COVER PAGE Whitepaper V0.1 Q3 2020 UNIFI - The DEFI Operating System ____________________________________________________________ “ Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. ” – Ayn Rand ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Overview DEFI solutions have been coming to market with narrow, exclusive, & complex peer-to-peer models which inherit the uncertainties & shortcoming of the industry which it intends to displace. While they have certainly played their part in propelling the industry forward, the models applied are not sustainable. Typically seen as a high risk, high nuance service model that is subject to centralized biases. Lending is the most direct means for the provision of liquidity. However, traditional lending is subjected to limitations due to the sub-optimal regulatory hurdles and slews of intermediaries. After intimately studying the landscape of Decentralized Finances, UNIFI has pinpointed & identified the critical systemic errors; namely those of throughput & Risk management. Originating as a complementary counterpart to the existing DEFI & crypto fin-services industry, UNIFI is a suite of technologies designed to optimize the management of decentralized finances & provide an environment capable of sustaining the ever-growing needs of a global population. Throughout this document, the term UNIFI is used to refer to the 3 distinct technologies from which the project is composed of; 1. Nitrex A non-custodial Platform outfitted with all the foundational tools for the management of Decentralized Finances. 2. Nitrous Layer A chain agnostic interoperability protocol. 3. UNIFI DEFI Decentralized Financial services for digital assets (cryptocurrencies). * * * The designs implemented by UNIFI are done so to uphold the experimental economic concept known as Superfluidity; the ability to utilize assets to their maximum liquid capacity. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Introduction The year is 2008, the world economy has just experienced one of the most catastrophic systemic failures in history. Unable to sustain the complex and delicate inefficiencies of traditional economic/financial models, the once accommodating financial services sector imploded. From simple trade to the highly complex crediting systems, financial services have been a fundamental cornerstone of human interactions for as long as history shows. Throughout human existence, financial services have taken on radically new meanings as to what finances are and what role they play in society. The overarching purpose of financial services has always been straight forward, to empower individuals with the capabilities to sustain healthy living and ultimately lead a life of freedom. However, as capitalism began to swallow the economy and globalization of financial technologies permeated human life, questions of morality came to light. Not only have traditional financial services been proven to be inadequate in terms of sustainability, they have also been found to be exclusionary. Participation in quality financial environments has become a matter of luck. Political issues have forced the establishment of siloed ecosystems that deny individuals the right to participate. Circa late 2008, early 2009, a solution to the woes of traditional finance arrives seemingly out of nowhere. That solution arrives in the form of cryptocurrency, namely Bitcoin. With the introduction of Cryptocurrency into the world economy, people began to rehypothecate value and finance as a whole. Cryptocurrency returned control over money back to the public. As crypto began to capture and restructure the world economic policies, people began to realize that in order for this nascent digital experiment to work the proper infrastructure must be built; decentralized financial infrastructure. This was the birth of DEFI. Decentralized Finance became the sector responsible for reproducing traditional service solutions ranging from savings products (like bank accounts) to liquidity aggregators (platforms for trading) to payment systems (recurrent payments & processing). Broadening what is possible in the crypto industry quickly attracted billions of dollars to the space. Of all the solutions nothing brought about as much an impact as did the concept of lending. Decentralized Lending protocols leveraged the market’s illiquidity and repurposed the allocation of assets. