Eximchain: Supply Chain Finance solutions on a securedpublic, permissioned blockchain hybrid

Juan Huertas , Hope Liu and Sarah RobinsonDate of Whitepaper: Jan 19th 2017 V5

ABSTRACTEximchain brings visibility to global supply chain finance

(SCF) through smart contracts. We build a public, permis-sioned chain for small-and-medium enterprise (SME) buyersand suppliers to create supply chain optimization tools andgain access to affordable capital sources to grow their busi-nesses. Our smart contract-based ecosystem allows SMEs toquickly implement customized SCF solutions or issue digi-tal tokens on a permissioned fork of Ethereum supportingdata privacy. We adopt a consensus protocol and quadraticvoting based governance model to provide practical, finitetime security guarantees on our public, permissioned block-chain hybrid. From financing to procure-to-pay, our productsutilize smart contracts to optimize the global supply chainfor buyers, suppliers, and financiers. Eximchain is an officialcandidate of the Blockchain Regulatory Sandbox Programin Guiyang, China and a member of EEA (Enterprise Ethe-reum Alliance).

1. ABOUT EXIMCHAINEximchain project was kicked off in 2015 at MIT (Massa-

chusetts Institute of Technology) by a team with decades ofacademic and industry experience in computer science, ban-king and global supply chain across the world. Our visionis to use blockchain technology to bring the global supplychain into the digital era and lower financing barriers forSMEs. The project has received valuable mentorship andguidance from the MIT Media Lab Digital Currency Initia-tive, MIT Center for Transportation and Logistics, and PlugAnd Play Fintech Accelerator. The project was chosen as theGrand Champion of the 2016 Boston Seagull Entrepreneur-ship Contest, the Engine of Innovation Prize of the 2016Rice Business Plan Competition, and a Finalist of the 2017MIT $100K Business Plan Competition Accelerate.

2. SUPPLY CHAIN FINANCE OVERVIEWTraditionally, supply chain management has focused on

the material flow of physical goods from manufacturers toend consumers. However, the recent global economic down-turn demonstrated that managing financial flows within thesupply chain can be as important as managing physical flowsof goods and services[1]. Supply chain finance (SCF), oneof the most exciting and promising new products emergingin the banking industry, is a set of technology-based busi-ness and financing processes that allow financiers to fund anorganization’s operations through its supply chain relation-

ships. SCF enables buyers to optimize working capital andsuppliers to generate additional operating cash flow while si-multaneously minimizing risk across the entire supply chain.More specifically, SCF enables buyers and sellers to shrinktheir inventories, collect money from customers faster anddelay payments to their suppliers. Citi recently completeda working capital study that showed companies managingworking capital through SCF were able to reduce these as-sets by 30%, resulting in EPS (earning per share) increasesin the range of 1% to 4%. Furthermore, the top 10% of com-panies that reduced their CCC (cash conversion cycle) wererewarded with a 30% stock price appreciation[2].

3. THE PROBLEMAccording to the International Finance Corporation (IFC),

small to medium-sized enterprises (SMEs) in developing coun-tries face a financing gap totaling over $2 trillion[3]. In Chinaalone, the vast majority of the 40 million SMEs remain un-served by existing financial resources[4]. This financing gapis particularly concerning because, as cited by the WorldBank, SMEs contribute up to 60% of total employment andup to 40% of GDP in developing markets[5]. Innovative SCFsolutions offer a powerful tool for SME buyers, suppliers andfinanciers to overcome this funding gap[6]. Innovations inthis space have traditionally been driven by large corpora-tions and banks in the field; however, cutting edge financi-al technologies offer new opportunities to extend the bene-fits of SCF to businesses of all sizes. According to a 2015McKinsey Report, of the $20 billion potential revenue poolthat exists for implemented SCF programs, only $2 billionis being captured today[7]. One primary issue inhibiting thewidespread adoption of SCF programs among SMEs is thatthey currently lack a trusted tool that provides transparencyto eliminate information asymmetry problems. Beyond this,there are quite a number of difficulties for adoption of SCFprograms on a global scale:

First of all, any supply chain strategy cannot be determinedin isolation. The market for SCF programs is inherently dy-namic: exogenous factors, such as interest rates, and endo-genous factors, such as inventory decisions and capital cons-traints, influence the evolution of the system.

Furthermore, the complexity of implementing SCF acrossthe global supply chain limits its adoption. It takes tremen-dous effort to onboard suppliers and integrate the processwith the existing operational flow by involving finance, pro-curement, and IT departments inside the organization.

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Last but not least, it is difficult to align incentives amongdifferent participants. Suppliers, buyers and financiers areindependent decision makers attempting to maximize profitsin the face of asymmetric cost structures and uncertainties.Such independent profit maximizations often lead to poorperformance of the entire supply chain.

The Eximchain platform solves these challenges by offeringseamless integration into the existing workflow of SMEs andenabling developers to create customized tools for specificbusinesses and industry use cases.

4. OUR SOLUTIONEximchain offers a platform to implement smart contract

based SCF solutions on a permissioned fork of Ethereumsupporting data privacy. Our ecosystem will enable SMEs togain access to affordable capital sources by giving financiersvisibility into the supply chain cash flow. The first gametheory-based application we plan to build, Multi-PartyDynamic Contracting*, (details to be described underAppendix- Use Case Example) will be designed in such away that no partner can improve his profit by deciding todeviate from the optimal set of decisions. That is, there isno incentive for the buyer, the supplier, nor the financier todeviate from the set of actions that will achieve the global-ly optimal solution. The implementation is executed by theconsensus of the network in a standard, automated, priva-te, and auditable fashion. From the user’s perspective, aftermaking the initial input and setting up the negotiation rule,they can receive the negotiation result from a “black box”where the system automatically executes an optimizationengine through multi-stage coordination until Nash Equili-brium is reached and each participant’s incentive is aligned.

Buyers and suppliers can automate contracting processeswith the Eximchain network. Suppliers and buyers normal-ly have different and conflicting objectives. For instance,suppliers want buyers to commit themselves to purchasinglarge quantities of products in stable volumes with flexi-ble delivery dates. Conversely, buyers need to be flexible totheir customers’ needs and changing demands. The difficultywith global optimization is that it requires firms to surren-der decision-making power to an unbiased decision maker.Additionally, establishing trust between the supplier andthe buyer is difficult to achieve. For example ,in January2013, the Walt Disney Company sued Blockbuster, accusingthem of cheating its video unit of approximately $120 milli-on under a four-year revenue-sharing agreement[8]. Throughthe Eximchain platform, buyers and suppliers can carefullydesign supply contracts to maximize profit on the supplychain with more visibility into demand, inventory and ups-tream/downstream operations through a trusted and secu-red network. Additionally, interactions and agreements aresaved automatically with a traceable record.

Financiers will be onboarded to the network with alignedincentives. In the real marketplace, suppliers and buyers fre-quently finance their working capital from a variety of creditsources, such as banks, and incur significant financing costs.Studies have shown that under the assumption of positiveinventory financing costs, traditional supply contracts failto achieve joint profit maximization[9]. Based on the limi-

ted information displayed in contracts, it is hard for banksto understand the market expectation and real dynamic bet-ween buyers and suppliers to mitigate risk. In 2014, a Chine-se trading company, Dezheng Resources, and its subsidiarieswere alleged to have used duplicate receipts to pledge metalas collateral for loans. The result was a flurry of lawsuits,including the UK High Court case between Mercuria andCiti, over exposure to a $270 million financing deal[10]. TheEximchain platform provides access to smart contract histo-ry between two parties, which grants banks more visibilityinto the supply chain operations and enables them to bet-ter estimate the risk of a transaction. Furthermore, access tothis smart contract information will provide other financiers,beyond traditional banks and lenders, with an opportunityto fund and generate value off of these transactions.

