Escrow Mechanism
Manda revolutionizes the way DAOs operate by enhancing efficiency and security. While opening a world of opportunities, Manda aims to eliminates the complexity and high cost traditionally associated with DAO operations.
As you know DAO stands for Decentralized Autonomous Organization but the definition is unclear. Decentralization can be explained as the combination of a social layer and a technical layer. The social layer, is the governance and the decision making, exposing multiple issues ******described here. The technical layer is the code that assures a trustless collaboration. Both layers need to be decentralized, without any single poin tof failure. It’s today possible but not efficient.
The Problem
Many DAO operations (Decentralized Operation or dOP) are nipped in the bud due to the complexity to execute it safely. The operation needs to be perfect: without vulnerabilty and not gameable at any point of the operation. Executing an operation decided by the governance is complex and costly. The DAO needs to create custom smart contracts and audit them. But how to do it safely when just handful of decision makers actually understand what is happening under the hood?
The process of planning it internally is time consuming, costly, highly dependent on the governance model of the entity and susceptible to security breaches. Some DAOs commission external labs to execute the operation. But requiring a third party is costly and can be an external vulnerability. Link: the exploit of Tornado Cash
In order to automate operations and cut operational costs, Manda aims to provide a simple and secure mechanism to swap digital assets on the blockchain, regardless of the number of stakeholders involved in process.
Introducing Manda Swap System, an alternative Swap designed to facilitate trustless DAO operations.
Digital assets swaps on blockchains
Swapping digital assets on the blockchain is one of the oldest use cases of cryptocurrencies, especially since the birth of the Ethereum protocol and the first token standard, ERC-20. However, over the years digital assets have evolved a lot and can now take many forms, they can be fungible, non fungible, semi-fungible.
Traditional Methods
Traditionally, the approach to swap digital assets has always been to leverage custom logic of smart contracts to build objective and decentralized escrows to perform “trustless” swaps.
Rani rephrase:
Traditionally, the approach to swap digital assets has been to leverage custom logic smart contracts. Such custom contracts could perform as decentralized escrows to ensure the execution of a trust-less swaps.
<aside> 💡 The smart contract acts as a neutral party, it eliminates the need for a third party to be involved in the swap, and therefore the need of each counterparty involved in the trade to entrust that third party with their funds.
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Counterparties are still trusting the author of the smart contract to write secure enough code, so that the funds residing in that smart contract cannot be stolen by a malicious actor. Unfortunately, so far, history has proven that writing secure code in a Turing complete language is not trivial.
Some popular patterns such as Hash Time Locked contracts, or Atomic Swap contracts, have emerged over the years to provide infrastructure for such swaps. However, they are often difficult to set up (HTLC needs a secret to be shared between the two counter parties, i.e. access to a true source of randomness). Most importantly, they all operate under the assumption that a smart contract is secure enough to act as a store of value.
The Solution at Manda
Manda aims to give an alternative for DAO operation, enabling each party to be sovereign of their fund all the time during the swap operation.
Trusting blindly the store of value during the swap process minimize the need of custom logic. With Manda Swap System the funds are held during the swap process in a quantum proof vault where only you and your counterparty shares the key. Rather than acting as vault, smart-contracts are only used as tools enacting transfer of value only. The process is modularized to apply the correct transfer rules to the type of digital assets being transferred.
The first step of our swap protocol, will be for the counterparties to create the vault they will use to conduct the transaction.
This “quantum proof vault”, is a dEOA (distributed EOA). You can understand it as an account shared by all the involved counterparties, where instead of having one private key, there are a collection of key shares split evenly between the participants.
Once the vault is up and running, and before any counterparties moves any of their assets to the vault, the swap environment must be set.
The swap environment is set when all counterparties, through the dEOA, sign a transaction that will deploy the escrow smart contract responsible for the swap, and grant it the permission to act as an authorized spender of the dEOA’s funds. This step is crucial, and should never be overlooked as it ensures the most important aspect of our swap protocol: self-recovery of assets, or ragequit as we like to call it. In fact, by designating the escrow as an authorized spender of the funds of the dEOA (nb: it can spend up to the amount agreed to be swapped for each asset) we ensure that any participant can bypass the threshold requirements of the dEOA to transact and ask the escrow directly, from their personal account, to recover the assets they had sent to the dEOA.
Once the swap environment is set up correctly, all that is left to do is for counterparties to send the assets to be swapped to the dEOA, and sign the transaction that will allow the escrow to redistribute the funds. Alternatively, if for any reason one of the counterparties does not want to perform the swap anymore, they can recover their funds by rage quitting.
Performing asset swaps in such a way brings several benefits. In fact, counterparties sovereign of their funds at all times preceding the swap, since the funds sit in a vault only they control, and self recovery of funds is ensured. Moreover, either all counterparties sign on the deal and the swap happens, or it doesn’t, and funds go back to their owners which makes the swap atomic. Finally, since we separate the store of value from the execution environment, new or custom swap environment can be set up effortlessly, without any additional costs on the participants, which allows our protocol to meet the evolving needs of traders.
Conclusion
To be competitive to Trad Org, DAO need to have the same opportunities, to have access to any operation and to trade with any parties. Manda, develop tools in order to make DAO evolve in an more autonomous and more efficient era.
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