TLDR; we introduce a decentralised protocol for person-to-person trading between cryptocurrencies and off-chain assets like cash on Joint Protocol.
Table of Contents
- What is Joint Protocol
- Protocol Development Roadmap
- P2P Token
It has been said countless times, but let me reiterate! — Centralised exchanges (CEXes) are the killer apps of the blockchain. When I say “killer”, I mean the destroyers of the DeFi space.
1.1. CEXes are designed to fail, eventually.
With their current design and business model, they will inevitably make the freedom that blockchain technology promises very difficult to achieve. They are actively contributing to the rollback of achievements the industry has gained in the past decades. The fact remains that they are making everyone in Web3 look like idiots — to friends, family, colleagues and regulators. Talent considering this space will no doubt question their decision or sanity. Ultimately, the actions of CEXes will fully invite regulators prematurely and with hurriedly crafted rules.
1.2. Most are irresponsible, and none can be trusted.
As proven by the recent collapse of the FTX exchange and the inability of many other exchanges to prove their reserve, it is suicidal to trust a centralised exchange with your coins. It does not matter much if they are of excellent standing today. They are designed to cause pain, eventually. It only takes an irresponsible CEO, board or regulator to change things for the worse. Look, the moment you move your coins into their custody, you have accepted the following:
- Loss of ownership: “Not your keys, not your coins” — you are subject to their public and hidden terms. They chose when to grant you access. They can withhold your coins for random reasons or at the request of a third party (e.g. state actors, other users & companies).
- Inaccessibility: you lose control over when and how you wish to use your coins. In times of significant events, when you need to move your coins out of centralised exchanges, you may find that you cannot exit because withdrawals have been disabled or your account has been flagged for reasons that need further clarification.
- Leverage risk: the FTX catastrophe demonstrates that many exchanges must prove their reserves. Many users own virtual coins or IOUs on centralised exchanges because in reality the actual coins have been loaned off, lost or locked in deals depositors did not approve or are aware of. You only learn these deals when the exchange loses your coins in failed ventures. While FTX is the latest to have fallen, many other exchanges operate similarly to FTX.
- Privacy loss and violations: Nowadays, you cannot use most centralised exchanges without sharing your identity, life history and live video of yourself. Many users also face discrimination or get preferential treatment based on the information shared with exchanges. In many cases, users still get rejected after completing the KYC; all that days spent filling out forms and waiting for approval go to waste. Moreover, there is no way to verify if the data shared in their failed application has been deleted.
1.3. We have strayed from Satoshi’s vision.
Satoshi described a system enabling peer-to-peer value transfer in the Bitcoin white paper. A financial system that gives people autonomy over their banking and payment needs. The whole point of blockchain technology is to eliminate intermediaries, allowing users to transact freely and directly. This freedom might not mean much to many, but to citizens of the developing world, it is everything. It means freedom from inflation, tyranny and over-regulation.
We all should be imbibing the principles Bitcoin is built on. Why are we trying so hard to throw away such vital attributes by inviting bankers and their schemes in the name of convenience and yields? Instead, we ought to be building systems that promote self-custody, person-to-person interactions, transparency and community ownership while working to improve user experience without introducing or accepting fundamental flaws.
1.4. CEXes do not need coin custody.
With the rise of automated market maker (AMM) protocols like Uniswap, we can agree that there is no reason why an exchange should require custody of your coins. AMM exchanges connect liquidity providers (sellers) with swappers (buyers), and at all times, they have full custody of their coins up until a trade is executed.
With fast, cheap layer-2 chains, building features previously exclusive to centralised exchanges is now possible.
1.5. P2P is the future.
By now, you must have concluded that P2P trading is the future. You are correct!
We need to build and embrace systems that enable users to trade and interact with other users directly without requiring permission from a central authority.
For millions worldwide, P2P has become the primary way they enter, interact and exit the crypto space. P2P is resilient against censorship. It’s non-custodial and can only be undermined by the platform operator. But here is the thing! It does not need human operators — just smart contracts and thoughtful economic incentives.
