Version 1.0 1 DMD Diamond Foreword Thank you to all the people, both DMD Diamond Foundation members and fantastic Diamond Community, who have contributed with their to this document and support over the years which inspired us to move forward and continue to develop DMD Diamond with passion. This white paper is the first draft. The final iteration will include detailed description of DMD Diamond 3.0 parameters and adjustment options for the zero micromanagement Diamond Proof of Stake engine split and merge mechanics. What is DMD Diamond DMD Diamond is a digital currency that that allows people to send money anywhere in the world instantly, securely and at near zero cost. It focuses on creating a multi entry, high rewards monetary system that empowers people to achieve financial freedom through blockchain based technology. DMD Diamonds conceptual goal is to become an ultra-scarce non-government controlled storage of wealth with software facilities that can increase that wealth over time. Emission Model DMD Diamond Coin rollout is one of the cornerstones of this monetary system. The emission model stays the same as in DMD Diamond 2.0, however, the introduced changes make the emission of new coins smoother and avoid sudden large reductions in yearly interest. In the past DMD Diamond relied on both Proof-of-Stake and Proof-of-Work algorithms to govern the network. DMD Diamond 3.0 will be run by state of the art Proof-of-Stake only, while Proof-of-Work is going to be removed completely.. Version 1.0 2 DMD Diamond See https//bit.diamonds/images/rollout_graph.png for higher resolution image Emission model in stages Below mentioned stages are just approximation that are to give general overview of how the issuance model is going to roll out; the dates will likely be subject to variation as all the changes are based on block numbers and not specific dates. Stage 1 from 2017-09-01 till 2018-02-01 From Block 0 till Block 115200 the reward will remain constant at 2.35DMD. Diamonds yearly monetary inflation will come down from the starting position of 23.7 and drop to 21.6 within 6 months time. Version 1.0 3 DMD Diamond Please note that in the first 1920 blocks the block reward will be 0.0235 instead of 2.35 to prevent instamining with Masternodes and Proof-of-Stake and give everyone time to migrate to the new blockchain. Stage 2 from 2017-03-01 till 2020-08-01 From Block 134400 till Block 691200 the reward emission will follow a curved line decreasing rewards slightly each month from 2.29DMD per block to 0.55DMD within 29 months. Also, a yearly monetary inflation rate will decrease substantially from 20.6 to 3.8 within that period. Stage 3 from 2020-09-01 till 2027-07-01 From Block 710400 till block 2284800 the reduction in network rewards will slow down from 0.5 DMD to 0.157 DMD per block, while annual monetary inflation will fall from 3.5 to 0.96 within that period. Stage 4 from 2027-08-01 - ongoing From Block 2304000 onward the network rewards will remain at constant level of 0.1563 DMD per block. Yearly inflation will be reducing slowly from 0.95 to 0.87 in the space of 10 years. Proof-of-Stake algorithm specification Layer 1 protocol’s block time, without using Diamond Masternodes, is 135 seconds requiring 6 confirmations for fully accepted transaction. This on average produces 640 blocks per day. The block size will be set to 3 MB. Block rewards are split between Proof of Stake and Masternodes, 35 and 65 respectively. The reason the Masternodes get relatively bigger share is to create Version 1.0 4 DMD Diamond greater incentive to run high perance Masternodes that are capable of powering various additional network services. With Layer 2 - Diamond Masternode Network - transaction will be fully confirmed and finalized in seconds. However, using Diamond Masternode network to make transactions is an optional feature. Layer 1 protocol, albeit not as fast, with default transaction speed can still process 12x more transactions than bitcoin. Treasure Digging – striving for deflation Reduction of money supply is a countermeasure to inflationary duation. The scarcer the supply, the suppliers can demand higher prices for the commodity. Conversely, the more abundant the supply, the cheaper the commodity. After DMD Diamond reaches Stage 4 there will be a long period of slowly decreasing annual interest rate. That is why DMD Diamond Foundation will aim at creating conditions that lead to deflation in the monetary system. This will be achieved through a new feature of Treasure Digging that involves burning coins. Burning coins is about sending them to an address which is unspendable; an address that has not derived from a private key but was rather generated manually. Treasure Digging will give ability to search for Unspent Transaction Outputs UTXO that was inactive for 10 years and claim part of their balance as a reward while the rest of the coins are burned. An