Eximchain allows developers to create variations on supplycontracts secured by the network and build solutions that arecustomized to their global supply chain. Currently, supplychain partners use a variety of solutions to align incentivesand mitigate inventory risk, including: buybacks, quantitydiscounts, revenue-sharing and two-part tariffs contracts. Onthe Eximchain platform, developers can build customizedsolutions based on specific industry needs, user dynamicsand market competition. Banks and anchor buyers can easi-ly scale the solution on the global supply chain by involvingupstream and downstream players. Although these solutionswill be varied, the contracting process will be highly stan-dardized and can be seamlessly integrated into the biddingprocess and other supply chain management tools.

Customized negotiation rules:

Each graph represents one state transaction. The negotia-tion will end after all parties reach Nash Equilibrium basedon the negotiation rules set by each party. Grey arrows re-present locked status while green arrows represent unlockedstatus.

Private channel coordination:

Each communication channel is private where only the in-volved parties can see the information provided during eachnegotiation. The system runs automatically based on pre-setinputs and only updates state of each negotiation cycle forinvolved parties.

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5. VALUE FOR OUR STAKEHOLDERS

Financiers:Risk Mitigation

We enable dynamic, real-time monitoring of supply chainfinancing processes to provide visibility into the whole sup-ply chain’s operations. Lenders can now better understandthe actions taken by end purchasers and upstream suppliersof each deal to better assess risk. With the combination ofa “Purchase Money Security Agreement” (PMSA)[11], al-so known as purchase money security interest, on the loan,which makes the lender the first claimant of the collateralrelated to the loan in the case of default, the financiers gainsa much better estimation on the risk and return of the in-vestment despite all external uncertainties.

Operational EfficiencyWith more information about the trade, the financier could

more accurately set the rating and risk factor. Increasedtransparency over trade transactions tends to lower the riskfactor and thus risk equivalent, which improves efficiencyin operation and management of the loan. By digitalizingand standardizing the contracting process, financiers savethe overhead effort of processing paperwork, understandingdifferent terms, and going through multiple levels of manualreview to make a final decision about the credit they areissuing.

Investment OpportunityIn the traditional corporate financing scheme, the finan-

ciers would be banks, focused on assessing the borrower’shistorical credit, capital position, collaterals and guaranteesof the companies in the supply chain that they are providingcredit to. However, in the SCF view, financiers could be anyinvestor or anchor buyer who is capable of assessing and ta-king the credit risk of the SCF product. Our solution willlower the barrier to entry for financiers in the global supplychain, and will allow institutional investors and accreditedindividual investors who are looking for short-duration, lowrisk and highly collateralized credit products to offer alter-native funding sources to SMEs in the future.

Buyers and Suppliers:Working Capital Management

By adopting our solutions, suppliers facing difficulties ob-taining affordable credit will now be able to access capitalthrough banks or alternative sources. Capital-constrainedbuyers who rely on direct financing from a financial instituti-on can obtain trade-credit in addition to standard contractsto subsidize their costs of inventory financing and improvetheir working capital.

Given the lack of transparency of the supply chain, we seemost SMEs rely on margin money deposits for bank gua-rantees[12] or factoring houses to get loans. For example, inChina, banks normally require 5-20% of the loan amount asa margin deposit depending on the credit risk of an SME.Fees charged by factoring houses can run as high as 15%of the loan amount every year[13]. With the combination ofa “Purchase Money Security Agreement” (PMSA) and im-proved clarity on each deal, we can potentially unlock up

to 15% of annual working capital loan for SMEs either bypaying less to cover margin deposits or eliminating the third-party guarantee company fee.

On the buyer side, a company with $10 million in revenueand a 60% cost of goods sold (COGS) ratio can experiencea cash flow increase of $16.7k per day of extended paya-bles ($10m * 60%/360 days=$16.7k). Parlaying that into a60-day term extension on trade-credit would result in a po-tential annual working capital/cash flow benefit of $1 millionfor the buyer ($16.7k * 60=$1m).

Credit Rate ArbitrationThe Eximchain platform enables anchor buyers to take ad-

vantage of their comparatively better credit ratings to offerSCF programs to fund their suppliers in return for extendedterms, lower prices, and improved long-term relationships.In this “buyer-driven” model, the anchor buyer becomes thefinancier in the ecosystem.

For example, if a supplier’s access to capital is 5 percen-tage points higher than the buyer’s 2.25% financing rate, asimple calculation will show the buyer that a 30-day invoicefor $500k can be extended to 96 days without adding costs tothe supplier. On the other hand, if the buyer were to main-tain the 30-day payment terms, the supplier could achieve areduced carrying cost of approximately $2,083( representing0.4% of the $500k contract). Armed with this knowledge,the buyer could negotiate a price reduction based on all, orsome portion, of these savings. For a company with $10 billi-on in revenues and $600 million in COGS, even a 0.4% dropwould equate to $2.4 million in savings[14].

Supply Chain OptimizationThe Eximchain platform also helps participants achieve

global optimization, without the need for an unbiased deci-sion maker, by allowing them to share the supply chain’s riskand the potential benefit. Below is an example to quantifythe value created for the supply chain based on a dynamiccontract between a supplier and buyer:

Assume the price of a product for the end customer is

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$125 per unit, the wholesale price paid by the retailer to themanufacturer is $80 per unit, the fixed production cost formanufacturer is $100k, the variable production cost per unitis $35, and any item unsold in the end has a salvage valueof $20. This implies that the retailer’s marginal profit forselling a unit: $45, is smaller than the marginal loss: $60*.The optimal order quantity depends on marginal profit andmarginal loss. So the retailer’s optimal policy is to order12k units for an average profit of $470k as shown on belowgraph Profit vs. Order Quantity. If the retailer places thisorder, the manufacturer’s profit is $400k ((12k*($80-$35))-$100k=$440k). Note that in this case, the retailer assumesall of the risk of having more inventory than sales.

By using a Buy-Back Contract where the manufactureroffers to buy unsold items from the retailer for $55, the re-tailer’s marginal profit: $45, is now greater than its marginalloss: $35, thus motivating the retailer to order more thanaverage demand. In this case, the retailer has an incentiveto increase its order quantity to 14k units, for a profit of$513.8k, while the manufacturer’s average profit increasesto $471.9k. Thus, the total average profit for the two partiesincreases from $910.7k, (=$470,7k+$440k) in the sequenti-al supply chain to $985.7k (=$513.8k + $471.9k) when aBuy-Back Contract is used. The Eximchain platform allowsthe retailer and manufacturer (i.e. the buyer and supplier)to share the additional $75k in profit generated from thiscontract based on their consensus[8].

*– Marginal profit/loss is the profit/loss of a firm or individual when oneadditional unit is produced and sold. Marginal profit and loss determine theoptimal ordering quantity- the ordering quantity that gives the maximizedprofit for a firm or individual.

Supply Chain ProvenanceUsing smart contracts and a token system, Eximchain can

expand the supplier-buyer-financier model and help buyersto gain visibility over the whole supply chain by interactingwith upstream suppliers.

Process AutomationEximchain helps to automate the negotiation and contrac-

ting process through private communication channels. Bothbuyers and suppliers can stop wasting time on tracking thesupply chain process flow manually and will, instead, be ab-le to maintain an audit of the final agreed upon contract inreal-time through Eximchain’s trustless network and securedprotocol.

6. ECOSYSTEM

IntroductionEximchain streamlines complex multi-party transactions

in SCF by using blockchain to solve information asymmetry

problems. We recognize that partnerships and a minimumviable ecosystem (MVE), rather than a minimum viableproduct, are crucial to successfully bringing a new block-chain solution to market.

MVE: The smallest configuration of elements that can bebrought together and still create unique commercial value

MVECombining a Blockchain, SDK, and Platform layer is ne-

cessary to bring enough players to bear for a healthy mini-mum viable network. Eventually, others will be able to de-velop solutions on our platform and make them immediatelyavailable to parties on the chain. In order for a blockchain towork, the computers on the system must validate and agreethat a transaction was completed. This is accomplished byagreeing on a sequence of ’blocks’ which each contain a setof transactions. BTC, for example, incentivizes participati-on in consensus by rewarding the first user to propose andvalidate a new block at each canonical height. Important-ly, our design draws a distinction between nodes capable ofproposing and validating blocks.

