Terms and Conditions for the Trustlines Validator Auction

Background

The Auction

The Trustlines Validator auction is a Dutch auction held to discover the fair opportunity cost value, i.e. price of a Validator Slot. The Ethereum address of successful bidders in a successful Auction will be included in the Validator Set.

  1. Acceptable tokens for a bid: The Auction is a smart contract on the Ethereum Mainchain. Note that the smart contract will not accept any other tokens than ETH as a bid.
  2. Participation: To be able to participate in the Auction, your Ethereum address must have been whitelisted by the Foundation prior to the start of the Auction. Every whitelisted Ethereum address can participate in the auction only once.
  3. Timing: The Auction ends at the earliest of two full calendar weeks starting from the Start Date or when the 55th successful bid is received by the smart contract. Whichever comes first.
  4. Threshold: If fewer than 20 Ethereum addresses have successfully participated at the time the Auction ends, it will fail. No Validator slots will be awarded and all participants can withdraw their bids. If 20 or more successful bids were received, the Auction will succeed.
  5. Limited Validator Slots: 55 Validator Slots are up for auction.

How the Auction works

The Auction begins when a transaction is sent by the Foundation at the Start Date. After this transaction, the smart contract operates independently and the Foundation will neither have nor retain any control or influence over it.

Once initialized, the Auction starts at a price of 10,000 ETH per Validator Slot. Then the price will continuously decrease over time as defined by the following parameters & functions:

    t = elapsed_time_in_ms / auction_duration_in_days,
    price = price_start * (1+t) / (1+t+decay),
    decay = (t^3) / 746571428571
  

whereby:

  • elapsed_time_in_ms is the elapsed time in ms since the auction started
  • auction_duration_in_days equals 14 days
  • price_start equals 10,000 ETH

When the price falls to a point that a Validator Candidate thinks is fair, they can send that amount as a bid to the smart contract. If and when the transaction is successfully included in the Ethereum Mainchain, the Validator Candidate has obtained a Validator Slot in the event of a successful Auction (see Threshold).

If the Auction is successful, all Validator Slots are priced equal, i.e. being equal to the price of the last successful bid received by the smart contract. Every participant can withdraw the difference between the end Validator Slot price and their bid.

The final Validator Slot price of each Validator Slot cannot be withdrawn from the smart contract and will be transferred to the Deposit Locker (more info in the definition of the Validator Auction) smart contract and kept there as a Stake for 9 months starting from the date the Auction ends (see Timing). Once the 9 months have passed, Validators can withdraw their Stake provided it doesn’t get slashed due to equivocation.

Validator technical capabilities

If a Validator Candidate successfully bid for a slot in the Auction, he/she will be included in the Validator Set. This will allow the Validator to run a validator node which can create blocks on the Trustlines Blockchain. Additionally to validating and creating blocks (including the genesis block) they will also be able to operate the Trustlines Bridge which is used to exchange Trustlines Network Tokens from the Ethereum Mainchain to Trustlines Network Coins on the Trustlines Blockchain. Other than these described capabilities there are no other unique capabilities connected solely to a Validator slot.

Why participate

The Trustlines Blockchain is a minimal viable Proof of Stake sidechain to the Ethereum Mainchain and is governed by a greenfield governance model in which Validators can gain technical and governance experience with such an experimental consensus model.

Besides the Validator technical capabilities mentioned above, Validators will also receive block rewards (as to be defined within the chain spec) in the form of Trustlines Network Coins if they actively run their validator node and take part in block creation. They will also be in a position to charge transaction fees for transactions that are included within the blocks a Validator creates.

Note that receiving block rewards and transaction fees is dependent on a community of Validators emerging and the potential users of the Trustlines Blockchain. The Foundation cannot guarantee that a Trustlines Blockchain including the Chain Spec as proposed by the Foundation actually emerges out of the actions of these third party stakeholders. Hence, participating in the Auction and thereby agreeing to these Terms and Conditions does not entail a right or an entitlement in any way whatsoever to either becoming and/or remaining a Validator or receiving block rewards and/or transaction fees.

General remarks, recommendations and good practice

Bidding and therefore sending ETH to the Auction does not guarantee a Validator Slot. Especially, your bid/transaction will be rejected:

  • If you send ETH from an address that isn’t whitelisted
  • If you bid less than the current Auction price
  • If you send ETH before the Auction has started or after the auction has ended
  • If you have already sent a transaction to the Auction (multiple bids will not result in more than one slot. Only 1 slot per person).

