Lockin and Lockout
The rise of blockchain has enabled people to see the prospects of the Internet of Values but existing blockchain networks still are limited by bottlenecks in interoperability and security. This makes it difficult to achieve cross-chain value transfer and smart contracts using existing encrypted digital assets.
FUSION’s vision is to become an inclusive, public financial platform for all encrypted digital assets. As such, the first thing to solve is the interoperability limitation currently preventing digital assets from interacting in across blockchains. Security, privacy and sustainability must also be guaranteed for all assets on the FUSION platform.
What is LILO (Lock-in and Lock-out)?
LILO (Lock-in and Lock-out) is one of the core functions of the FUSION mainnet. Users can lock digital assets onto FUSION, enabling new capabilities for those assets. At any time, users can lock-out their assets, returning them to their original address. The first batch of supported, mainstream digital currencies include: BTC, ETH, USDT, and all ERC-20 tokens, covering over 80% of the current volumes in the digital currency market.
Lock-in refers to the process that enables Distributed Control Rights Management (DCRM) and asset mapping for all key-managed tokens. Lock-out refers to the reverse of this process. Lock-out returns exclusive control of the digital asset to its owner, restoring complete keys and returning centralized management of the keys to the asset owner.
FUSION is a decentralized platform that is maintained by nodes. After Lock-in the ledger is publicly recorded on the blockchain and cannot be tampered with. At the same time, the digital assets after Lock-in are managed by distributed key algorithms in the decentralized nodes of the FUSION network. These algorithms are proven to be secure, just like bitcoin encrypted algorithms. We encourage community evaluation of our algorithms and codes, which will build trust in FUSION.
The working mechanism of LILO
LILO implements registration mapping of digital assets based on distributed key generation (DKG) technology and threshold signature (t/n) technology. In the process of implementing Lock-in, the DCRM completes asset registration mapping through atomic transactions. For Lock-out, the dismantling of distributed control rights and asset mapping is through a similar transaction process. The key objective of LILO is to map digital assets safely and securely to the FUSION platform and achieve safe and reliable storage and usage.
The process of ensuring effective generation of distributed keys is paramount to
securely and reliably implementing digital asset Lock-in. If the private key is
stored completely in one place, private key leakage will likely occur due to
node attacks or malicious private key collections in the node. On FUSION, the
private key is split between different nodes to ensure it’s complete security.
As shown in the figure below:
Each node only generates and saves a part of the private keys, and no transfer or assembly of private key shards can occur between them. The algorithm must ensure that the distributed keys are always available. To do so, the number of nodes that holds a shard of the private key is calculated to so that there are always enough nodes online to ensure availability of assets with very high probability. When a node broadcasts a transaction to the network, the node signs the transaction with its private shard. This is an asymmetric operation, meaning that the private key shard cannot be analyzed and re-produced from any content in the broadcast. Security of shards of private keys is the primary function of FUSION.
When the node finishes the verification of the private key shard, it collects the results of the shard signature via the broadcast. When the number of transaction signatures reaches the signature threshold, the transaction is considered to be valid. The process of asset registration mapping is actually the issuance or retraction of ownership of a digital asset in the user’s account onto the public distributed ledger. This completes the mapping of the digital asset onto the main blockchain or the de-mapping thereof.
For more detailed LILO content, please refer to FUSION’s white paper.
As of May 17 2018, FUSION has attracted more than 12 billion US dollars in assets to be Locked-in when the mainnet is released. Why is FUSION so attractive to capital?
FUSION can lock-in digital assets controlled by private keys. Digital assets include cryptocurrency, traditional financial assets controlled by private keys, as well as traditional assets such as real estate, art objects, and automobiles. Once these assets are digitized and locked-into the FUSION platform, business processes can be completely automated and operating costs will be greatly reduced. Previously ERP (Enterprise Resource Planning) tools and other systems helped companies automate their business processes but they were limited by their internal capacities. All companies have their own supply chain, customers and related business partners. These processes all function in silos and as a result cannot benefit from the efficiencies of automation. After asset digitisation, these processes can be programmed in smart contracts to achieve significant automation, improving efficiency, scalability and reducing costs.
Consider that each company or cryptocurrency is like a small lake or little river; they each have their own limited ecosystem. Of course, there is diversity and some are relatively bigger than others. Take a company like Alipay for example, a huge company but theoretically still bound by the limitations of existing as a predominantly isolated ecosystem. Even bitcoin is the same! If you want to send RMB using Alipay to another person, that person needs to have a registered account with Alipay. If they lock-in on FUSION, it is just like the lake pours into the ocean; all value in different ecosystems will be inter-connected. FUSION will be the huge ecosystem that enables all of these separate parts to interact together. Value in one ecosystem can exchange with others as long as they are locked-in on the FUSION Blockchain.
Complicated financial instruments become feasible on FUSION. In today’s world, even agreements involving 3 different parties often makes costs unacceptably high. However, if all the assets are locked in on FUSION, a programmable smart contract involving 10+ parties, handling 20+ different asset types, based on 30+ different conditions, is just some lines of code. And importantly, code guarantees that it will be executed exactly as it is written.
Trust and value are transmitted between the parties on the chain.
These companies saw the value of FUSION’s cryptofinance platform, allowing them to gain unique and insurmountable advantages when facing industry competitors. Therefore, they very much hope to lock-in their assets through FUSION.
For example, on one established food supply chain platform, users can only select the investment tools provided by the platform. The current investment options are mainly divided into short-term (within 30 days) and long-term (within one year), and the main areas of investment are also in the food supply chain, catering services industries, etc. But after locking the assets onto the FUSION platform, users can have more financial tools to choose from, and not just in the food service industry. Investment tools will also tend to be more diversified, and long-term (longer than 1 year) financial investment tools will also be available to the public, giving them more options to choose from. More importantly, the online risk-free environment and smart contracts can be automated when certain conditions are met, improving the efficiency of the global economy.
The innovative LILO function provided by FUSION allows many different digital assets to lock into the public blockchain. On FUSION, these assets can be utilized in complex multi-currency smart contracts, adding value to the internet. In other words, FUSION’s encrypted financial infrastructure takes civilization into the age of cryptofinance. FUSION is like a value-added “highway” on the Internet. With the launch of FUSION’s public testnet, we are building a brand-new eco-system, together.
Reach us on Telegram for questions and discussion about this complex technology.