BlockchainTechnical challenges with blockchain technology have kept

corporate players at bay. At the time of this writing, fur-ther research and development for the full potential of thistechnology to be realized are required on the Bitcoin andEthereum main nets. These are:

Scalability- All smart contract code must be executedby all participants on the network.

Privacy- All information on a public blockchain is visibleto all participants to read.

Faced with the choice of waiting for Ethereum to end theIce Age[15] and release Casper in the coming years, or buil-ding on recently produced viable solutions in this area, wehave chosen to leapfrog the Ethereum Roadmap by lever-aging Quorum, an enterprise focused version of Ethereumreleased by JP Morgan. Quorum allows us to leverage Con-stellation[16] and a minimal Ethereum client fork to offer:

Confidentiality- private transactions secured by the net-work

Performance- performance increases in the load com-plex private transactions have on the network (none).

Consensus- permissioned consensus and governance ru-les to drive new economic incentives at the protocol level.

Quorum, and therefore Eximchain, is designed to developand evolve alongside Ethereum. Because it only minimallymodifies Ethereum’s core, we are able to incorporate themajority of Ethereum updates quickly and seamlessly[17].

At the lowest level, we are modifying how the ethere-um client protocol enables consensus and permissions theblockchain. Our blockchain distinguishes between partici-pants that can validate blocks and participants that canpropose blocks. The latter allows us to both secure priva-

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te transactions on the network and incentivize developers toparticipate in the evolution of our environment.

ConsensusRather than proof-of-work (mining), Eximchain uses a

vote-based consensus algorithm that forks QuorumChain toadd a few governance rules, the governance mechanism isincluded in the appendix for completeness, implementationdetails can be found here.

Settlement FinalityThe recent development on Istanbul BFT (Byzantine Fault

Tolerance), which will be incorporated into Quorum, ensuressettlement finality and speeds up settlement time to under 1second from the current tens of seconds to tens of minutes.

7. GOVERNANCEThe reason why Eximchain chose to use Quorum is becau-

se the current proof of work based blockchains like Bitcoinand Ethereum are not ready for enterprise-grade solutions(details to be described under Appendix- Motivation). Webelieve the incentives of developer pools, clients, and corpo-rates contributing value to the ecosystem must be alignedat the protocol level. This governance model can be appliedto other public, permissioned blockchains that are lookingto address similar issues.

Our proposed quadratic voting based governance modelallows for a series of checks and balances between nodes. Weanalyze how a voting system based consensus model drawsa clear line between safety and liveness: the percent vote re-quired for consensus trades safety for speed. We analyze thecounter balance of power between actors in the system, pro-posing a model that discourages collusion and analyzes therobustness of the protocol to keep block proposers and vali-dators in check under: independent choice, coordinatedchoice, and a bribing adversary. We conclude by ana-lyzing several failure modes of the system and subsequentrecovery.

Voting Smart Contract[17]

Quorum Consensus Process Flow [17]

Quorum Consensus Block Creation [17]

Quorum Consensus Block Voting [17]

Maker Nodes (Generals)Maker Nodes are responsible for proposing blocks and

their addresses are registered in the BlockVoting contract.The initial set of Maker Nodes is pre-configured in the ge-nesis block and will initially be comprised by our Token Ge-neration Event stakeholders, however once the network isestablished, this will begin to change.

Maker Nodes will have the responsibility of voting in anew block proposer every governance cycle. Nodes can optto become Maker Nodes if they are KYC approved and votedin by an agreed threshold of existing Maker Nodes.

Voting Nodes (Soldiers)Voters are also registered in the BlockVoting contract. Li-

ke Generals, the initial set of Voters is pre-configured in thegenesis block and will initially be comprised by our initi-al token holders, application clients, and developer pools.Functioning as validators, for the chain’s transaction histo-ry, these nodes help to secure the network and may be votedin as Makers once the network is established.

Registered Voters will have the responsibility of voting outa block proposer every governance cycle.

Governance AnalysisConsortium style chains have a number of trade-offs re-

lated to the way they scale, permissioned by design, it isimportant to consider the evolution of the system and sta-keholders in the face of dishonest nodes (traitors) and in-centive driven collusion.

Recent developments in permissioned-DLT have enabledus to design novel consensus rules that allow for a funda-mental change in the underlying incentive mechanism andactors that underlie the consensus protocol of permissioned,public chains.

The desired outcome is to keep a cohort of dishonest no-des from gaining control of the block proposal mechanismor forking the chain, while bootstrapping a cohort of honestnodes with vested interest to protect the network and punishpotential traitors. In the face of an undefeatable adversaryleading to mechanism failure we analyze the time, collusion,and resources required for such an attack.

While not strictly necessary for the purposes of this ana-lysis, it is important to keep in mind the real world identitiesbehind these nodes will largely represent corporate incenti-ves in the global supply chain and development communi-ties. Ultimately we believe the incentives of these stakehol-ders must be aligned at the protocol level, it follows shortlythat developers have a vested interest and duty to secure theinfrastructure their applications, clients and corporates relyon. Similarly, clients and end-users have a vested interest inensuring honest development that improves the ecosystem,as well as a vested interest in punishing freeloaders on thenetwork. The latter reflects our view that block makers onthe network should represent developer pools, motivatingclients and end-users to become registered voters to validatetransactions and participate in governance.

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In all cases, while attacks to the network yield severalfailure cases, the confidentiality property of private statestored on the blockchain is preserved. That is to say, protocolor governance failure does not necessarily entail breach ofsecurity to private data as long as private keys remain secure.

Adversary under independent choiceThe consensus algorithm and governance is not fully open

to any client issuing commands, under independent choice,stakeholders have no incentive to deviate from the protocolas their attack would be defeated by the network. Nodescannot single handedly confirm the proposed block at eachcanonical height. Block makers who deviate from the pro-tocol would reveal their intentions to the network, placingthemselves at risk of being voted off the block maker poolin the next governance cycle. Both block makers and valida-tors have a history of who voted them into the system, bya majority block maker vote and by invitation respective-ly; in this way the reputation of known traitors is linked toother nodes on the system (and real world entities) visibleto anyone in the voting smart contract.

Adversary under coordinated choiceAssume an undefeatable, coordinating, racket of dishonest

nodes who by a series of governance cycles gain control ofa majority of block maker nodes that would allow them tocontrol block proposal to deviate from the protocol. Theconsensus algorithm is not fully open to any client issuingcommands; taking control of block maker governance requi-res traitors to be voted into the block maker pool.

Assume all nodes in the initial block maker pool of size k,under irrational choice, consecutively vote into the pool: anundefeatable coordinating racket of dishonest block makernodes of size, m, over a sequence of n governance cycles. Weanalyze the cost, coordination and time required to launchan optimal attack and fool the network.

Let b[1], b[2], . . . , b[n] denote the nodes added to theblock maker pool and s[1], s[2], . . . , s[n] the nodes removedfrom the block maker pool over n governance cycles lengthT. A k-strategy is a sequence that allows the coordinatedadversaries to control block proposal after a sequence of ngovernance cycles by voting in m nodes without replacement.

(b1, s1) → (b2, s2) → ..... (bm, sm) ; m ≤ n,

where worst case, m=n and m > 13

k, assuming a traitoris added each cycle and an honest node is removed. If theadversaries can assure the above, it is left up to the readerto see coordination of the attack requires collusion of 1

3k

nodes over a minimum attack duration, P = 13

kT beforeour strong assumption of k honest initial nodes fails.

For a concrete example, k= 2048, T = 2 weeks , a perfectlycoordinated attack to control block proposal would take 26years and coordination of 683 parties. Each must be ca-pable of convincing honest nodes representing the developerpools, clients, and corporates that they are contributing va-lue to the system throughout the duration of the attack tokeep any of them from being voted out at each governancecycle and extending the minimum attack period.