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ The theory of Liquidity - Liquidity begets liquidity Liquidity is a cornerstone of global finance. Liquidity, at its most bare, is the availability to enter and exit out of a position. The ease with which one can sell their holding while incurring no slippage in price. However, creating and maintaining liquidity is no simple endeavor. Trade is a multi-party event that includes a seller & buyer. In the event of a trade agreement, parties from both sides must be involved; whenever one side of the equation goes up, the other goes down. Liquidity must be configured to solve for the fluctuations. Liquidity is a reflexive element; where there is liquidity then more liquidity will be attracted to it, where there is no liquidity then it will likely never arrive. If assets are illiquid, that means that there are very few stakeholders involved and those which are involved, offer price points with large discrepancies (huge premiums); this premium is known as a liquidity premium. This creates an environment in which people are disincentivized from participating in that market; due to fear of capital loss or permanence. On the other hand, if a market is liquid then it will attract more participants due to the feelings of certainty in exiting. Lending means asset availability and asset availability means Liquidity. Lending within the traditional financial framework is an all to familiar model wherein which there is a single party posing counterparty risks to its participants. On the other hand, the lending models within a Decentralized Financial framework exist in two general categories, P2P & Pooled. Figure 1 - Decentralized Lending Models ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ - UNIFI DEFI - UNIFI DEFI is a collection of financial services built with cryptocurrency & blockchain technology. The UNIFI DEFI applications are made easily available via the Nitrex platform. The services include the provision of Liquidity (Lending/Borrowing), Margin Trading & Staking. Liquidity Provision (Lending/Borrowing) UNIFI has opted to operate under a pooled asset model in order to accommodate liquidity in the crypto markets. Rather than forcing (p2p) entity-to-entity interactions, UNFI introduces contracts between entities and the protocol. The former model shifts risk from central part failure to counterparty failure, whereas the latter spreads risk out throughout the protocol. By opting for such a model risk is distributed across participants & higher levels of certainty regarding capital flow are achieved. Existing liquidity solutions operate under a simple lending-borrowing schema; where negotiations are established “directly” between users & the assets that are used as collateral are removed from circulation. This schema is net positive for the industry. However, it does not address the entirety of the liquidity problem. By having assets locked up in contracts between two parties they become illiquid and that illiquidity translates to the open market; which then drives away the masses with instability. This is where the theory in longevity and market positioning of the UNIFI platform is derived from; by providing a more fluid ecosystem the economic bandwidth of the industry increases, in turn allowing it to sustain a greater audience as well as increase market opportunities for new entrants. First we address the Lending side of Liquidity. UNIFI’s platform, Nitrex, offers its users the ability to Join existing pools or create their own & source liquidity. Liquidity pools accrue interest & distribute it proportionally to its lenders. Therefore, the rates & rewards are established according to a variety of factors including: pool size, position size, duration of position, market health, asset ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ availability, asset saturation, counterparty risk, asset archetype & asset demand. Rewards can be dealt with in one of three ways; 1) Automatic swaps into stablecoins 2) automatic re-appropriation of the rewards into the stake (compound staking) 3) Rewards can simply be withdrawn in their specified variants directly into wallets. Furthermore, the UNIFI lending proposition is tied with the Staking module. In order to participate in, and create new, liquidity pools users will be required to stake a certain amount of tokens (At launch this number will be 1,000 UNIFI). With the requirement of staking in order to participate in liquidity, UNIFI expects its market curators to act in a more active & honest manner. As in the case with life, good behavior is rewarded & bad behaviour is punished. (more on staking further in this reading) The Benefits of lending through UNIFI can be summed up as follow: - Putting otherwise stale assets to use. Majority of the Crypto communities abide by the hodl strategies. Participants buy assets, send them from exchanges to wallets, and leave them there doing nothing. Rather than having assets detached from the rest of the crypto economy, UNIFI utilizes those stale assets & brings liquidity back into the open markets. - Earning Passive Income. People accumulate cryptocurrency in hopes that they will benefit from price appreciation. This thinking leads to the aforementioned detachment of assets from economic activity. On the