Pendulum Infrastructure Blockchain For Traditional Finance

Ana Marie — Fri, 23 Sep 2022 05:05:40 +0000

Welcome to Pendulum

Pioneering the internet of fiat. Pendulum An Open-Source Substrate-Based Blockchain will offer composable fiat services to fintech companies and build the future of forex on DeFi.

Introduction

Built on Parity’s Substrate framework, Pendulum establishes the missing link between fiat and DeFi with a sophisticated smart contract network. Pendulum chain aims to become the one-stop hub for the internet of fiat. Innovations that Pendulum will bring include:

Cross-chain trust-minimized bridges
A network optimized for a broad basket of fiat-pegged stable tokens
Next-generation smart contract technology
Opt-in compliance layer with privacy features

Seamless on/offramps standards for integrations into local banking networks

This litepaper will present an outline of the technology and the plans to build Pendulum chain into a critical piece of Web3 infrastructure.

Spacewalk: Stellar bridge

The Stellar network an open blockchain with a focus on efficiency in speed and transaction costs, as well as integrations into the traditional financial system. It has a rich ecosystem with a focus on compliant fiat-pegged tokens and local (as well as instant, in a growing number of countries) fiat on- and offramps.

Spacewalk a trust-minimized bridge and the first to connect the Stellar network and the DotSama ecosystems. Based on XCLAIM and interBTC, it is implemented as a Substrate pallet and allows any Substrate-based blockchain to implement a direct Stellar bridge.

The architecture of the bridge consists of the following components:

Vaults:

A set of escrow accounts used to lock assets in Stellar. Their behavior is defined in XCLAIM and interBTC. In Spacewalk they have an additional property: each vault has an allowlist of assets that it can lock and support for bridging operations between Stellar and the Substrate chain. This allowlist is implemented through trustlines of the Stellar account. Every vault needs to provide collateral with DOT or KSM (or related) tokens with the bridge pallet. These tokens are slashed in case the vault misbehaves.

Bridge Pallet:

The main component of the Spacewalk bridge that implements all logic on the side of the Substrate-based chain. Its behavior is based on interBTC. It is particularly responsible for minting tokens during deposits and burning tokens during withdrawals. It is able to support any Stellar asset by employing the Tokens and Currrencies pallets of the Substrate Open Runtime Module Library.

Stellar Oracle:

A decentralized system that provides information about the state of the Stellar network to the bridge pallet. The Stellar oracle is trustless and reliable and its functionality is based on specific unique aspects of Stellar:

The Stellar network has multiple tier levels, where the nodes in Tier 1 enjoy the highest level of trust of its peers. There are currently 23 Tier 1 nodes; this set and its structure is rather static and only changes rarely. It only ever changes through a voting process. We will incorporate complete information about the Tier 1 network in the bridge pallet.

Every Stellar node has a static signing key pair and signs messages that it gossips to the network. Particularly, every node announces through a signed message that a block has been finalized. The decentralized oracle will forward these signed messages from Tier 1 nodes to the bridge pallet. This way the bridge pallet can reliably infer what Stellar blocks are finalized.

Three Milestones for Developing Spacewalk

1st Milestone: Define the fundamental structure of the project

The Spacewalk code repository will consist of the Spacewalk pallet, some offchain clients to operate vaults and oracles, and a Substrate standalone chain that implements the Spacewalk pallet that is use for testing purposes.
Integrate multi-asset support: vaults will support multiple assets and a user can issue and redeem different kinds of Stellar assets

2nd Milestone: Implement how to manage collateral for multiple Stellar assets

Use a price feed oracle for all assets supported by the vault
Determine the total combined value of all tokens locked in the vault account and compare the value of the collateral

3rd Milestone: Implement the Stellar oracle and all its components

Add a mechanism to store and maintain the current configuration of the Tier 1 network, including its public signing keys and the set of Tier 1 quorums

Built on Substrate

Pendulum built on Substrate, a blockchain framework developed by Parity Technologies. The framework was use to build both Polkadot and Kusama. The advantages of Substrate are many: in addition to having native compatibility with the Polkadot chain, Substrate has cross-coding language support, forkless upgrades with built-in upgrade coordination, deterministic finality (for fast consensus reaching), and a suite of pre-built but customizable components (“pallets”).