Additionally:

  • The Auction might not meet the threshold of 20 bidders, in which case the Auction has failed and the ETH bid can be withdrawn from the smart contract by its respective Auction participant.
  • The Validators might choose not to launch the Trustlines Blockchain. This requires at least 50% of the Validator Set to do so.
  • Users of the Trustlines Blockchain or projects building on top of it might align on a different Validator Set, therefore choosing a different fork of the Trustlines Blockchain rendering the Validator Set determined by the auction obsolete. Validators will still be able to withdraw their Stake after the 9-month staking period.

The functioning of the Ethereum mainchain is out of the control of the Foundation, so the Foundation cannot be held liable for any malfunction, breakdown or abandonment of the Ethereum protocol and/or the Ethereum Mainchain.

All actions are voluntary, there is no obligation to take part in the Auction.

The Auction does not directly benefit the Foundation.

Validators can be removed from the Validator Set by the majority of the Trustlines Blockchain community by hard forking. Validators removed from the Validator set in such a way will neither earn block rewards nor transaction fees going forward. The Stake on the Ethereum Mainchain will remain locked for the remainder of the 9-month Staking period and will be slashable if equivocation can be proved.

Definitions

Affiliate(s) means any and all persons and or entities directly or indirectly controlling, controlled by or under common control with such person, where control may be by either management authority, contract or equity interest.

Ethereum Mainchain or Ethereum blockchain means the smart contract protocol, virtual machine and decentralized network including all its related components and protocol-related projects both present and future, which​ ​began​ ​operation​ ​(Genesis​ ​Block)​ ​on​ ​July​ ​30th,​ ​2015.

Ether (ETH) means the cryptocurrency native to the Ethereum mainchain, i.e. the blockchain token​ ​of​ ​Ethereum.

Trustlines Network is short for “The Trustlines Network ecosystem”, which is an ecosystem of entities, individuals and code that aims to promote financial & economic inclusion of all people through decentralized and open source systems.

Trustlines Protocol represents a set of rules, processes and definitions forged into deployable code. It will comprise several technical components used to calculate paths and store transactions, i.e. smart contracts, the Trustlines Blockchain and the code for the relay servers. It aims to provide a base layer to enable interactions within the Trustlines Network.

Trustlines Blockchain means a purpose built sidechain to the Ethereum mainchain that is intended to serve as a database and storage for transactions to support an implementation of the Trustlines Protocol.

Foundation means​ ​the Foundation,​ ​a​ ​Liechtenstein non-profit​ foundation​ ​registered​ ​in​ Ruggell, Liechtenstein.

Final Validator slot price is the price of the last successful bid that has been successfully sent to the auction contract and is included in the Ethereum Mainchain

Proof of Stake (PoS) means a type of consensus algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. In PoS-based cryptocurrency blockchain networks the creator of the next block is chosen via various combinations of random selection. In contrast, the algorithm of proof-of-work-based cryptocurrencies such as bitcoin uses mining; that is, the solving of computationally intensive puzzles to validate transactions and create new blocks.

Sidechain means a designation for a blockchain that runs in parallel to a primary blockchain. Entries from the primary blockchain can be linked to and from the sidechain; this allows the sidechain to otherwise operate independently of the primary blockchain.

Validator means an individual or entity who or which has deployed and operates the Trustlines Blockchain client in order to validate and relay transactions on the Trustlines Blockchain and is part of the Validator Set.

Auction means the Trustlines Validator auction governed by these terms and conditions. This auction is being hosted via a combination of Smart Contracts on the Ethereum Mainchain in order to discover the fair opportunity cost value (i.e. price of a Validator Slot) and thereby the amount of ETH to be staked in order to obtain a Validator Slot on the Trustlines Blockchain.

Validator Candidate means an individual or entity whose Ethereum address which he/she/it has provided to the Foundation and has been whitelisted in the Auction smart contract by the Foundation in order to take part in the Auction.

Validator Slot one of the 55 Validator positions being auctioned in this Auction.

Validator Set means a list of the Ethereum addresses of the Validator Candidates that have successfully obtained a Validator Slot. Said list being maintained in a specific smart contract as defined within the chain spec.

Terms mean these terms and conditions forming the Agreement between you, the Validator Candidate and the Foundation

Disputes means any dispute, claim, suit, action,cause of action, demand or proceeding arising out​ ​or​ ​in​ ​connection​ ​with​ ​this​ ​Agreement,​ ​or​ ​the​ ​breach,​ ​termination​ ​or​ ​invalidity​ ​thereof.

