The AppCoins Whitepaper In Short
TL;DR In this post we provide an executive summary of the entire AppCoins whitepaper. It has enough detail to understand the AppCoins solution, while keeping the reading time under 10 minutes.
Today there are 2.1 bn smartphone users in the world generating more than USD77 bn in annual gross revenue. Those numbers are projected to double by 2020. However, app stores are still riddled with inefficiencies and malware. In-app purchases (IAP) are not accessible to the low-end market, in-app advertising is plagued by too many intermediaries, malware is still prevalent and innovation is slowing down.
The reasons are diverse: payment models are not suited for emerging countries and younger generations; there is no trust between the actors of the ecosystem; and there is a lack of standardisation defining clear interfaces and enabling market free entry for new players. The AppCoins network is an open and distributed protocol built on the Ethereum blockchain. It aims to mitigate the current inherent deficiencies of app stores.
By marrying blockchain technology with app store technology, app advertising, in-app billing and app-approval can be drastically improved and sped up through disintermediation and redistributing the unlocked value to end-users and developers. “AppCoin” ERC20 token will be used by the developers to advertise their Apps to the users. From every advertising investment inside the app store, 85% goes to the user. The user has to use those coins to buy items (in-app purchase) inside the apps and games, generating the return of the investment to the developers.
In parallel, the Advertising and IAB transactions are used to establish the reputation of the developer. The design of the AppCoins protocol rests on three main pillars: 1) transparency, 2) equitability and 3) community-focus.
Firstly, open and transparent standards facilitate trust and privacy. Secondly, revenue shares are redistributed away from unnecessary intermediaries to end-users and developers. Thirdly, through open-source code, knowledge is accessible to the community.
The AppCoins network redefines the following three app store core processes: 1. Advertising inside the app store — Developers advertising to users to install their app or game. There are different advertising models depending on the intended action: CPI (Cost per Installation), CPA (Cost per Action), CPM (Cost per Thousand Impressions) and others. There are different technologies and platforms to support it: Ad networks, Exchanges and RTB (Real Time Bidding).
2. In-App Purchase (IAP) —When users want to unlock premium features inside the app or game, the purchase mechanism is tied to the respective app store. To enable payment transactions, the developer has to either integrate the SDK from the app store or use its API.
3. App approval — To offer the app in the store, developers have to go through a stringent approval process in which the submitted app is screened by anti-virus and anti-malware tools, as well as static and dynamic code analysis platforms. Some app stores also rely on manual app testing.
Blockchain Limitations and Scalability
AppCoins, aims to use the blockchain to to enable a worldwide app economy by:
- Storing digital value
- Coupling value storage and transfers, with logic
- Scaling it to millions of users
Unfortunately, pure blockchain technology will only solve the first point. Using blockchains comes at a high price in terms of scalability, which results from it being a distributed network and from using a proof-of-work method for mining new blocks. Because a blockchain is a distributed network, all the nodes perform the same computations on the same data. To provide security for the system, many computers are required to mine for new blocks.
Blockchain have a number of limitations in terms of scalability:
- Limited transaction volume
- High fees
- Latency
At the present there are about 2 billion Android users. The average Ethereum transaction is around 160 bytes [1]. If we wanted to create an AppCoin economy directly on Ethereum using these numbers, we would get a system with the characteristics shown in the table below:
At the present Ethereum is incapable of handling this volume with an acceptable latency and cost. Additionally all transactions ever done are publicly visible on the blockchain which might not be desired either. For more detailed information on these please see our white paper [1].
Naturally we at AppCoins were not the first to recognise these drawbacks. Projects like the Lightning Network [2] (for Bitcoin and derivations) or Raiden [3](Ethereum) were started to deal with these. They address all the challenges mentioned by using direct payment channels between the participants to facilitate payments. How does this work?
Direct payment channels
In short, by creating a payment channel two parties deposit initial funds in a smart contract on the blockchain. Now, whenever they want to do a payment, they exchange receipts with a new balance signed by them. This way they can do any number of payments between them, assuming they don’t exceed the balance. If the intended transfer is higher than the balance, an increase of the deposit is made. Only when a party wants its funds back it contacts the smart contract with the latest receipt and can recover their balance. In case of disputes, the smart contract is the final mediator using receipts from both parties as proofs.
Because the payments are done offline from the main blockchain network, the volume of transactions is practically unrestricted. There is minimal, possibly no fees and the latency is only limited by the link capabilities between the two participants. Therefore the scalability problem is solved. Additionally the transactions are not public but known only to the parties involved.
AppCoins scenario
AppCoins will be an ERC20 compliant Ethereum token. The app store functions as a bank. It will provide smart contracts where, upon deposit, a user has his Ether converted into AppCoins and a payment channel between the user and the app store is opened. Just like when a person opens an account in a bank.
The app store acts as the gateway to the digital payment world for the user. It is also an intermediary to facilitate transactions to users connected through other app stores, i.e. it is a payment hub. The payments are instant, cheap and there can be any number of them.
What about the fees? The user has to pay fees on each Ether deposit to his account with the app store and on checking out, i.e. settling his payment channel. Further fees may be the taxation done by the app store used to pay for its infrastructure. If there is several app stores in the same ecosystem like we envision, there might be further (minimal) fees to forward the payments from one user to another.
Sources:
[1] P. Trezentos, D. Pires, and Aptoide Team, “AppCoins: Distributed and Trusted App-based Transactions Protocol.” [Online]. Available: https://appcoins.io/pdf/appcoins_whitepaper.pdf.
[2] E. Stark, “What is the Lightning Network and how can it help Bitcoin scale?,” Coin Center, 15-Sep-2016. [Online]. Available: https://coincenter.org/entry/what-is-the-lightning-network.
[3] C. Joker, “Raiden Network Explained: Continuing the Blockchain Revolution,” Bitcoin & Ethereum & Crypto Blockchain News, 11-Sep-2017. [Online]. Available: https://coinjoker.com/raiden-explained/. [Accessed: 26-Oct-2017].
[4] Etherscan.io, “Ethereum Transaction Growth Chart,” Etherscan. [Online]. Available: https://etherscan.io/chart/tx. [Accessed: 26-Oct-2017].
