recently as July 23rd, 2022, when hackers stole $6 million worth of AUD tokens from Audius, a Web 3.0 music platform. Governance systems without a failsafe create high levels of unnecessary risk. A system which considers short and long term risk, ramifications of changes, malicious intent, etc., is necessary to secure a blockchain ecosystem properly.

Guardian Nodes

13 Guardian Nodes will be deployed at the $SOURCE genesis event, managed by the $SOURCE Guardian DAO. Their purpose is to protect the sovereignty, ethos and constitution of the chain, as well as to provide sustainable funding for the community pool and $SOURCE Swap incentives. These nodes hold authority by being delegated a combined minimum of 33.4% of $SOURCE from the strategic reserve and $SOURCE partners. This delegation ensures a successful “No with Veto” by the $SOURCE Guardian DAO to shut down any threatening or manipulative governance proposals. The $SOURCE Guardian DAO will consist of blockchain experts that share a common vision and purpose for the $SOURCE blockchain. As a comparison to these 13 nodes, the top 7 validator nodes on $ATOM are delegated 34.77% of circulating supply by ATOM delegators. The more distributed a chain’s supply is to various validators the more secure it is. Governance Proposals can be used to add additional Guardian Nodes in the future that will further secure the network.

In order to avoid top-heavy centralization, Guardian Nodes will be set to 100% commission. This removes any incentive for additional delegators to delegate to Guardian Nodes and encourages delegation to community validators. Guardian nodes will also avoid being involved in most governance proposals and will, by default, vote “Abstain” to prevent centralized influence over community governance. “No with Veto” will only be used by Guardian Nodes to protect the chain from malicious proposals.

Nefarious narratives are not always perceived as immediate threats by individuals with limited technical expertise, and the Guardian Nodes are to be viewed as a “fail-safe” mechanism that provides enhanced security to the chain. Subversive, threatening and spammy proposals will be immediately shut down and prevented by Guardian Nodes as they exist as a deterrent for any malicious behavior whatsoever.

Guardian Nodes use $SOURCE delegated to them from strategic enterprise partners. These partners will have signed private contracts to commit their delegated tokens to assigned Guardian Nodes as well as trusted community validators.

Source Protocol’s founding team encourages the education and active participation of the community to distribute their delegations to several validator nodes. This increases chain security and makes the network more decentralized. Everyone in the community will have a different level of commitment to actively participate in governance. It is recommended to always research your $SOURCE community validator.

To summarize, the benefits provided by $SOURCE Guardian Nodes are:

  • Designed to protect governance and secure the future of $SOURCE
  • Managed by $SOURCE Guardian DAO’s expertise
  • 13 Guardian Nodes deployed at genesis to spread network distribution
  • Non-competing with $SOURCE community validators
  • Provides additional funding for community pool
  • Abstains from voting unless the chain is threatened
  • Provides opportunity for strategic enterprise partners

Value-Backing From Guardian Node Staking

Not only do Guardian Nodes protect and secure the chain, they also provide the chain with a revenue stream. Guardian Nodes will provide additional revenue to the Community Pool, Liquidity Mining Rewards and Strategic Reserve. This allows for a steady flow of value to expand and improve the development, adoption and progress of the $SOURCE ecosystem.

Community Pool

3.5% of the Genesis Distribution is allocated to the Community Pool. The pool is used to fund beneficial proposals passed by the community to improve the $SOURCE ecosystem. There is a 5% tax on all block rewards that also contributes toward replenishing the Community Pool. A percentage of stake rewards from Guardian Validators will also contribute toward replenishing the community pool.

Strategic Reserve

Approximately 33.6% of the $SOURCE genesis distribution will be allocated to the Strategic Reserve. This is used for Guardian Nodes and the funding of $SOURCE development efforts. These funds will be delegated into the 13 Guardian Nodes from the $SOURCE Guardian DAO controlled multi-sig wallet. As strategic partnerships are formed, these funds will be transferred and the partners will sign private contract agreements that maintain their delegated $SOURCE within the Guardian Nodes. $SOURCE in the Strategic Reserve will not be market-sold, as it is needed to make Guardian Nodes possible. $SOURCE purchased from the strategic reserve to raise development capital will also be released on a vesting schedule.

Staking rewards from the strategic reserve will be moderately compounded to uphold the 33.4% minimum delegation of total supply needed for Guardian Nodes. Additional $SOURCE accrued from staking will be used to further fund the community pool, or will be delegated to top performing community validator nodes that provide exceptional services to the $SOURCE ecosystem.

Summary

Source Swap

Introduction

Source Swap is a DEX and AMM currently in beta testing that will allow for trading and liquidity mining of $SOURCE-based tokens, native Cosmos SDK assets and cw-20’s. Wrapped tokens from $SOURCE Protocol’s Binance Smart Chain-based “$SOURCE One Market” will also be integrated. It will allow users to use IBC transfers from various chains for a secure and interoperable user experience. Liquidity pool incentives will be provided from the $SOURCE liquidity mining reward allocation from the genesis distribution.

Fees: Transaction, Swap & Exit

Transaction fees are paid by users when signing and posting transactions to $SOURCE Chain. These fees are distributed to $SOURCE stakers.

Swap fees are paid by users when trading with the $SOURCE Swap AMM decentralized exchange. They are calculated based on trade size and vary by liquidity pool. These fees are added to their respective pool and then distributed to users based on the proportion of their liquidity pool token share.

Exit fees are paid by users when exiting a liquidity pool. They are calculated as a percentage of LP token shares being redeemed. Upon exit, the user’s LP shares are burned and the value is distributed to the remaining LP shares. Exit fees are set by the pool creator. $SOURCE governance can also deploy additional fees to improve the network if needed.

Source One Market & Source One Card

The Source One Market on Binance Smart Chain is a non-custodial, peer-to-peer lending and borrowing market where users are able to earn rewards from lending and access credit lines by collateralizing their crypto assets. Source One Market assets will be bridgeable to $SOURCE Chain, where they can be traded and used for liquidity pool mining within Source Swap.

This will allow for wrapped Binance Smart Chain assets (BEP-20) to have access to the Cosmos Interchain ecosystem.

Source One Market has been developed on the Binance Smart Chain in order to access large volumes of wrapped assets. $SOURCE will implement a bridge and swap feature that allows simple transfer of Source One assets to be used in liquidity pools on $SOURCE and Source Swap.

The Source One card will allow users to manage and pre-load value from their crypto assets to spend at retail locations and online. The card will have several additional bonuses and reward incentives. Spending crypto earnings is a great feeling and the Source Protocol development team is building the backbone to support this in a truly decentralized manner.

Unofficial $SOURCE Genesis Distribution

(These are not final numbers, all of the following is subject to change)

$SOURCE Release Schedule (fixed inflation)

MAX SUPPLY: 1,043,556,906 (unofficial: the true max supply will be around 1 billion and will be finalized once the SOURCE-Drop is released)

Staking

Users will be able to delegate/stake their $SOURCE to qualifying validator nodes via a Keplr wallet. Staking $SOURCE will have a bonding period of 14 days. Once $SOURCE is delegated to a validator, it can be redelegated at any time to another validator node if desired without breaking the bonding period. However, once delegation is broken, the user will not receive staking rewards or have their holdings become liquid until 14 days have passed. The $SOURCE development team is actively working with professional validators to help secure and decentralize the network. The staking rate is determined by numerous factors and will be viewable within the Keplr wallet.

$SOURCE-Drop Airdrop

Summary

The $SOURCE-Drop has been carefully designed to provide maximum benefit to community members that hold both Source Token $SRCX (Source Protocol’s Automated DeFi market rewards token, BEP-20) and Cosmos Hub $ATOM. $SRCX should be held in Metamask, Trust Wallet or Binance Smart Chain Wallet, and $ATOM should be held in the Keplr Wallet. Registering both wallets in $SOURCE’s Web 3.0 app via wallet connect will be required in order to participate.

Details

The $SOURCE-Drop will be whale-capped and will not be game-able. The amount of $SOURCE claimable will be determined by the combined average wallet weight of a holder’s ATOM and SRCX balances. Wallet weight is determined by the proportion of a user’s holdings to circulating supply. If no SRCX is held, a zero will be registered in the calculation and this will significantly reduce the quantity of $SOURCE received for ATOM stakers that do not hold SRCX. Likewise, SRCX holders that do not register an ATOM address on the claiming app will also not be able to receive the $SOURCE-Drop. A Cosmos Hub $ATOM address is needed (via Keplr wallet) to generate the new $SOURCE blockchain public address. ATOM and SRCX held on centralized exchanges will not be eligible for the airdrop.

Bonus Eligibility

Contributors and participants to the $SOURCE testnet (now public) will be eligible to receive bonus $SOURCE-drop from active participation such as creating a wallet, setting up a validator node on $SOURCE testnet, launching a smart contract, and more. Additional contributions and active participation by community members will also be rewarded.

Conclusion

Source Chain $SOURCE will be a highly utilized, transacted and scalable global Web 3.0 network. The genesis distribution model is designed to “jump start” the network by inviting and incentivizing users and contributors to join the $SOURCE ecosystem. Source Protocol’s development team has many features and tools being built and tested that will have a significant impact on the network.

The $SOURCE test net can be joined by clicking HERE. All are invited to contribute and provide feedback to the foundation of this revolutionary Web 3.0 ecosystem.

Developers click HERE to dive into SOURCE CHAIN DOCUMENTATION

Links

Website: https://www.sourceprotocol.io

Telegram: https://t.me/sourceprotocol

Discord: https://discord.com/invite/zj8xxUCeZQ

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