other hand, while assets are lent to the UNIFI DEFI protocol they accrue interest. Given that all risk parameters are properly addressed, users do not risk losing their assets & earn more of them. Addressing the Borrowing side of Liquidity. UNIFI is a decentralized platform. All of the activity that happens on it, does so without the meddling of intermediaries. Thus, by removing points of contact, loan terms are able to be provided at much favorable levels to the consumers because the activity happens between users & UNIFI. Just as in the case with lending, terms for the Borrowing side of the equation are subject to a broad range of nuances; pool size, position size, duration of position, market health, asset availability, asset saturation, counterparty risk, asset archetype, asset demand, & reputation. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ The Benefits of borrowing through UNIFI can be summed up as follow: - Increased Exposure One of, if not the most prominent value proposition for borrowers of cryptocurrency is exposure. Given that all loans must be collateralized, whenever a user takes out a loan they are increasing their digital asset position. This is a speculative means to long an asset. Borrowing is an alternative means for leveraging. Simulation : Bob has 1 Bitcoin & BTC is worth $10,000. He wants to get more Bitcoin because he expects the price to go up in the near term. Bob goes to UNIFI and requests a loan for $5,000 or 0.5 BTC. In order to get the loan he must collateralize 1 BTC. Receiving the 0.5BTC leaves Bobs crypto net worth tied to 1.5 BTC ($15,000). Bitcoin goes to $20,000 turning Bob's net position to ($30,000). To get his 1BTC back he must pay back the $5,000 + $250 interest. Bob sells $5,250 worth of BTC (0.25125) and receives his 1 BTC back. Now, Bob has 1.24875BTC (+24.87% increase in asset) as well as a crypto net worth of $24,750 (+147.5% increase in USD). - Leading Industry Rate UNIFI DEFI aggregates data for its rates across other leading platforms, therefore, UNIFI will always be presenting its users with the most competitive rates for all assets. Moreover, due to the flexible nature of the UNIFI token, UNIFI is able to provide, not only equal, but higher rates when users choose to receive their settlements in UNIFI tokens. From its genesis launch, UNIFI will be using UNISWAP as its source of liquidity for its platform. Uniswap has been selected due to it’s high level of trust (proven track records of facilitating decentralized trade) & orderbook depth (greatest average BUY/SELL depth as this is important for the tightening of spreads & reductions in slippage). Moreover, UNIFI will offer an entirely new model for liquidity pooling, a model that allocates liquidity for the purposes of leverage. These pools act as the collateral to ensure settlement in the event of insolvency. The quality assurance of the pool is tightly knit with other modules of the UNIFI ecosystem, namely Staking. Given that in order to create liquidity pools, users must have addresses that are associated with staking on the network. This effect is all the more exacerbated by inspecting the relationship between staking & governance. Governance demands active participation as does the creation of LP’s. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Margin Trading Margin has been an elusive concept for the cryptocurrency industry to implement for years. Recent innovation has finally brought it to market & UNIFI has taken what works, removed what doesn't and enabled Margin trading under a new model. Margin trading is inherently risky for all parties involved & typically requires some form of collateralization. UNIFI proposes the paradigm of Margin via the aforementioned exposure to a Liquidity pool. The liquidity pool acts as a form of insurance in the case of Margin Insolvency. Initially, UNIFI will support 5 assets for Margin trading; Bitcoin (BTC) Ethereum (ETH), US Dollar Tether (USDT), Binance Coin (BNB) & the UNIFIDEFI token (UNIFI). Staking Staking within the UNIFI ecosystem is a fundamental module that is intertwined with nearly every important & valuable function. Here we address the role of staking from the standpoint of a financial service. Staking within the cryptocurrency industry can be likened to Government Bonds or bank deposits. Governments play the role of a trusted source of truth. Blockchains (the technology upon which cryptocurrency is built) have been called “truth-machines”, they are a source used to verify data. People that utilize a government’s currency by default support that government. People who utilize a cryptocurrency support that network. Whenever an entity purchases Government Bonds they are playing two roles, securing the financial wellbeing of the government by giving them working capital (in theory) & earning guaranteed income on that capital. Likewise, whenever an entity stakes their cryptocurrency on a network they secure it while in turn getting a reward for doing so. Staking mechanisms employed to date have been inadequate; they have been exclusively accessible to an audience with exceptional technical knowledge and they have been largely fragmented. UNIFI offers a chain-agnostic, intuitive, Staking-as-a-Service solution. (more on staking further in this reading). ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Key Values 1. Liquidity As mentioned above (in the section on liquidity), liquidity plays an inseparable role within the global monetary ecosystem. Providing more liquidity directly translates to healthier and more sustainable market conditions. UNIFI addresses the needs not only of users but of the industry as a whole by increasing the metaphoric bandwidth of the crypto economy. 2. Borderlessness & Global Inclusion Traditional financial systems operate under a geolocational lottery premise, people are either born into good financial environments or they are excluded from them. DEFI ( and the greater crypto industry as a whole) is the catalyst which removes the borders that keep people out and provides equal opportunity to all. UNIFI works to circumvent traditional systems and promote an interoperable world. 3. Non-Custodial As the old crypto adage goes to claim “Not your Keys, Not your Coins”. UNIFI abides under the same premise; At no point will any 3rd party be involved in the custodying of assets. Users retain full ownership over their assets before, during, and after contracts expire. Applications The UNIFI protocol services are applicable across a wide range of use cases and audiences. Below we identified the four most exciting and impactful areas: Trading Investment Portfolio Management Research Traders will be able to aggregate all of their data from a single source. Moreover, with time being of the essence (when in terms of price discrepancies) Traders will be able to venture into and create entirely new strategies. With the most robust tools for analysis, Investing, from the private & personal to the enterprise & governmental, will become a reality for the audience that has yet to enter into the space. Institutions are thought to be last to enter into the crypto industry because it stands against their ethos; however, UNIFI believes that institutions have been timid in their approach so far due to an unsatisfactory selection of performance tools. Hedge Funds, Venture Capital, Mutual funds, and everything in between are now able to provide the necessary information to their clients. Researchers across a multitude of disciplines, from computer science to finances to economics & even social psychology (or even the aspiring young traders) will be able to access nascent data and build new models & understandings of the world around us. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ - Nitrex - Nitrex is the non-custodial platform through which all of the UNIFI application services are provided. One of the greatest hindrances to adoption of the cryptocurrency industry has always been poor UX/UI. Due to the time-agnostic nature of blockchain technology, blockchains do not natively live on the traditional web infrastructure (blockchains measure progress of the network in blocks). This goes to mention that the majority of the professional efforts in Crypto have been focused on work for the backend, the functions & operations, rather than on the usability of it. This technological dissonance has caused much difficulty in developing & deploying products that satisfy the non-niche, broader audiences. Nitrex stands to change that. IRIS Analytics Iris Analytics is a suite that is imbued with all the necessary tools for purposes of research & analysis. The IRIS suite provides data points across the three major areas of interest relating to the crypto industry. + Technical indicators. Tools common among traders & investors that help interpret chart/price data. Things such as the Relative Strength Index, Bollinger Bands, MACD, Ichimoku clouds, and the such. + Market Indicators. Tools that intimately belong to the crypto industry. Otherwise arbitrary data points such as Market Capitalization, Supply, Active wallets, On-chain activity, distribution, and so on. + Financial Sector Indicators. Nascent data points that are applicable to the sub-category of cryptocurrency Decentralized Finance. This includes Arbitrage opportunities across platforms, active market rates, protocols, TVL, etcetera. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ - Nitrous Layer - The blockchain & greater crypto industry is notorious for suffering from issues of interoperability, scalability, & throughput. Majority of the current industry is built on older-generation infrastructure. The most popular development platform which hosts over 99% of all active Dapps, Ethereum, is limited to 15tx/s. Ultimately, Nitrous is an ecosystem of blockchains that leverage sister-chains for processing during times of high stress. Nitrous also works by batching activity into blocks and pushing them to their according blockchains in epochs. By abstracting away the three leading issues of blockchains, it becomes possible for teams to focus on building better products for the end users (rather than being constantly managing against their blockchains backend.) The Nitrous Layer is a blockchain solution that provides an agnostic VM. It leverages a system called dynamic chain-pegging. Dynamic chain pegging works by opening communication channels between chains and establishing a trade of proofs between them. Simply put, tokens are locked on one chain & minted on another. Simulation: -- Chain A exists in the Nitrous layer & can process 1,000tx per second. It gets a spike of activity to 3,000tx per second. -- Chain A opens channels with Chains B (2,000tx/s) & C (1,000tx/s). -- Chain A locks X amount of Atokens. Publishes the Proofs of locking & mints the according amount of Btokens & Ctokens on the channel chains. -- Chains B & C process the excessive (2,000tx/s) of Chain A through their chains. -- Once activity on Chain A stabilizes, process proofs are generated by chains B & C -- Chains B & C burn the minted tokens & publish the proof to Chain A. -- Chain A receives both proofs & re-establishes its appropriate token state. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Tokenomics As briefly mentioned earlier, the UNIFI token cryptosystem is built on a token model derived from an adaptation of Keynesian, Hyakian, & modern cryptoeconomic monetary theories. Token Name UNIFIDEFI Token Token Symbol UNIFI Token Supply 150,000,000 Decimals 18 Token Standard ERC-20 Token Class Utility - Governance Platform Ethereum Distribution Model Incentives Reward for Staking Inflation N/A Distribution Model Network Incentives 60,000,000 40% Staking Rewards/Governance Market Making 55,000,000 36.67% Bootstrap Entry/Exit Liquidity Operations 25,000,000 16.67% Marketing/Dev/Bounties Team 10,000,000 6.67% Founders Allocation ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ The UNIFI Token plays 6 key roles within the UNIFI ecosystem: 1) Governance 3) Collateral 5) Sybil Protection 2) Staking 4) A unit of Account 6) Network Deductions I. Governance The key element to DEFI systems is fair governance. Governance over a crypto network is the defining aspect of decentralization in a project. Without a governance parameter present, a network cannot be a public good & UNIFI is a protocol built for the public. The UNIFI protocol is controlled, secured, and maintained by stakeholders of the project's native UNIFI token. Every unit of a UNIFI token represents portion ownership over the UNIFI platform; however, the severity of governance is segmented according to individual exposure to the UNIFI tokens. Bounds are placed around the absolute minimum and absolute maximum influence that a single address exudes on the network in order to create as fair an environment as possible. By introducing an absolute minimum added scarcity incentives whole asset ownership as well as deters dust accounts from flooding the network. Moreover, with a minimal bound in place, greater levels of certainty regarding demand are achieved; whereas holding below the threshold brings purely economic benefits, holding above it attracts actors with greater levels of commitment and involvement. As for the maximum bounds implementation; without a limitation to influence, single entities can launch long ranged attacks to control the network. Maximum bounds help in deterring saturation from few central powers & level the playing field for protocol entrants. Token accounts that supersede the maximum bound will only be weighted according to the bound. Proposals Within the framework of decentralized governance, there is a need for the existence of Proposals. Proposals are essentially recommendations to alter the state of a project (add or remove certain parameters) which require others in the community to review and pass judgment on. Submit Proposal - 100,000 UNIFI (staked) Vote on Proposal - 1 UNIFI (locked) Proposal Duration - 28 days Proposal Acceptance - 5% quorum of total circulating supply ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ The Governance module is implemented through 2 distinct components: 1) UNIFI Token Ownership In order to participate in the governance processes, a user must have no less than 0.00066% (1,000 tokens) of the total supply of UNIFI tokens. The tokens must also be staked on the network, tokens that are not staked will not participate. Upon committing to a governance act (ex. vote) tokens must be bonded until the act is concluded. 