Undefeatable Bribing AdversaryAssume an undefeatable bribing adversary who by a set of

highly unlikely events, knows exactly which nodes will pro-pose the next sequence of n blocks and the price requiredto bribe each one to propose a tampered block. Assume allnodes will commit treason for a price, the undefeatable bri-bing adversary has resources k at his disposal, and is drivenby profit incentive. We analyze the cost of such an attack,m, over a sequence of n blocks.

Let b[1], b[2], . . . , b[n] be nonnegative integers that deno-te the price required to bribe each block-proposer to confirmthe proposed block at each canonical height, over n blocks.A k-strategy is a sequence that allows the adversary to con-trol block proposal over a sequence of n blocks for a price m.

1 ≤ b1 < s1 < b2 < s2 < .... < bm < sm ≤ n,

where m is a positive integer less than or equal to k. Theprofit corresponding to the strategy is the total reward ob-tained if you bribe the network for b1, and profit s1 fromcontrolling a fixed number of transactions for one block, bri-bing the network for 2 blocks at b2, profiting s2 from con-trolling a fixed number of transactions for two blocks, and soforth. If the adversary can calculate the profit from control-ling each proposed block p[1], . . . , p[n] it is trivial to designan algorithm for the adversary to compute a k-strategy withmaximum profit.

Governance Level AttackA similar k strategy could be designed to control gover-

nance over n vote cycles at cost m to an undefeatable bribingadversary.

Our governance model is unique in that nodes have theresponsibility of periodically voting out Block Maker nodescounterbalanced by block maker nodes being able to appointa replacement. We make an analogy to Block Makers asgenerals and other nodes registered to vote as soldiers toreason in laymen terms. You can say that governance levelattacks are part of the protocol and built into the systemto discourage majority collusion. Under similar assumptionsas above, we expect generals (Block Makers) to appeal tosoldiers (registered voters) to defend their status. A coalitionthat controls over 1

2of tokens could vote out any general

they chose, we expect this to incentivize generals to spin upsoldiers in their control to defend their status the only waythe protocol allows: by voting out another general not intheir coalition, simultaneously improving network security.

Governance HardeningAssume an initial token supply of X tokens, we analyze the

case where an adversary owns X-1 tokens and is attemptingto gain control of the governance mechanism, we analyze theminimum cost of controlling a sequence of n governance cy-cles with length T of an undefeatable attack strategy, in theface of network collusion against the attacker, and analyzethe cost and time required from an undefeatable adversaryto maintain control of the network. Our governance modelimplements quadratic voting making the cost of each vvotes for a governance decision cost v2 tokens, all tokenspaid are then redistributed equally between the voting pool.To assure control of the first governance cycle, the adversary

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must place 2 votes at a cost v[1]2 = 4 tokens, controlling X-5 of the token supply in the second cycle, to assure controlof the next cycle, the adversary must place 6 votes at costv[2]2 = 36 to beat the possible 5 votes against his governancedecision; this can continue to scale this way until v[k] wherethe marginal cost of k nodes voting against the adversaryincreases:

(votes1, cost1) → (votes2, cost2) ... → (votesn, costn)

Optimal Defense : (1, 1) → (4 , 4) → (25, 25) → (676,676) → (k-1 , k-1)

Optimal Attack: (2, 4) → (5 , 25) → (26, 676) → (677,458329) → (k, k2)

Sequence of optimal voting decisions for an attacker wouldcost:

1 + 4 + 25 + 676 + 458329 + 210066388900 + ...+ v[k]2 <X − 1/2

By correctly parameterizing the system it is possible toprove an adversary can control a bounded number of gover-nance cycles that can be defeated by k honest nodes.

Counter MeasuresThe premise of attack from a bribing adversary is a valid

concern if we are to expect the value of the network to scaleas the square of connected users [Metcalf’s Law]. Perhapsunsurprisingly, distributed concentrations of wealth and asmaller block size discourage bribing people to deviate fromthe protocol for profit incentive. In practice, the non deter-ministic choice of block proposers using random timeoutslimits the calculation of such a k-strategy by an undefeata-ble bribing adversary. The cost of the k-strategy to launcha governance or protocol level attack scales inversely to thepercentage of validators required for block confirmation andnumber of nodes on the network. Our proposed governancemodel allows for a series of checks and balances between no-des. We are experimenting on mechanism design trade offson our testnet and will make our results public in the comingyear.

Bootstrap MechanismsQVEC- Quadratic Voting on Ethereum Chain

PeacekeepersThese are k = safety factor * initial token holders partici-

pant nodes originally launched as block makers to defend thenetwork and are registered in the voting contract as part ofthe bootstrap mechanism; these nodes participate in con-sensus but are forced to abstain at each governance cycle.They will be first to be voted off the block proposer poolto make room for new Maker nodes, allowing the ecosystemto become fully decentralized over time while ensuring theminimum attack period of an undefeatable adversary cannotbe realized in the infancy of the network.

Quadratic VotingNodes can make v votes for a governance decision by pay-

ing v2 tokens, from there it’s just a majority vote. All funds

raised are returned by giving back to each individual in thevoting pool,1/(voting pool-1) of the funds paid by the vo-ter. The theory is that if someone gains x from a decisionbeing made, and each vote has a probability p of being pi-votal, then they have the incentive to keep buying votes foras long as the price of the next vote is less than px. Becausethe total price of v votes is v2, and we know from calculusthat the derivative of v2 is 2v, users will have the incenti-ve to keep spending tokens until 2v > px; hence, they willspend v = px/2 tokens. You can see from this math that thenumber of tokens that a voter buys should be proportionalto x, ie. the amount that they gain from the decision beingmade. Hence, the number of votes that a voter makes shouldactually reflect the strength of their preference, and not justwhich option they prefer.[18]

Finite Attack WindowIt would be irresponsible of us to claim undefeatable ad-

versaries are unlikely in practice* or claim that the proto-col will defend the network indefinitely, rather we choose toerr toward practical guarantees that ensure network safetyby attempting to bound the minimum attack period andcost of an undefeatable adversary. It follows shortly thatgiven an unbounded amount of time a determined enoughundefeatable adversary would eventually be able to launcha successful attack. The only way to hedge against this is toensure a finite possible attack period in a similar time scaleto the minimum attack period of an undefeatable adversary.In 100 years, the voting contract will suicide halting all fur-ther change of state in the network, triggering open-sourcelicences on any remaining proprietary portions of our soft-ware.

*For example a single blockchain enabling Export/Import (or any othervalue exchange for that matter) could become a military or terrorist target.

8. APPLICATIONAt a higher level, we are creating a smart contract SDK.

The smart contract SDK layer will allow developers to buildapplications from basic components, accelerating develop-ment of future SCF solutions.

We want to enable the engineering of monetary systemsand make implementation of monetary theory, economicsand law accessible to developers. The first step is enab-ling the implementation of systems that can be reducedto modeling the strategic interaction between two or mo-re players,specifically in situations containing a set of ru-les, outcomes, and desired objectives. Participants can buildsupply chain applications on top of the Eximchain smartcontract SDK:

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Our aim is to show developers how our SDK easily sup-ports complex multi party transactions, enabling them tobuild applications and other supply chain finance productson top of our ecosystem.

Smart Contract SDK

Financing: Through instant and transparent proof of or-der verification on blockchain, suppliers seize early paymentdiscounts to improve working capital and buyers seize creditarbitrage opportunity.

Procure-to-Pay: Participatants can maintain an audit ofthe final agreed upon contract in each step of the procure-to-pay process in real-time through a trustless network andsecured protocol.

Sourcing: Sourcing platforms or rating agents can use theProof of Existence (PoE) functionality- document time stam-ping, verifying document integrity, demonstrating data ow-nership without revealing data, to provide independently ve-rifiable reputation data.