address that has outputs of at least 10 years old qualify to be treated as ‘lost coins’ where the owner no longer has access to them, could be either through lost passwords, coins sent to wrong address or any other misfortune. As a transaction is time stamped every time the coins are moved, the counter towards 10 year check automatically resets. Active participants who utilize DMD Diamond or actively support the network by staking coins by definition reset their Version 1.0 5 DMD Diamond clocks proving the coins are not lost. For long term holders there would be self-check safeguards at wallet startup that provide easy one click solution to extend shelf life of coins for another 10 years. Also, a single UTXO of 10 000 DMD will be immune to Treasure Digging as this coin pile size is reserved for Diamond Masternodes and as such can be used as an endless secure cold storage. This feature will create a situation where more coins are removed from the circulation than are added to it through regular network reward system. Another positive aspect of this feature would be incentivizing people to pay more attention to their money and encourage in active participation of securing the network. The technical details of how this feature will work are going to be published closer to the software release date. If Treasure Digging feature alone is not enough to keep DMD Diamond forever from reaching a total 4,380,000 coins, there will be an array of services and apps which will require burning DMD which will ensure the total number of coins is never reached. What’s more, in DMD Diamond 3.0 transaction fees will be burned to create an additional deflationary effect. Proof of Stake 3.0 DMD Diamond 3.0 adopts Proof-of-Stake 3.0 which solves many underlying issues of Proof of Stake used in DMD Diamond 2.0. As in all implementations of Proof-of-Stake one must prove it has access to coins which grants the user ability to partake in network competition where the main prize is privilege to sign the transaction for which the winner is rewarded with new coins. The general rule states the higher the network competition there more secure the network becomes. Version 1.0 6 DMD Diamond Proof-of-Stake 3.0 dealt with security and stability deficiencies of the previous generation of Proof of Stake including Coin Age, Blockchain Precomputation and Block Rewards. All the above constitute a potential attack vectors. The original implementation of Proof-of-Stake used a concept of Coin Age. It was meant to incentives those holders who do not take part in securing the network very often by making it easier to win the race if the coins were held untouched for a long time. Coin age was calculated by the weight of unspent coin UTXO and the time they have been dormant. It was argued the more reluctant participants would be more keen to take part in network competition and work in harmony with those who partake on 24/7 basis. Also, from monetary issuance model it created a static yearly interest rate for all participants. However, this model has introduced some worrisome behaviours where majority of shareholders were disconnecting from the network for long periods of time, gaining enough coin age to stake and connecting again to claim their rewards. This became a reoccurring pattern. With such system in place there was little incentive to keep nodes running continuously, and the fewer the nodes the easier it was to cute an attack especially as the stakes could be compounded and coin age gathered in advance. Another attack vector that er Proof-of-Stake protocol was vulnerable to was Blockchain Precomputation. Proof-of-Stake 3.0 introduced stake modifier interval that enhances obfuscation of hash which makes it harder to predict the time of the next proof of stake block. This prevents an attacker from staking multiple blocks in a row. Furthermore, as mentioned above, Proof-of-Stake based on Coin Age - which tried to create a common APR for all users - did not encourage satisfactory level of network support and yearly compounding interest was not big enough pull factor for users to run their nodes continuously. To prevent this in Proof-of-Stake 3.0 the block reward was made a constant 2.35 DMD per block initially. This was based proportional to the supply of coins maintaining yearly interest at around Version 1.0 7 DMD Diamond 25. Block reward will be following emission curve line reducing its block value over a period of time to reflect set coin rollout. Now only active participants can compete for the network reward. Probability of a node winning the right to sign a transaction will be proportional to the percentage of its share of allocated coins taking part in that competition. With this change the fewer participants the bigger the rewards as totality of the paid out reward is split among fewer participants. This measure creates much stronger pull factor encouraging the network