2) Governance Hub The UNIFI protocol will have its community memorandums hosted through digital hubs such as social media networks or Forums (similar to Decred’s Politeia) II. Staking As briefly mentioned previously in this paper, staking is a vote of confidence on the long term wellbeing of a network. Staking on the UNIFI platform is a multi-purpose module; it reflects on the security, economics & governance of the UNIFI protocol. Specifications Minimum Stake: 1,000 UNIFI Y1 Rewards: 48% Maximum Stake: 100,000 UNIFI Penalty: N/A* -Bounds- Aforementioned in the governance section above, bounds have been put in place on the staking requirements as a means to combat unsatisfactory outcomes. With bounds in place UNIFI hopes to drive an active audience into the platform's operations. The bounds have been identified as being 1,000min/100,000max (0.00067%/0.067% of the total supply) resulting in a membership range of no less than 150,000 & no more than 1,500. Moreover, the risks associated with too much power concentration with a single entity controls are disincentivized (minimized) as well as risks associated with too large a membership pool (which results in issues with arriving to consensus) are mitigated. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ -Rewards- To incentivize the desire for long term participation among UNIFI token stakeholders, the Staking mechanism’s emission schedule employed by the UNIFI protocol attempts to bootstrap interest with high yields for early entrants. For the First year of operations the target emission rate is set to 48% of the stake; the exact rate depends on duration & size of stakes. Moreover, Staking has been positioned to become the sole means for distribution of the token. -Penalty- While it is important to incentivize good behaviour, it is just as important to disincentivize bad behaviour. For the early stages of the project, the disincentivization module has been set to control emissions. Acts that induce penalties have been limited exclusively to premature unstaking. In the event of an early exit, users will not incur a loss on their principal capital, instead they forego the interest which they might have accumulated. Governance Staking is the mechanism by which inclusion into the Governance of the UNIFI ecosystem is required. Users that are not staking cannot suggest any changes to the protocol. While the minimum requirement for staking is 1,000 tokens, it does not unlock all of the governance capabilities. Only staking addresses at or above the 100,000 token level are able to take advantage of all capabilities. > 100,000 UNIFI < 100,000 UNIFI - Proposal Voting - Staking - Proposal Voting - Staking - Proposal Submittance - Asset Listing Recommendation - Asset Delisting Recommendation - Data Point suggestion - Rate Model Adjustment - Fee Adjustments - Platform Integrations At this time there is no staking requirement to participate in voting. Voting requires a lockup of 1 UNIFI token that is released after a proposal closes. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Security Consensus is the center-most aspect of any distributed system. Consensus within crypto/blockchain environments generally falls into 2 broad categories, PoW & PoS (proof-of-Work/proof-of-Stake). The former has been identified as being highly technically complex & taxing on the planet's energy systems. Staking on the other hand, reduces technical complexity while proving a green solution to energy consumption. UNIFI token holders that stake their tokens to the network help in maintaining the network's security. With tokens locked into the network, less tokens are available on the open market for malicious actors to manipulate. Additionally, Stakers are tasked with the packaging & processing of blocks (for the Nitrous Layer). As more participants go into staking, the security guarantees of each consecutive block increase. Economics The financial applications & general cryptoeconomic system of UNIFI require participants to stake tokens in order to create & maintain aspects such as the liquidity pools. III. Collateral UNIFI tokens are the native reserve asset of the UNIFI network. Treated as any other form of collateral that is processed through the network; UNIFI tokens can be used to collateralize loans on the platform. Given their direct predisposition to the network, choosing UNIFI over other options results in exclusive rates. Asset Lending Rate Borrowing Rate ETH 8% 11% BTC 6.2% 9.1% BCH 4% 23% XLM 7% 13% USDT 10% 12% UNIFI 14.7% 15.3% ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ IV. Unit of Account All interactivity within the UNIFI platform is denominated in the UNIFI token. Regardless of what asset is being utilized through the protocol, the processing is accounted for in UNIFI. In the event of a deposit of ETH the protocol will capture the ETH, convert denominations