Inventory Management: By sharing real-time demand in-formation cross the supply chain, participants can make bet-ter inventory plans and automate the reconciliation processacross different ledgers and systems to save time and reducecost.

Supply Chain Optimization: Using Multi-Party DynamicContracts - a combination of private channels and a confi-gurable state machine to coordinate a confidential bi-levelstackelberg SCF negotiation (as described in Appendix).

Supplier Management: Using smart contracts and a tokensystem, Eximchain can help buyers to gain visibility over thewhole supply chain by interacting with upstream suppliersbut still maintain privacy on each transaction level.

Risk Mitigation: Eximchain enables dynamic, real-timemonitoring of supply chain processes to provide visibilityinto the whole supply chain’s operations. Participants canmanage risks in one place.

Private channelsSeries of confidential two way channels coordinated by the

FSM (Finite State Machine).

FSMCoordinates rules and implements mechanisms modeling

the strategic interaction between two or more players. Takesthe shape of coordinating information exchange between anumber of two way private channels through a semaphorenotion and embedded mechanism design.

Strategy Computation MachineWe consider the design of Computational Game-Theoretic

Frameworks - machine games, where we replace strategies byTuring machines (smart contracts)[19]. For example, giventhe state of a game, a strategy computation machine may

return a distribution over possible actions, the complexity ofthe computation depends on implementation of the machinebut the interface can be clearly defined.

Platform development status and plan

Q3-Q4 2017

Signed letter of intents from 9 companies including SMEs,a listed company in China and a cross-border e-commerceplatform.

A Strategic Cooperation Agreement with Guiyang High-tech Industrial Development Zone Management Commissionand Guiyang Big Data Development and Management Com-mission, China.

Current Stage (Q4 2017- Q1 2018)

Governance hardening

First POC in Supply Chain Sourcing

Large scale network testing

Token Generation Event

In the next few months, Eximchain will launch severaltestnets and onboard SMEs to execute smart contract ba-sed solutions through the network.

Release 2.0 (Q2 to Q3 2018)

Native Token Swap

Mainnet Launch

First Governance Cycle

Second POC in Supply Chain Financing or Inventory/LogisticsManagement

First SDK Release

Release 3.0 (Q4 2018 to Q1 2019)

Second SDK release

Second Governance Cycle

Third POC in Supply Chain Financing or Inventory/LogisticsManagement

Over the next 15-18 months, our platform will enable par-ticipants in global supply chain to launch their own supplychain management tools or digital tokens on our blockchainusing our smart contract SDK.

9. TEAM AND ADVISORS

8

TeamHope Liu, CEO of Eximchain, B.A. from Peking Universi-

ty and MBA from MIT, handled cross-boarder transactionsat UBS Beijing, Hong Kong and Singapore for 6.5 years. Sheis the Lab Lead of the North America Blockchain Associa-tion and has been working on Eximchain project from MITMedia Lab since 2015. She led the team to win the grandchampion of Boston Seagull Entrepreneurship Competitionand has been featured by mainstream blockchain medias inU.S.

Juan Huertas, CTO of Eximchain, B.S.in Computer Sciencefrom MIT. He started coding at age 13 and has been a Tech-nology Consultant for startups since he was 18 years old. Hebuilt a cryptocurrency enabled game to play and distributecryptocurrency anonymously during his junior year in colle-ge at MIT.

James Xu, Architect of Eximchain. He worked in IBM for14 years holding various positions across the globe as enter-prise packaged software offering manager, Delivery ProjectExecutive of a team 100+ across 14 time zones, and Associa-te Partner managing key account in China. He has extensiveexposure in supply chain management, retail, CPG and glo-bal trade domains. He also co-founded a startup, building aEV car sharing platform.

Jia Zhang, Business Analyst of Eximchain. Jia has beenin supply chain field since 1994. She spent 7 years in ICBCmanaging global trade finance and international settlement.After that, she acted as the Chief Representative of MS Tex-tiles in China for almost 10 years, managing local supplierrelationships, goods inspection, and logistics arrangement.She speaks Chinese, English and French.

Louis Lamia, Director of Engineering and Infrastructureat Eximchain, B.S.in Computer Science from MIT. He wasa Software Development Engineer at Amazon Web Serviceson the Elastic File System team for over 2 years involved invarious projects, most notably encryption-at-rest.

Douglas Sanchez, Director of Product at Eximchain, B.S.inComputer Science from MIT. Before joining Eximchain, hewas leading industrial, product and brand design for Tulip,a manufacturing app platform startup in Boston.

AdvisorsRamble Lan is the president of NABA (North America

Blockchain Association), Chief Architect of the RegulatorySandbox in Guiyang, China, and the Chairman of SupplyChain Blockchain Association in Fujian, China. He is alsothe CEO of SwftCoin (www.swftcoin.com).

Tiger Zhong is the CEO of Trademanger (www.Tradema-nager.com)- a platform that provides big data services forsmall and medium sized business in global trade with over50k active users. He has experience providing services tosmall and medium size business in China for over 16 years.

Catherine Dai is the Founder and Owner of BoaoTechand HongKong Boao, Co-Founder and Shareholder of Gibo-Star Int’l. She plays Angel/VC role for 16 companies ran-ging from TMT, Biopharmaceutical, Heavy industry, to Gar-ment, Catering, and Entertainment Industry in China.

Daniel Wang is a China based, U.S. trained executive withextensive transactional background. He is currently the di-rector of investment of a Fortune 500 company, and used tobe an attorney practicing in Silicon Valley, Hong Kong andMainland China.

Can Kisagun is a co-founder at Enigma- a data-driven

crypto investment platform that raised $45m during TokenGeneration Event in 2017. Previously Can worked at McKin-sey & Company for 3 years focusing primarily on finance andbanking engagements. Can holds an MBA from MIT Sloanand BS in Industrial Engineering from Northwestern Univer-sity. Prior to Enigma, Can was a co-founder of Eximchain.

Peter Missine established himself as an independent stra-tegy consultant after a few years at McKinsey & Co. Priorto his MBA at MIT Sloan, Peter spent five years as an in-ternational commodity trader on three continents for LouisDreyfus Commodities (LDC). At LDC he also worked withinternational trade flows, supply chains, transfer pricing andanti-dumping.

Manmeet Singh is currently the managing partner of Block-seed Venture, Expert-in-Residence at Chinaaccelerator andthe Investment Advisor for Nanjing Municipal Government.He previously run an Asia focused financial advisory firmand was the China Representative of ICIC Bank.

William Peckham is the Managing Partner of ProteusGrowth, a cross border strategy consulting firm based outof Beijing, as well as China Operating Partner of Higher-Order VC, a crypto currency fund. He has served as an ad-visor to numerous foreign tech startups in China includingRobomed, Enigma, Rogue Initiative, INS Ecosystem, andQuintype.

10. TOKEN AND PARTICIPATIONEximchain is offering Eximchain Platform Native Tokens,

that will be used to pay network fees, validate state changes,and execute governance. The native tokens will also be usedto access applications built on the Eximchain network, suchas SourceAssist and solutions developed with the EximchainSDK.

Token StructureEXC tokens are ERC-20 compatible tokens. These tokens

will be distributed on the Ethereum blockchain pursuant toa related ERC-20 smart contract, they are redeemable forEximchain Platform Native Tokens on the Eximchain Plat-form upon network launch. Following the close of the To-ken Generation Event, the EXC Tokens will tradeable un-til 2 weeks before Mainnet Network Launch. At this point,the ERC-20 Tokens become fixed (non-transferable) on theEthereum blockchain prior to our Mainnet Network Launchin Q2 2018 when Eximchain Platform Native Tokens will bedistributed to contributors in the genesis file and becomelisted on exchanges.Total token supply: 150,000,000 EXCFundraising target: $20m

Token DistributionToken distribution:

Sold during Token Generation Event: 40%Distributed to SME and early adopters: 20%Reserved for team and Advisors: 20%Bonus: 10%Hedging/reserve: 10%

Sold during Token Generation Event: No more than 60,000,000EXC are to be distributed among contributors. Each tokenwill be sold for approximately $0.33. There will be be no bo-nus or discount available to contributors during the Token

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Generation Event.