For P2P to take its rightful place, We must build modular and composable systems that democratise and improve crypto on-ramp, trading, and fiat off-ramp systems so users can choose how to enter and who to patronise and exit on their terms.
1.6. CEXes should just be ramps
Centralised exchanges thrive because they provide convenient on-ramp and off-ramp services. Without these capabilities, there would be no need to patronise them in a fully mature P2P-driven ecosystem. With P2P becoming dominant and democratised, exchanges can remain relevant by providing on-ramp and off-ramp, market-making, order matching, and mediation services. They should have no business holding users’ assets and settling trades.
However, they must now compete with other individuals and companies who can provide cheap on-ramp and off-ramp services directly to users. They will also face competition from other market makers and order-matching systems. With more choices, healthy competition is expected, and the users ultimately benefit.
1.7. We need a P2P trading protocol
For P2P trading to become ubiquitous, there has to be a layer that defines the rules of engagement for all trade partners and asset types. The missing layer is a trade protocol that exists as a smart contract on the blockchain.
A trade protocol that will enable swaps between on-chain and synthetic assets that represent an off-chain store of value such as fiat, stock and more.
Although Uniswap Protocol made trading between purely on-chain assets common, it does not support swaps involving off-chain assets. We have to go further.
This trade protocol will provide standard functions that enable all the trade participants to fulfil their roles without needing custody of funds. If all exchanges were to integrate such a trade protocol, users would instantly never have to worry about losing funds. The industry will never have an FTX-like situation again, as no exchange can access deposits, let alone mismanage them. Exchanges may be able to de-platform users from their interfaces but can never access users’ assets. Instead, users can stroll to one of many alternative interfaces and still access the protocol.
The good news is we at Joint are building that P2P trading protocol — The Joint Protocol.
2. What is Joint Protocol
Joint is a peer-to-peer protocol for swapping an on-chain token (ex: ERC20, NFT) for an off-chain asset (ex: cash, giftcard, stock) and vice versa.
Joint Protocol facilitates the exchange of asset pairs like cryptocurrency for cash and cash for cryptocurrency without requiring a centralised authority to provide token custody, escrow and mediation services. Instead, it relies on smart contracts for escrow, requires the user’s to trade directly from their wallet and includes a democratised meditation system built on the wisdom of the crowd.
In simple terms, what does it do?
- Joint Protocol enables users to swap tokens for fiat (USD, JPY etc.).
- Joint Protocol can facilitate the exchange of assets represented by ERC20 for fiat.
- Joint Protocol can facilitate the exchange of assets represented by ERC20 for fiat.
- Joint Protocol enables market makers (e.g. exchanges) to connect buyers and sellers without requiring custody of tokens.
Joint Protocol’s swaps share a similar transaction flow to centralised exchanges like Binance or LocalBitcoin but without the centralisation components such as a platform-operated market, escrow, and mediation.
On Joint Protocol, a market is where swaps between a base asset and a quote asset occur. A market’s base or quote asset can be any ERC20, ERC721, or synthetic token.
Unlike centralised exchanges, anyone can create a market with any pair combination, such as BTC-ETH, ETH-USD, BAYC-USD, BAYC-MAYC, and so on. Therefore, when a user wants to swap an asset they possess in their wallet for something else, they must first find a market that matches the pair they desire.
Some other attributes of a market:
- Market creators can optionally set a fee that will be subtracted from every swap that occurs in the market. Market fees allow existing centralised exchanges to build non-custodial, safer exchanges and still earn revenue.
- Users can create markets that are permissioned, allowing centralised exchanges to meet regulatory obligations such as AML/KYC.
3.2. Liquidity Provider
In Joint Protocol, a liquidity provider is a user who adds liquidity to a market. The Liquidity provider supplies the market with the base asset. For example, a WETH-USDT market will attract liquidity providers that add WETH directly from their wallets.
Liquidity providers can set their price, the minimum and maximum volume they prefer to handle and remove their liquidity anytime.