to UNIFI at the current market price, and proceed with the activity. Upon exiting, the deposited assets undergo the reverse process, Converting through UNIFI at the current market prices. This entry & exist denomination mechanism increases network activity and token demand. V. Sybil Protection Due to the nature of accessibility in the design of Open Networks, attacks on the UNIFI platform & its underlying network are anticipated. The most pressing being a Sybil attack. Sybil attacks can indefinitely delay a system's operations with floods of activity coming from malicious entities. Since in an open environment, there are no identities; there must be a mechanism in place which protects the network from becoming congested with false requests. Herein lies the role of the UNIFI token. For every call to the network the caller must pay a micro fee; a fee that is too small to impede regular user participation and large enough to disincentivize malicious actors from spamming the network with false transactions. VI. Network deductions UNIFI tokens are the native asset of the UNIFI ecosystem. Utilizing them for network operations will result in a two-fold benefit to the users. First, priority in order execution. In events of time disorganization, such as multiple orders happening at once for a loan request & the supply is limited, orders of UNIFI will execute ahead of other non-UNIFI denominated orders. Second, rate enhancement. Users that opt in to use the UNIFI tokens for lending/borrowing will receive market rates that supersede any open market services. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ Important Aspects to Note LTV Ratio The LTV (Loan-to-Value) ratio is the measure of collateral required to take a loan. Whenever borrowers collateralize their positions they are allotted a certain amount in return based on factors including, but not limited to: the amount of collateral, the type of collateral, their reputation, the state of the market, and so on. Why this plays a vital role in the system is thus: in the event of a positions LTV ratio thinning out the risks of the collateral value dropping below the value of the loan increases. Insolvency - Borrowing - In the events of premature contract closure or inability to repay the loan, collateral will be deducted & put into a warning escrow account. The escrow account will hold assets for an X period of time before liquidating them on the open market. The account will drain collateral for a period of ~ x Days or until the system balance is stabilized. Should a repayment be made during insolvency (before the system auto-stabilizes) the warning escrow contract will immediately halt and initiate a reversal of funds back to the contract originator. - Margin Trading - For the events of insolvency for collateral on margin positions, the UNIFI has implemented an immediate, automatic & irreversible recoup mechanism that forces liquidation and loan repayment. Oracles & Data Points Blockchains do not communicate with technology outside of itself; they are state machines that are not aware of external factors. In order to accurately price rates, define contract terms and provide competitive competence the system requires data feeds from outside of the blockchain must be provided. As a means to further the degree of UNIFI’s decentralization, multiple oracle solutions are implemented to fetch data: 1) An internal smart contract 2) ChainLink (future) 3)Band/NEST. The data points which provide pricing will initially be sourced from Coinbase, Kraken, CoinMarketCap & CoinGecko; as the project develops and integrates across other DEFI platforms; the data feeds on those platforms will be used as reference points as well. ______________________________________________________________________________________________ WhitePaper v0.1 UNIFI - The DEFI Operating System ____________________________________________________________ ~ References & Citations ~ [1] Archives accessed August 5, 2020, “ The Maker Protocol: MakerDAO's Multi-Collateral Dai (MCD) System ”, MakerDao https://makerdao.com/en/whitepaper [2] Archives, May 2019, “Akropolis Protocol Whitepaper”, Akropolis Decentralised LTD https://wiki.akropolis.io/wp2019/ [3] Archives, January 2020, “AAVE Protocol Whitepaper v 1.0”, Aave https://github.com/aave/aave-protocol/blob/master/docs/Aave_Protocol_Whitepaper_v1_0.pdf [4] Archives, accessed August 5, 2020 “Compound Protocol Documentation”, Compound Finance https://compound.finance/docs [5] Satoshi Nakamoto. Bitcoin: A peer-to-peer electronic cash system. 2008 [6] Chris Chinchilla, June 17, 2019, “ A Next-Generation Smart Contract and Decentralized Application Platform ”, Ethereum Foundation https://github.com/ethereum/wiki/wiki/White-Paper ______________________________________________________________________________________________ WhitePaper v0.1