Distributed to SME and early adopters: It is importantthat Eximchain token holders plan to use our supply chainsolutions and participate in the early stages of the Exim-chain governance mechanism. For this reason, 20% of the to-ken supply, is reserved for SMEs and Early Adopters. Thesetokens will serve as an incentive for early stage participantswho will use the Eximchain platform to conduct contractnegotiations, build supply chain products and participate innetwork governance. SMEs interested in applying for tokensto cover development and prototype phases will need to signa Commitment Letter or Letter of Intent to qualify.

Reserved for team and advisors: Eximchain will reserve20% of the token supply for the Founding Team and earlyfinancial backers for this project since 2015. 4 years vestingschedule will be applied to the team and advisors.

Bonus: 10% of the token supply is reserved for marke-ting, and community partners during the Token GenerationEvent, and participants of the Eximchain Bounty Program.

Hedging/reserve: 10% of the token supply is reserved forhedging volatility and future raise.

Token Generation Event TimelineToken Generation Event: Q1 2018

Launch mainnet and start token listing process: Q1-Q2 2018List tokens on multiple exchanges: Q2-Q3 2018

Use of FundsEximchain needs to launch Token Generation Event to

fund platform development, build the supply chain financeecosystem and cover other operational costs:

Platform Development 50%: This includes maintainingcompetitive salaries for top talent in China and the U.S.paying for software hosting, accelerated development of le-gacy system integrations and acquisition of hardware. Thehardware and hosting will be offered to anchor buyers andthat will need stand- alone computers to manage their re-spective supply chains on a global scale.

Build the Supply Chain Ecosystem 25%: This includeseffort to onboard SMEs through incentivizing early stageusers and on-going business development to onboard sup-pliers, buyers and financiers. Eximchain will reserve a pro-portion of tokens for this purpose in a secured wallet toensure fair distribution.

Operational Expenses 20%: This includes basic operatio-nal costs such as office space, legal costs to pursuing andobtaining required licenses, and security measures for thevalue of the token including hedging mechanisms.

Exchange Listing 5%: Eximchain will work with a numberof global exchanges to ensure liquidity for token holders. Weare working with multiple exchanges and partners to facili-tate getting Eximchain Native Tokens listed.

ParticipationNative tokens on the Eximchain Platform will only be

minted in the genesis block, associating them with inves-tors’ wallet addresses. Tokens will only be minted while thecontract is active.

The Token Generation Event KYC and whitelist processis scheduled to continue through to March 2018. All parti-cipants in the Token Generation Event must complete ourKYC-AML process.

The minimum contribution amount is 150 ETH duringthe private sale. The private sale registration was closed onJan 11th 2018. An individual cap will be applied during thebeginning of the Token Generation Event. Only participantson the whitelist can join the process. The whitelist registra-tion was closed on Jan 16th 2018, pending announcement ofBounty Program and Marketing Campaign.

We invite engagement and dialog on our business modeland our ecosystem design. The opportunity that these tech-nologies will unlock for businesses of all sizes is remarkableand we need public involvement to fulfill that mission.

To become a part of our community, give us feedback onthe whitepaper or just to find out more about Eximchain:

Visit our website at www.eximchain.com .

Join our Telegram channels.

Follow us on Twitter.

Or email us at hello@eximchain.com.

11. LEGAL CLARIFICATIONEximcoins are utility tokens whose entire value derives

from the services provided by the Eximchain platform inexchange for holding or consuming the tokens, as detailedabove. They are not intended for speculation and hold noclaim to intellectual or other property or cash flows. Theygrant no right to participation in the company, and no claimin decision making over company assets or strategy. Thereis no promise of value or claim on revenue associated withEXC other than that derived from platform usage. In short,EXC are not securities. Also, the estimations under Valuefor our Stakeholders are based on assumptions and there canbe no guarantee that they will be achieved. Actual resultsmay vary substantially from the figures shown.

DISCLAIMER OF LIABILITYTo the maximum extent permitted by the applicable laws,

regulations and rules, Eximchain shall not be liable for anyindirect, special, incidental, consequential or other losses ofany kind, in tort, contract or otherwise (including but notlimited to loss of revenue, income or profits, and loss of useor data), arising out of or in connection with any acceptanceof or reliance on this Whitepaper or any part thereof by you.

10

NO REPRESENTATIONS AND WARRANTIESEximchain does not make or purport to make, and hereby

disclaims, any representation, warranty or undertaking inany form whatsoever to any entity or person, including anyrepresentation, warranty or undertaking in relation to thetruth, accuracy and completeness of any of the informationset out in this Whitepaper.

REPRESENTATIONS AND WARRANTIES BYYOU

By accessing and/or accepting possession of any informa-tion in this Whitepaper or such part thereof (as the casemay be), you represent and warrant to Eximchain as follows:(a) you agree and acknowledge that the EXC tokens do notconstitute securities in any form in any jurisdiction; (b) youagree and acknowledge that this Whitepaper does not con-stitute a prospectus or offer document of any sort and is notintended to constitute an offer of securities in any jurisdicti-on or a solicitation for investment in securities and you arenot bound to enter into any contract or binding legal com-mitment and no cryptocurrency or other form of payment isto be accepted on the basis of this Whitepaper; (c) you agreeand acknowledge that no regulatory authority has examinedor approved of the information set out in this Whitepaper,no action has been or will be taken under the laws, regulato-ry requirements or rules of any jurisdiction and the publica-tion, distribution or dissemination of this Whitepaper to youdoes not imply that the applicable laws, regulatory require-ments or rules have been complied with; (d) you agree andacknowledge that this Whitepaper, the undertaking and/orthe completion of the Eximchain Initial Token Sale, or futuretrading of the EXC tokens on any cryptocurrency exchange,shall not be construed, interpreted or deemed by you as anindication of the merits of the Eximchain , the EXC tokens,the Eximchain Initial Token Sale and the Eximchain Wallet(each as referred to in this Whitepaper); (e) the distributi-on or dissemination of this Whitepaper, any part thereof orany copy thereof, or acceptance of the same by you, is notprohibited or restricted by the applicable laws, regulationsor rules in your jurisdiction, and where any restrictions inrelation to possession are applicable, you have observed andcomplied with all such restrictions at your own expense andwithout liability to Eximchain ; (f) you agree and acknow-ledge that in the case where you wish to purchase any EXCtokens, the EXC tokens are not to be construed, interpre-ted, classified or treated as (i) any kind of currency otherthan cryptocurrency; (ii) debentures, stocks or shares issu-ed by any person or entity (whether Eximchain ) (i) rights,options or derivatives in respect of such debentures, stocksor shares; (ii) rights under a contract for differences or un-der any other contract the purpose or pretended purpose ofwhich is to secure a profit or avoid a loss; (iii) units in acollective investment scheme; (iv) units in a business trust;(v) derivatives of units in a business trust; or (vi) any othersecurity or class of securities. (g) you are fully aware of andunderstand that you are not eligible to purchase any EXCtokens if you are a citizen of China, or a citizen, resident(tax or otherwise) or green card holder of the United Statesof America; (h) you have a basic degree of understandingof the operation, functionality, usage, storage, transmissionmechanisms and other material characteristics of cryptocur-rencies, blockchain-based software systems, cryptocurrencywallets or other related token storage mechanisms, block-

chain technology and smart contract technology; (i) you arefully aware and understand that in the case where you wishto purchase any EXC tokens, there are risks associated withEximchain and the Distributor and their respective businessand operations, the EXC tokens, the Eximchain Initial To-ken Sale and the Eximchain Wallet (each as referred to inthe Whitepaper); (j) you agree and acknowledge that neit-her Eximchain nor the Distributor is liable for any indirect,special, incidental, consequential or other losses of any kind,in tort, contract or otherwise (including but not limited toloss of revenue, income or profits, and loss of use or data),arising out of or in connection with any acceptance of orreliance on this Whitepaper or any part thereof by you; and(k) all of the above representations and warranties are true,complete, accurate and not misleading from the time of youraccess to and/or acceptance of possession this Whitepaperor such part thereof (as the case may be).