When users want to swap an asset they have (crypto or fiat), they find a market, select a liquidity provider of their choice and initiate a swap.
Liquidity providers are the agents providing on-ramp and off-ramp services to the users of the Joint Protocol. They can be individuals or corporations. With a capable Joint Protocol interface, users can filter liquidity providers based on attributes like volume, success rate, location, payment method, verification status and more.
Swapping is the exchange of an asset you own for liquidity in a market. The asset you own can be an on-chain token (WETH, UNI, BAYC) in your wallet or an off-chain asset you own (cash, stock, gift card etc.). Users swap by finding a market that will take what they have (quote asset) and give them what they want (base asset).
There are two types of swap operations:
- Instant: An instant swap is initiated when the asset the user has is on-chain, and the asset the user wants from the market is also on-chain (e.g. WETH-USDC). Instant swap is what users of Uniswap experience.
- Order: An order swap is initiated when the asset the user has is off-chain while the asset the user wants is on-chain, and vice versa (e.g. USD-WETH). In this swap type, an interactive session is started where Joint Protocol’s smart contract coordinates the transfer of the off-chain asset to the counterparty and enforces the release of the on-chain asset to the receiving counterparty after payment is confirmed.
The order type is the most involved and risky swap type because it requires both swap participants to be responsive and responsible. The party in possession of the off-chain asset is expected to transfer it to the counterparty using the agreed off-chain method. Likewise, the party expecting the off-chain transfer must quickly acknowledge receipt of the asset and mark the trade as “paid” so that the Joint Protocol can release the escrowed asset.
Centralised P2P exchanges address this issue by acting as the arbitrator called upon when an order stalls due to a disagreement or an unresponsive participant. However, this centralised mediation system is shrouded in secrecy and mistrust and prone to favouritism and human error, and the decision is usually irreversible. As a result, many users come out of disputes feeling cheated or scammed by the platform.
When disagreement or delays prevent a swap order from being finalised, swap participants need a mechanism that can be used to resolve the condition. That mechanism is referred to as a mediation system in the Joint Protocol.
Joint Protocol’s mediation system uses the crowd’s wisdom; this means that disputes are settled by specialised protocol participants randomly selected to resolve a dispute. They operate by predicting (or voting) the dispute’s ruling based on the evidence provided by the swap participants. These protocol participants are known as mediators.
A Joint Protocol mediator is a participant who has skin in the game. They are highly capitalised entities that must lock up a security deposit before they are permitted to mediate. The mediator role is open to anyone. Here are the requirements for becoming a mediator:
- Purchase a ticket: Intending mediators must purchase a ticket that allows them to join a market as a mediator. The protocol sells the mediator ticket; it sets the price of a ticket based on the supply and demand of tickets. Therefore, tickets have a limited supply that is enforced by the protocol.
- Security deposit: During the purchase of a ticket, the intending mediator must also include a security deposit. This deposit ensures the mediator has something to lose if they misbehave or are inefficient. While the protocol sets the minimum securing deposit, market creators can set an even higher minimum value for their market. For instance, a market with a high daily volume would need mediators with large security deposits as a guarantee. Tickets can be drained of their purchase price and security deposit, but it will take a period to take effect.
- Join Market: With a ticket, the intending mediator can join a market. However, only a mature ticket can join a market. When a ticket is purchased, it must wait for a duration before it is considered mature. The mediator must pick a market they understand and commit their ticket to it. Once joined, the ticket will be eligible for drafting into dispute created within the ticket’s host market. A mediator can only join one market at a time and cannot leave a market immediately after they join it.
- Availability: Mediators must be ready to jump into a dispute when drafted. Joint Protocol will randomly draft mediators into disputes at any time of the day. So mediators are expected to be ready. Joint Protocol takes mediator availability very seriously and will slash the security deposit of a mediator that fails to participate in a dispute resolution.
By default, when a swap dispute is created in a market, a minimum of three (3) mediators are drafted into the dispute. These drafted mediators and the swap participants must go through several dispute phases to arrive at a verdict.
