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COTI Overview | Digital Currency Built for Payments

luisramalho(29)

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COTI is a payments transaction network supported by a native digital currency called XCT. Their goal is to solve the payments challenges that we are facing today by combining the best of both worlds; the blockchain and traditional payments.

In a nutshell, COTI wants to provide a reliable and cost-effective form of payment for buyers and sellers.

Components

They will basically have three components: the network core, its native currency, and its applications and services.

Let's now see what are each of there.

Network core

So, Network core. There are three key components underpinning COTI’s network, which include:

(1) The Trust Scoring Engine, which automatically assesses the interactions between buyers and sellers over time, assigning each network participant with a unique Trust Score.

(2) The Mediation System, which resolves disputes between transacting parties and maintains the integrity of the network.

(3) The Currency Exchange, which provides network participants with a means of moving seamlessly between currencies — both fiat and digital.

Native currency

Then we have the native currency, XCT. This is a digital currency that serves as a way of collecting network fees, compensating mediators, exchange between buyers and sellers. They claim that XCT was designed to overcome the scalability challenges associated with the current digital currencies, and that it will support instant, zero-fee transactions.

Applications and services

Finally, the applications and services. Here they say in the white paper that they are developing a collection of applications and services that will provide individuals, merchants and crowdsourced mediators with seamless connectivity to the COTI network. So, COTI wallet and virtual debit cards for the consumers. For merchants, they will provide processing solutions that will in turn facilitate the acceptance of payments in either fiat or digital currencies at substantially lower processing fees. And finally for mediators, the COTI mediator client will enable mediators to contribute to, and be compensated for, the successful resolution of transaction disputes.

Furthermore, COTI wants to comply with existing regulations, both as a payments network and as a currency exchange. Thus, they are working in the licensing of this product.

In the white paper, they explain in much more detail how these components will work together. Definitely recommend that you go and have a look as it is very comprehensive. One thing I appreciate is when white paper are written in LaTeX, it does add a layer of credibility. I also appreciate that they did include a substantial amount of mathematics in the white paper.

Scaling Blockchain Payments

An interesting section is the "Scaling Blockchain Payments".

In there they mention that trust scoring and the RCF combined with system-specific risk mitigation tactics can provide the ability to scale slow-to-settle payment systems, both traditional and blockchain alike.

As you know, Bitcoin is trying to address the scalability issues with proposals such as the lightning network. Therefore, and to the extent that COTI is deployed as part of the Bitcoin blockchain COTI plans to leverage parts of these designs to enable
large off-chain transactions to occur at high throughput while maintain on-chain enforceability.

However, the credit based model is the real strength of COTI. This provides buyers and sellers with credit alike, and therefore the slow-to-settle base infrastructure becomes significantly less limiting so long as COTI has confidence in eventual settlement.

That's all about COTI. A sustainable network-based payment feature set, including instant credit, risk-based pricing, decentralized mediation, and network-based market making. The aim is to provide users with the ability for low-risk transactions with low fees.

Let me know what you think about this project in the comments.