CAUTIONARY NOTE ON FORWARD LOO-KING STATEMENTS

All statements contained in this Whitepaper, statementsmade in press releases or in any place accessible by the pu-blic and oral statements that may be made by Eximchainor their respective directors, executive officers or employeesacting on behalf of Eximchain or the Distributor (as thecase may be), that are not statements of historical fact, con-stitute ”forward-looking statements”. Some of these state-ments can be identified by forward looking terms such asaim”, ”target”, anticipate”, ”believe”, ”could”, estimate”, ex-pect”, ıf”, ıntend”, ”may”, ”plan”, ”possible”, ”probable”, ”pro-ject”, ßhould”, ”would”, ”willor other similar terms. Howe-ver, these terms are not the exclusive means of identifyingforward-looking statements. All statements regarding Exim-chain’s financial position, business strategies, plans and pro-spects and the future prospects of the industry which Exim-chain is in are forward-looking statements. These forward-looking statements, including but not limited to statementsas to Eximchain’s revenue and profitability, prospects, fu-ture plans, other expected industry trends and other mat-ters discussed in this Whitepaper regarding Eximchain arematters that are not historic facts, but only predictions.These forward-looking statements involve known and un-known risks, uncertainties and other factors that may cau-se the actual future results, performance or achievementsof Eximchain to be materially different from any future re-sults, performance or achievements expected, expressed orimplied by such forward-looking statements. These factorsinclude, amongst others: (a) changes in political, social, eco-nomic and stock or cryptocurrency market conditions, andthe regulatory environment in the countries in which Exim-chain conducts its respective businesses and operations; (b)the risk that Eximchain may be unable or execute or imple-ment their respective business strategies and future plans;(c) changes in interest rates and exchange rates of fiat cur-rencies and cryptocurrencies; (d) changes in the anticipatedgrowth strategies and expected internal growth of Exim-chain ; (e) changes in the availability and fees payable toEximchain in connection with their respective businessesand operations; (f) changes in the availability and salari-es of employees who are required by Eximchain to operatetheir respective businesses and operations; (g) changes inpreferences of customers of Eximchain ; (h) changes in com-petitive conditions under which Eximchain operate, and the

11

ability of Eximchain to compete under such conditions; (i)changes in the future capital needs of Eximchain and theavailability of financing and capital to fund such needs; (j)war or acts of international or domestic terrorism; (k) occur-rences of catastrophic events, natural disasters and acts ofGod that affect the businesses and/or operations of Exim-chain ; (l) other factors beyond the control of Eximchain ;and (m) any risk and uncertainties associated with Exim-chain and their businesses and operations, the EXC tokens,the Eximchain token sale and the Eximchain business(eachas referred to in the Whitepaper). All forward-looking state-ments made by or attributable to Eximchain or persons ac-ting on behalf of Eximchain are expressly qualified in theirentirety by such factors. Given that risks and uncertain-ties that may cause the actual future results, performan-ce or achievements of Eximchain to be materially differentfrom that expected, expressed or implied by the forward-looking statements in this Whitepaper, undue reliance mustnot be placed on these statements. These forward-lookingstatements are applicable only as of the date of this White-paper. Neither Eximchain nor any other person represents,warrants and/or undertakes that the actual future results,performance or achievements of Eximchain will be as dis-cussed in those forward-looking statements. The actual re-sults, performance or achievements of Eximchain may differmaterially from those anticipated in these forward-lookingstatements. Nothing contained in this Whitepaper is or maybe relied upon as a promise, representation or undertakingas to the future performance or policies of Eximchain. Fur-ther, Eximchain disclaim any responsibility to update anyof those forward-looking statements or publicly announceany revisions to those forward-looking statements to reflectfuture developments, events or circumstances, even if newinformation becomes available or other events occur in thefuture.

NO ADVICENo information in this Whitepaper should be considered

to be business, legal, financial or tax advice regarding Exim-chain, the EXC tokens, the Eximchain token sale and theEximchain business (each as referred to in the Whitepaper).You should consult your own legal, financial, tax or otherprofessional adviser regarding Eximchain and their respec-tive businesses and operations, the EXC tokens, the Exim-chain token sale and the Eximchain business (each as refer-red to in the Whitepaper). You should be aware that youmay be required to bear the financial risk of any purchaseof EXC tokens for an indefinite period of time.

NO FURTHER INFORMATION OR UPDATENo person has been or is authorized to give any informa-

tion or representation not contained in this Whitepaper inconnection with Eximchain and its respective businesses andoperations, the EXC tokens, the Eximchain token sale andthe Eximchain business (each as referred to in the Whitepa-per) and, if given, such information or representation mustnot be relied upon as having been authorized by or on be-half of Eximchain token sale and the Eximchain business (asreferred to in the Whitepaper) shall not, under any circum-stances, constitute a continuing representation or create anysuggestion or implication that there has been no change, ordevelopment reasonably likely to involve a material changein the affairs, conditions and prospects of Eximchain or in

any statement of fact or information contained in this Whi-tepaper since the date hereof.

NO OFFER OF SECURITIES OR REGISTRA-TION

This Whitepaper does not constitute a prospectus or offerdocument of any sort and is not intended to constitute anoffer of securities or a solicitation for investment in securi-ties in any jurisdiction. No person is bound to enter into anycontract or binding legal commitment and no cryptocurren-cy or other form of payment is to be accepted on the basis ofthis Whitepaper. Any agreement in relation to any sale andpurchase of EXC tokens (as referred to in this Whitepaper)is to be governed by only the terms and conditions (T&Cs)of such agreement and no other document. In the event ofany inconsistencies between the T&Cs and this Whitepaper,the former shall prevail.

You are not eligible to purchase any EXC tokens in theEximcoin Initial Token Sale (as referred to in this Whitepa-per) if you are a citizen of China, or a citizen, resident (taxor otherwise) or green card holder of the United States ofAmerica. No regulatory authority has examined or approvedof any of the information set out in this Whitepaper. No suchaction has been or will be taken under the laws, regulatoryrequirements or rules of any jurisdiction. The publication,distribution or dissemination of this Whitepaper does notimply that the applicable laws, regulatory requirements orrules have been complied with.

RISKS AND UNCERTAINTIESProspective purchasers of EXC tokens (as referred to in

this Whitepaper) should carefully consider and evaluate allrisks and uncertainties associated with Eximchain, the EXCtokens, the Eximchain token sale and the Eximchain (eachas referred to in the Whitepaper), all information set out inthis Whitepaper and the T&Cs prior to any purchase of EXCtokens. If any of such risks and uncertainties develops intoactual events, the business, financial condition, results ofoperations and prospects of Eximchain could be materiallyand adversely affected. In such cases, you may lose all orpart of the value of the EXC tokens.

12. ACKNOWLEDGMENTWe would like to express our gratitude to the many people

who supported us as we wrote this paper: Nina Yan, ZachChen, Jessie Liu, Malak Alyousef, Louis Lamia, Steven Ri-vera, John O’sullivan and Sawan Jindal. Thank you.

13. APPENDIX

Use Case Example*Multi-Party Dynamic Contracting

Inspired by the system proposed in “Optimal bi-level Sta-ckelberg strategies for supply chain financing with both capital-constrained buyers and sellers”[20] and“A partial credit gua-rantee contract in a capital-constrained supply chain: Finan-cing equilibrium and coordinating strategy,”[21] below weprovide an example of a Dynamic SCF system that can becreated through the Eximchain platform.