- Evidence Phase: The participants must share evidence of payment or non-payment with the mediators. Mediators must be familiar with the market’s payment method to make an informed prediction or risk getting punished by the protocol.
- Vote Commit Phase: The mediators must encrypt and commit their decision after the evidence phase. Mediators can not abstain; they must either vote to release the asset escrowed in the swap order or cancel it entirely. Mediators that missed the vote commit phase will have their security bond slashed.
- Vote Reveal Phase: The reveal phase begins after the commit phase ends. In this phase, mediators must decrypt and reveal the decision they committed in the commit phase. Hashing techniques verify that the revealed vote matches the committed encrypted value. Like the previous phase, mediators who miss this phase will have their security deposit slashed.
- Appeal Phase: At this phase, the outcome of the dispute is already known to all parties. A swap participant who is unhappy with the verdict may create an appeal. Unlike P2P on centralised exchanges where the platform operator’s decision is final, Joint gives swap participants a chance to re-appeal a dispute’s ruling. But there is a catch. Joint Protocol requires an appeal fee
xto be deposited before a re-appeal is started. This re-appeal fee increases for every new re-appeal created (fee=
x * numberOfAppeals). Additionally, each new appeal increases the number of mediators drafted (draftees=
minMediatorPerMarket* * *numberOfAppeals). If the appeal creator loses the re-appeal, the appeal deposit is paid to the counterparty. A re-appeal fee is an economic approach to disincentivising liquidity lock attacks.
- Execution Phase: The execution phase executes the verdict of the mediators, whether to release the escrowed asset or cancel the swap order. It includes several events:
- Tallying: This involves counting votes to know who voted for the winning prediction, those who voted against the winning prediction, and those who did not participate.
- Reward Allocation: In this event, mediators who predicted the majority verdict are rewarded with newly minted tokens. The mediators who predicted the minority verdict would have a portion of their security deposit slashed and burned.
- Verdict Execution: Finally, the outcome of the dispute is executed; the escrowed asset is released, or the swap order is reverted and cancelled.
Joint Protocol’s verification system is designed to introduce trust and confidence into the protocol by enabling trusted markets to be created. A trusted market is one where the market creator, liquidity provider, and traders have been verified.
As a protocol building a new defi primitive, Joint needs to meet the needs of different people and organisations; one of those needs is the ability to trade in a market with verified participants. As a result, many users will feel more comfortable swapping with a liquidity provider verified by a reputable firm.
The verification system is made up of a:
- Issuer: The issuer is responsible for granting permission to entities that want to provide verification services to the Joint Protocol.
- Verifier: The verifier is an off-chain entity that provides verification services to users of the Joint Protocol. The verifier is responsible for performing any off-chain checks (KYC checks, accredited investor, bitcoin holder, etc.) to prove a user is who they say they are. In addition, verifiers must deposit a specific amount of P2P tokens into the verification contract as a bond.
- Verified: A user whose account has been verified by a verifier. Verified users can access verification-restricted markets or be filtered by Interfaces and assigned a verified badge.
A market can have one or more verification preferences that must be met by liquidity providers, mediators, swappers, or all.
3.6. Messaging System
A swap order involving an off-chain asset will kick start an interactive session where the swap participants communicate directly with each other. Within this session, they can share payment information, discuss developing issues, request status and other swap-related topics. Centralised exchanges provide a plain-text messaging system accessible to anyone with access to the database; users’ messages can be read by staff, auditors, and regulators or risk exposure to hackers in a data breach. The bottom line is that your conversations are never private.
Joint Protocol includes a private messaging system based on ECIES that enables swap participants to send encrypted messages that can only be decrypted and read by the intended receiver. Anyone can deploy the Joint Protocol’s messaging system. The messaging system includes the following components:
- Message Network: A network dedicated to broadcasting messages.
- KeyStore: The KeyStore is a public directory storing users’ keys. It is like an address book for people on the Joint Protocol.