Pendulum will focus on high scalability. This allows for a large number of transactions per second and will keep transaction fees low as surge pricing effects will lead to highly increased fees in heavily congested networks.

Examples of these efficiency gains are:

Currently the parachain and relay chain blocks need to be created synchronously during the same timeframe. In the future this will be decoupled and allows for a higher ratio of the blocktime to be usable for transaction execution.

Relay chain nodes will be able to process multiple parachain blocks at once.

The communication between relay and parachain blocks will become more efficient so that less data needs to be transported or can be prefetched ahead of time.

Offload Polkadot governance and DOT token processing from the relay chain into a separate parachain so that the relay chain nodes can focus on parachain block validation only.

Introduce multiple relay chains that can split work even further

There will be many efficiency improvements for the execution of WebAssembly smart contracts.

Although these improvements will make Pendulum a highly scalable blockchain, we will further increase scalability through second layer technologies such as Plasmas and Rollups.

The Journey

The Pendulum journey began with SatoshiPay connecting the world through instant payments in 2014 and has evolved to building a fiat-optimized Pendulum chain on Polkadot today. In 2014 SatoshiPay founder and crypto pioneer Meinhard Benn set out to make micropayments fast, global and easy. In 2019 the multi-signature wallet for stellar was launched and 2020 saw SatoshiPay process more than 1,000,000 euros in borderless content payments. This led the team to discover a problem. The problem being that many global fiat backed stable-tokens (such as those on Stellar) currently cannot take advantage of use cases on smart contract blockchains.

So Pendulum aims to become the missing link between fiat and DeFi. Pendulum intends to connect fintech companies and forex markets with the opportunities of DeFi. To achieve this, the interoperable smart contract blockchain Polkadot was chosen as the foundational layer zero to build on. With Polkadot’s advance smart contract compatibility, an entire fiat DeFi ecosystem can be develop on the Pendulum chain including AMMs, lending protocols, forex optimized money markets, fiat yield farming opportunities and more.

Pendulum Achievements to date

1. Received Stellar R&D grant to build Pendulum chain prototype

2. Raised $5 million in a private sale round

3. Started development of the Spacewalk bridge

4. Rocco testnet parachain deployment

5. First milestone of the Substrate Builders Program completed

6. Berkeley Xcelerator Program

7. Web3 Foundation grant for Spacewalk development

8. Amber Forex AMM whitepaper

9. Ecosystem Grants Program

10. Amplitude Kusama parachain auction win

Now that Amplitude (Pendulum’s sister network) have won the Kusama parachain auction, the next leg of the journey is to win a Polkadot parachain slot for Pendulum. Polkadot crowdloan participants will have the opportunity to earn PEN token rewards, similar to how the Amplitude participants are being reward with native AMPE tokens.

Proposals in the following categories can be vote on by the community of token holders:

1. Asset Listings — Listing and delisting the token on DEXes and CEXes.

2. Reward Distributions — The mechanism and amount of rewards distributed to different players of the network.

3. Parameter Modifications — Technical upgrades, smart contract configuration changes, transaction fees, etc.

4. Community Suggestions — Other suggestions / recommendations from the community.

The objective of these tokenomics is to set up a fertile ground for a community-driven chain where experimentation can blossom. For more details on the Amplitude crowdloan participation and bonuses please visit our FAQs page.

About Pendulum

Pendulum Chain a smart contract blockchain network connecting fiat rails to the decentralized finance ecosystem. By bridging robust and compliant fiat-pegged tokens from the most prominent blockchain networks into the vibrant DeFi ecosystems. The Pendulum addresses the ever-growing demand for fiat liquidity in DeFi. Behind the development of the open Pendulum protocol is SatoshiPay, a fintech company which has developed blockchain products since 2014.

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