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In the supply chain financing system shown, we formulatethe interactions between the capital-constrained buyer (Re-tailer), the capital-constrained supplier (Manufacturer) andthe financier (Bank) as privately executed smart contractsthat coordinate a bi-level Stackelberg game. The Bank actsas the leader in setting the financing rate for the Manufac-turer and Retailer. The Manufacturer acts as the subleaderto make the best response according to Bank’s decision andto set the wholesale price for the Retailer at the same ti-me. The Retailer acts as the follower to respond to both theBank and Manufacturer.

Firstly, the leader (Bank) will evaluate the Retailer’s andthe Manufacturer’s financing conditions (e.g., initial capital,bankruptcy risks and procurement/production quantities)and make optimal decisions to announce the interest rateRr and Rm, respectively. Then, in response to the Bank,the subleader (Manufacturer) will simultaneously update hisdecision and decide how much to charge the buyer for thewholesale price w. Acting as the follower, the Retailer de-cides how much to order according to Bank’s interest rate,Rr, and Manufacture’s wholesale price. To pursue the resultof the Stackelberg equilibrium, Retailer and Manufacturerselect a best-reply policy, denoted by (4) and (5).

The model can be expressed as below:

The Eximchain ecosystem involves a single shared block-chain and a smart contract SDK. Besides the model mentio-ned above, our software architecture is tailored to implementmany SCF products from basic components on our ecosys-tem. Ultimately, developers can use our software to createvariations on Stackelberg Strategies or their own multi partySCF products.

MOTIVATIONAs of writing, large mining pools control and secure proof

of work based blockchains like Bitcoin and Ethereum, as thesystems shift toward transaction based economies, and proofof stake respectively, the financial incentive provided to de-vote a large amount of hash power or coin holdings to securethe network will drive decentralized networks into the palmsof a handful of mining pools. We believe it is important todistinguish the value these pools contribute to the chain by

devoting resources to add security to the network, from thevalue developers contribute by adding novel functionality tothe ecosystem.

Recent developments in permissioned-DLT have enabledus to design novel consensus rules that allow for a funda-mental change in the underlying incentive mechanism andactors that underlie the consensus protocol of permissioned,public chains.

We propose a system that grants developers, and mem-bers of our Token Generation Event a privileged position inthe consensus protocol of the underlying blockchain, incen-tivizing and funding developer pools to add functionality tothe system by allowing them to exclusively collect networkrewards at the protocol level from state changes driven byDapps on the network.

Today*, Ethereum and Bitcoin stakeholders (as a whole)keep mining-rigs humming to the tune of $5M and $6M perday respectively. Bitcoin, touted as the prime example ofsuccessful dPoW is majority controlled by a handful of mi-ning pools, with no roadmap to alleviate the centralizationof hash power. While the case is similar for Ethereum atpresent, we will have to wait and see how their transitionto security deposit based dPoS will affect the distribution ofblock proposers and whether initial token holders begin tobond their ETH (which brings up peripheral concerns aboutillegitimate initial token holders who will have a huge incen-tive to raise as much ETH as possible).

Hashrate Distribution - BTC 6/27/2017

Hashrate Distribution - ETH 6/27/2017

Considering a 66% attack is possible in both networks un-

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der collusion of less than 10 parties, it becomes clearer thatthe security of these ecosystems are largely hinged on thebounties available to these miners each day, none of whomcontribute to the codebase of the underlying system thatenables the creation of this value. The result is that miningpools have complete control over how the system evolves;in these networks, developers are second class citizens, con-stantly at risk of forks in a network that their applications,clients, and corporates rely on, forks that are ultimately de-cided by the mining groups profiting from their innovationand market speculation. Perhaps due to the latter, thesenetworks look more like security rackets every day, whereeach additional dollar of network incentive gives you less se-curity than the last dollar*. A new protocol is necessary toalign network incentives with those of developers, clients,and corporates.

*consider that only 5 months ago Ethereum miners were getting paid$500k/day to secure the network compared to today’s $5M/day

Consensus + Token FAQThe token functions to keep the network incentivized to

participate in consensus and governance. Our native token’sprimary use is to pay gas, a mechanism used to incentivi-ze Block makers to process your transactions. Further allnodes registered to vote can make ’passive income’ (don’tparticularly love the term) by participating in governancesystem via quadratic voting. 1000 EXC min required to par-ticipate in consensus mechanism, as a masternode, but notethat this is not exactly PoS: nodes can be voted off the con-sensus mechanism irrespective of their wealth via quadraticvoting governance. Masternodes are required to have 1000EXC collateral, a dedicated IP address, and be able to run24 hours a day without a more than a 1 hr connection loss,they claim 100% of the transaction fees in blocks they make.

14. REFERENCES[1] Lotta Lind, Miia Pirttila, Sari Viskari, Florian

Schupp, and Timo Karri. Working capitalmanagement in the automotive industry: Financialvalue chain analysis. Journal of purchasing and supplymanagement, 18(2):92–100, 2012.

[2] Benefits Beyond Treasury: How Supply Chain FinanceImpact the Bottom Line. Citi Transaction Services.http://www.citibank.com/transactionservices/

home/about_us/articles/docs/citi_insights_scf_

updated.pdf/, 2012.

[3] Peer Stein, Oya Pinar Ardic, and Martin Hommes.Closing the credit gap for formal and informal micro,small, and medium enterprises. 2013.

[4] Blockchain Platform for Supply Chain FinanceLaunches in China, CFO Innovation Asia, 2017.

[5] Small and Medium Enterprises (SMEs) Finance. TheWorld Bank. http://www.worldbank.org/en/topic/financialsector/brief/smes-finance/, 2015.

[6] How Supply Chain Finance Can Close the FundingGab for SMEs., 2016.

[7] Mckinsey on Payments, Supply-chain finance: Theemergence of a new competitive landscape, 2015.

[8] David Simchi-Levi, Edith Simchi-Levi, and PhilipKaminsky. Designing and managing the supply chain:Concepts, strategies, and cases. McGraw-Hill NewYork, 1999.

[9] Chang Hwan Lee and Byong-Duk Rhee. Coordinationcontracts in the presence of positive inventoryfinancing costs. International Journal of ProductionEconomics, 124(2):331–339, 2010.

[10] Henry Sanderson and Neil Hume (2014), Qingdaofraud case taints commodity financing. FinancialTimes. https://www.ft.com/content/b3cc4dc4-86ba-11e4-9c2d-00144feabdc0?mhq5j=

e3/, 2014.

[11] https://www.investopedia.com/terms/p/

purchase-money-security-interest-pmsi.asp//.

[12] http://www.investopedia.com/terms/b/

bankguarantee.asp//.

[13] Based on the prevailing rates on margin moneydeposit for bank guarantee and guarantee fee offeredin China .

[14] Bob Dyckman. Integrating supply chain finance intothe payables process. Journal of Payments Strategy &Systems, 3(4):311–319, 2009.

[15] Ethereum to end the Ice Age. https://github.com/ethereum/go-ethereum/commit/

71d32f54f70917c53fd3a691cface3bc73ffa1b7/.

[16] Quorum allows leverage Constellation. https://github.com/jpmorganchase/constellation/.

[17] https://www.jpmorgan.com/country/US/EN/Quorum/.

[18] https://www.reddit.com/r/ethereum/comments/

453sid/empirical_cryptoeconomics//.

[19] Joseph Y Halpern and Rafael Pass. Game theory withcostly computation. arXiv preprint arXiv:0809.0024,2008.

[20] Nina Yan, Hongyan Dai, and Baowen Sun. Optimalbi-level stackelberg strategies for supply chainfinancing with both capital-constrained buyers andsellers. Applied Stochastic Models in Business andIndustry, 30(6):783–796, 2014.

[21] Nina Yan, Baowen Sun, Hui Zhang, and ChongqingLiu. A partial credit guarantee contract in acapital-constrained supply chain: Financingequilibrium and coordinating strategy. InternationalJournal of Production Economics, 173:122–133, 2016.

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