to grow and compete. DMD Diamonds hybrid security scheme mitigated some attack risks by having Proof of Stake and Proof of Work blocks interlacing one another making it harder for a potential attacker to corrupt the system as he/she not only had to gain majority control in staking but also control majority of the mining channel. With the appearance of FPGA mining, which completely centralized mining, Proof of Work protocol no longer posed a credible solution to the network security and the support for this channel has been dropped. Proof of Stake 3.0 is a credible alternative that is much more energy efficient and minimizes environmental impact of normally energy intensive tasks. Also, lower hardware requirements make the system more appealing to a wider group of users and investors. The strength of DMD Diamond has always been the self-adjusting Proof of Stake engine as it allowed the user to be mpt from tedious micromanagement of coin piles. With that in mind the Proof of Stake 3.0 engine will give the same comfort of use for its users by utilizing adaptable coin pile split and dust merge rulesets with default values that should fit most users out of the box. Additionally, it will feature easy and automatic forwarding of Masternode rewards to your primary Proof of Stake address. Version 1.0 8 DMD Diamond Diamond Masternodes A DMD Diamond network consists of full nodes running as servers facilitating connectivity and transmission of updates. Masternodes is a time tested concept which was originally created to prevent decrease in number of full nodes and incentivize people to keep the network running, decentralised and expanding. Over the years as the technology matured Masternodes became ever more useful and could per additional network services that go above what a vanilla full node could do. Diamond Masternode is a computer a node that runs Diamond Wallet constantly connected to the Diamond Network and pers certain network duties/services for which it gets network rewards. To become a Diamond Masternode you are required to send exactly 10 000 DMD towards a Masternode address and leaving it unspent which will be used as a collateral. These coins never leave your wallet and are only used to prove you have the right to become a Diamond Network service provider. A user can at any time opt out from Diamond Masternode program keeping all the coins. There are numerous benefits to being in the Diamond Masternode program such as providing network stability and efficiency but also it reduces the volatility of the currency by withdrawing large amounts of coins from the open market which in turn aids price appreciation. When DMD Diamond 3.0 is launched there will be two types of services Diamond Masternodes would do transactions mixing MixTX and quick transactions QuickTX. Quick Transactions QuickTX - transactions sent with the use of this feature can be received and deemed fully confirmed in a matter of seconds. This is much faster than using traditional way which can take up to 2.25 minutes to achieve Version 1.0 9 DMD Diamond one confirmation. In contrast, Bitcoin takes about 10 minutes to confirm a payment once; this makes DMD Diamond 4x faster. Transactions Mixing MixTX - this service provides enhanced anonymity by allowing properly prepared coin piles, through the build in Diamond Wallet coin-mixer tool, to be sent making it much harder to trace the source address. In the future, Diamond Masternodes are planned to enable many more services and its first instalment can be considered a foundation upon which the future network services will be built. How much can I earn with a Masternode Diamond Masternodes cost money and effort to host so they are paid a share of the block reward to incentivize them. Diamond Masternodes are paid 65 of every Proof-of-Stake block rewards, which is distributed to Diamond Master Nodes one at a time on a random basis. Diamond Network is projected to have just a couple of hundred of such nodes running. Because of that, each Masternode will take part in many pay-out rounds each day frequency depends on Masternode competition making sure that investment, upkeep and servicing of Masternodes stays rewarding. This is in stark contrast to what other projects propose where one has to wait for days to get a chance of earning the reward. There are three types of limits on the number of active Masternodes. The first limit is set by the number of coins available in the system. There will be 4 380 000 coins ever produced / 10 000 coins needed for collateral which gives us 438 Masternodes in total. The second limit comes in a of a psychological and financial barrier where it becomes increasingly expensive to acquire a Masternode due to limited market liquidity and coins being used or burned and not traded on the cryptocurrency exchanges. Version 1.0 10 DMD Diamond The third limiting factor is the number of active Masternodes. Wh