- Mailbox: The mailbox is an entity on the message network responsible for receiving, storing, responding to and relaying messages to users. Anyone can run a mailbox, including swap participants.
- Client: A user-facing application lets users send and receive messaging via the messaging network. The Joint Interface will include a fully-featured messaging application.
With Joint Protocol messaging, users can hop from one Interface to another and from device to device and still have access to all their messages. Messages in a mailbox are stored in an encrypted format; no one except the intended receiver can read them.
The Interface is a user-facing application allowing users to access Joint Protocol decentralised P2P service features. Web, mobile, and command-line applications are examples of interfaces through which users will be able to access the Joint Protocol.
Unlike centralised exchanges where the Interface is closed-sourced and entirely controlled by the exchange, Joint Protocol’s Interface will be open-sourced. As a result, anyone can deploy and modify it to fit their personal, corporate or regulatory needs.
Just as Uniswap has done for on-chain swaps, Joint Protocol aims to standardise the Interface for swapping between on-chain and off-chain assets. We have also made the protocol interfaces easy for other smart contracts to integrate and use Joint Protocol and working on SDKs to enable existing, non-custodian services to integrate Joint Protocol.
Joint Protocol market creators can set a fee deducted from swap transactions completed in their market. This fee model enables market creators such as exchanges, app integrations, and private market makers (on WhatsApp, Telegram etc.) to earn revenue. The protocol also collects a small fee and redistributes most of it to Joint Protocol’s P2P token holders and some to its inventors.
At first, Joint Protocol will be managed by the Joint Lab team. However, this will change when the protocol reaches maturity. Joint Protocol’s governance structure represents a co-ownership and co-management between the community and the protocol inventors, where both classes perform similar functions and hold each other accountable. Before the transition to co-governance, Joint Team will use Snapshot to check the temperature and for consensus within the community.
4. Protocol Development Roadmap
We plan to launch Joint Protocol on multiple blockchain networks. Ultimately, Joint Protocol will be the gateway for P2P trading, powering public and private markets on many EVM-powered chains.
Initially, we will support the Ethereum, Polygon, Binance and Optimism chains. You can find our priorities below:
- Joint Protocol Core: Complete core contracts for the trade engine.
- Message Protocol: Complete protocol for sending encrypted messages.
- Web Interface: Complete the official web interface and release it on GitHub.
- Verification Protocol: Complete the verification protocol and launch a verification service.
- NFT Mint: Facilitate the minting of DroidPD NFT (free mint).
- IDO: Public distribution of P2P tokens via an Initial DEX offering.
- Game of Liquidity: Incentivised testnet for testing liquidity provisioning functions and bootstrapping liquidity provider community in preparation for mainnet launch.
- Game of Swap: Incentivised testnet for testing swap functions and experience.
- Game of Mediation: Incentivised testnet for testing mediation functions. This event will enable the development of the mediation community.
- Airdrop: Token distribution to the game of liquidity/swap/mediation participants.
- TGE: Generation and distribution of tokens to strategic partners and the community in line with the token distribution plan and release schedule.
- DEX listing: List the P2P token on AMMs on all supported chains.
- Mainnet Launch: Launch Joint Protocol on the mainnet of all supported chains.
5. The P2P Token
Initial supply: 1,000,000,000 P2P
The P2P token is an inflationary token minted on Ethereum. A portion of the initial supply will be bridged to Polygon, Binance Chain and Optimism to enable Joint Protocol’s operate and provide its services on these networks.
5.1. Token Utility
Joint Protocol’s P2P token is an integral part of the system providing essential utilities such as incentives, security and governance. Below are the most critical utilities:
- The P2P token will be used as a reward for protocol participants such as miners, mediators, traders and liquidity providers.
- The P2P token will also be used for governance. For example, at protocol maturity, token holders can vote on significant changes to the protocol.
- The P2P token is required for mediation re-appeals, mediation ticket acquisition and staking.
- Additionally, P2P tokens are required as a security bond for verification providers who must lock P2P to offer their service.
We have a growing community of people interested in Joint Protocol. Find us on: