NXT Whitepaper - Payment Network

NXT Whitepaper - Payment Network

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BCNext (pseudonym)
NXT is an open source cryptocurrency and payment network launched in November 2013 by anonymous software developer BCNext.

It uses proof-of-stake to reach consensus for transactions - as such there is a static money supply and, unlike Bitcoin, no mining.

NXT was specifically conceived as a flexible platform around which to build applications and financial services. It has an integrated Asset Exchange (comparable to shares), messaging system and marketplace. Users can also create new currencies within the system.

Bitcoin has proven that a peer-to-peer electronic cash system can indeed work and fulfill payments processing without requiring trust or a central mint. However, for an entire electronic economy to be based on a fully decentralized, peer-to-peer solution, it must be able to do the following: process transactions securely, quickly and efficiently, at the rate of thousands per hour or more; provide incentives for people to participate in securing the network; scale globally with a minimal resource footprint; offer a range of basic transaction types that launch cryptocurrencies past the core feature of a payment system alone; provide an agile architecture that facilitates the addition of new core features, and allows for the creation and deployment of advanced applications; and be able to run on a broad range of devices, including mobile ones. NXT (pronounced “next”) satisfies all these requirements.

Introduction and Overview
NXT is a 100% proof-of-stake cryptocurrency, constructed from scratch in open-source Java. NXT's unique proof-of-stake algorithm does not depend on any implementation of the “coin age” concept used by other proof-of-stake cryptocurrencies, and is resistant to so-called “nothing at stake” attacks. A total quantity of 1 billion available tokens were distributed in the genesis block. Curve25519 cryptography is used to provide a balance of security and required processing power, along with more commonly used SHA256 hashing algorithms.
Blocks are generated every 60 seconds, on average, by accounts that are unlocked on network nodes. Since the full token supply already exists, NXT is redistributed through the inclusion of transaction fees which are awarded to an account when it successfully creates a block. This process is known as forging, and is akin to the “mining” concept employed by other cryptocurrencies. Transactions are deemed safe after 10 block confirmations, and NXT's current architecture and block size cap allows for the processing of up to 367,200 transactions per day.

NXT transactions are based on a series of core transaction types that do not require any script processing or transaction input/output processing on the part of network nodes. These transaction primitives allow core support for:
  • a fully-decentralized asset exchange
  • alias creation, transfer and sale
  • storage of small, optionally encryptable strings of data on the blockchain
  • a digital goods store
  • account control features
By leveraging these primitive transaction types, NXT's core can be seen as an agile, base-layer protocol upon which a limitless range of services, applications, and other currencies can be built.

Ongoing NXT development includes the implementation of a novel Transparent Forging feature which will allow a transaction processing capacity increase of two orders of magnitude using a deterministic block generation algorithm, coupled with additional network security mechanisms. The latest development roadmap2 also outlines the following short-term feature additions to the NXT core:
  • a voting system
  • asset exchange dividend payments
  • a monetary system for facilitating the creation of new cryptocurrencies and associated services that are secured by the NXT blockchain
  • atomic cross-chain trading, multi-signature transactions and escrow features
  • additional mechanisms for securing the NXT blockchain, including penalties for accounts that do not behave as expected on the network
Whitepaper Timing
Most cryptocurrency creators issue a whitepaper before their currency is boot-strapped. NXT's first formal whitepaper was created for version 1.2.2 of the NXT software, almost eight months after the creation of the genesis block.

The core development team has always been of the opinion that NXT's source code is its whitepaper: since Java is human-readable and the full source is available, anyone is welcome to gain an understanding of NXT's mechanics by examining the source. This whitepaper can be seen as a translation of key components of the Java source code into English, and it was created in order to make the design and function of Nxt more accessible to people who do not possess programming skills.