Stake means the amount of ETH deposited in the Deposit Locker smart contract and equaling the final Auction Validator Slot price.

Trustlines Bridge means a combination of one smart contract deployed on the Ethereum Mainchain, one smart contract deployed on the Trustlines Blockchain and a tool (tlbc - bridge) that Validators run. It allows to transfer Trustlines Network Token from the Ethereum Mainchain into the Trustlines chain as native Trustlines Network Coins. The exact code and specifications of the Trustlines Bridge are still in development.

Trustlines Network Tokens (TLN) means tokens within the ERC20 TLN token contract on the Ethereum Mainchain, which can be converted to TLC by sending them to the Trustlines Bridge.

Trustlines Network Coins (TLC) means similar to the Ethereum Mainchain, the Trustlines Blockchain requires transaction fees to be paid in a cryptocurrency native to the blockchain. These tokens will be called Trustlines Network Coins. The exact code and specifications of the TLC is still in development.

Chain spec means a JSON file which specifies rules of a blockchain

JSON means an open-standard file format that uses human-readable text to transmit data objects consisting of attribute–value pairs and array data types.

Smart Contract(s) means the specific smart contracts used for this Auction as can be viewed on https://etherscan.io/address/0x7255E01F934307FfB7a41FC78B6b1688f5dc6845

Equivocation We define equivocation of a (present, former, or future) validator as using their private key to sign two or more different blocks with the same step number, irrespective of the block's height, validity, or other fields

Step number/time slot Validators are assigned time slots in a round robin fashion in which they can produce a block which increases the Blockchain length

Acceptance of terms and conditions

By participating in the Auction, you accept these terms and conditions.

Representations and warranties of the Validator Candidate

By participating in the Auction, the Validator Candidate represents and warrants that:

  1. You have read, understand and accept these Terms;
  2. You understand the restrictions and risks associated with taking part in the Auction as set forth in these Terms, and acknowledge and assume all such restrictions and risks;
  3. You have a sufficient understanding of the functionality, usage, storage, transmission mechanisms and intricacies associated with cryptographic tokens and blockchain-based software systems;
  4. You have obtained sufficient information about the Trustlines Protocol, the Trustlines Network, the Auction, the Validator technical capabilities, the Trustlines Blockchain and the Foundation to make an informed decision whether or not to take part in the Auction;
  5. You understand and accept that none of the information contained in these Terms is intended to form the basis for a solicitation or recommendation for an investment of any kind whatsoever;
  6. You understand and accept that you waive your rights to have any Dispute resolved in a court, and that you waive your rights to a jury trial. Instead, any Disputes will be settled through amicable negotiations and/or through binding arbitration.
  7. You are not registered on any of the following sanction lists; United Nations Sanctions (UN), US Consolidated Sanctions OFAC, Specially Designated Nationals (SDN), EU Financial Sanctions, UK Financial Sanctions (HMT), Australian Sanctions, Switzerland Sanction List - SECO, INTERPOL Wanted List, Consolidated Canadian Autonomous Sanctions List, Office of the Superintendent of Financial Institutions (Canada), Bureau of Industry and Security (US), Department of State, AECA Debarred List (US), Department of State, Nonproliferation Sanctions (US), or any other internationally recognised sanction list.
  8. Any and all of your actions, whether directly or indirectly related to the Auction, the Validator technical capabilities, the Validator Slots and the Trustlines Protocol comply with applicable laws and regulations in your jurisdiction, including, but not limited to, (i) legal capacity and any other threshold requirements in your jurisdiction (ii) and any foreign exchange or regulatory restrictions applicable to such actions.

Review and testing of the Smart Contracts

The Smart Contracts have been, on a reasonable effort basis, reviewed, tested and approved by technical experts. The technical experts have confirmed to the Foundation that the Auction Smart Contracts have, with regard to both accuracy and security, been programmed according to the current state of the art. The Validator Candidate however, understands and accepts that smart contract technology is still in an early development stage and its application is of an experimental nature which carries significant operational, technological, financial, regulatory and reputational risks. Accordingly, while the conducted review and testing raises the level of security and accuracy, in theory, the Validator Candidate understands and accepts that the review and testing does not amount to any form of warranty, including direct or indirect warranties that the Smart Contracts are fit for a particular purpose or do not contain any weaknesses, vulnerabilities or bugs which could cause, inter alia, the complete loss of the Ether sent to the Smart Contracts and/or held in the Smart Contract.

Associated risks

By participating in the Auction, you expressly acknowledge and assume the following risks:

  • Risk​ ​of​ ​losing​ a Validator Slot, ETH bid or Stake​ due​ ​to​ ​loss​ ​of​ ​private​ ​key(s);
  • Risks​ ​associated​ ​with​ ​the​ ​Ethereum​ blockchain: any malfunction, breakdown or abandonment of the Ethereum blockchain may have a material adverse effect on the Smart Contracts;
  • Risk​ ​of​ ​mining​ ​attacks: the Auction Smart Contract is susceptible to attacks by miners in the course of validating bids on the Ethereum blockchain, including, but not limited, to double-spend attacks, majority mining power attacks, and selfish-mining attacks. Any successful attacks present a risk to the Auction including, but not limited to, accurate execution and recording of bids;
  • Risk​ ​of​ ​hacking​ ​and​ ​security​ ​weaknesses: hackers or other malicious groups or organizations may attempt to interfere with the Auction in a variety of ways, including, but not limited to, malware attacks, denial of service attacks, consensus-based attacks, Sybil attacks, smurfing, and spoofing;
  • Risk​ ​of​ ​uninsured​ ​Losses: unlike bank accounts or accounts at financial institutions, the ETH held in the Auction Smart Contract is uninsured unless you specifically obtain private insurance to insure them. Thus, in the event of loss or loss of utility value, there is no public insurer or private insurance arranged by the Foundation, to offer recourse to you;
  • Risks​ ​associated​ ​with​ ​uncertain​ ​regulations​ ​and​ ​enforcement​ ​actions: the regulatory status of, including but not limited to the Auction, the Validator Slots, and distributed ledger technology is unclear or unsettled in many jurisdictions. It is difficult to predict how or whether regulatory agencies may apply existing regulation with respect to such technology and its applications. It is likewise difficult to predict how or whether legislatures or regulatory agencies may implement changes to law and regulations affecting distributed ledger technology and its applications, including but not limited to the Auction and the Validator Slots. Regulatory actions could negatively impact the whole Trustlines Protocol in various ways, including, for purposes of illustration only, that some or all of the parties involved in the Trustlines Protocol in general might require licensing or is subject to existing legislation;
  • Risks​ ​arising​ ​from​ ​taxation; the tax characterization of acquiring a Validator Slot and/or acting as a Validator is uncertain. You must seek your own tax advice in connection with your partaking in the Auction, which may result in adverse tax consequences to you, including withholding taxes, income taxes and tax reporting requirements.
  • Unanticipated​ ​risks: blockchain technology and the Trustlines Protocol are a new and untested technology. In addition to the risks referred to above, there are other risks associated with your partaking in the Trustlines Auction, including unanticipated risks. Such risks may further materialize as unanticipated variations or combinations of the risks previously referred to.

Indemnification

To the fullest extent permitted by applicable law, you will indemnify, defend and hold harmless the Foundation and its Affiliates from and against all claims, demands, actions, damages, losses, costs and expenses (including attorneys’ fees) that arise from or relate to (i) you participating in the Auction; (ii) your obligations, representations and warranties under these Terms, (iii) your violation of these Terms, and/or (iv) your violation of any rights of any other person or entity directly and indirectly related to the Auction.

Exclusion of Warranties

To the full extent permitted by law, no warranty, guarantee or similar assurance whatsoever is expressed or implied with regard to the Trustlines Protocol and its components. The smart contracts are used at the sole risk of the User (Users included but not limited to a Vaidator Candidate) and on an ‘as is’, ‘under development’ and ‘as available’ basis.

Participating in the Auction and thereby agreeing to these Terms does neither entail a right nor an entitlement in any way whatsoever to either becoming and/or remaining a Validator or receiving rewards and/or fees.

No Reliance

The Validator Candidate has had an opportunity to (i) review these Terms, (ii) ask questions and receive answers from the Foundation concerning these Terms and the Auction, and (iii) obtain any additional information concerning the Auction, the Smart Contracts and the Foundation to the extent necessary for Validator Candidate in order to make an informed decision to enter into these Terms and to take part in the Auction. The Validator Candidate acknowledges that in making a decision to take part in the Auction, the Validator Candidate has relied solely upon these Terms and independent investigations made by the Validator Candidate. The Validator Candidate is not relying on the Foundation with respect to the legal, tax and other economic factors involved in entering into these Terms and understands that it is solely responsible for reviewing the legal, tax and other economic considerations involved with taking part in the Auction with its own legal, tax and other advisers.

Limitation of Liability

The Validator Candidate acknowledges and agrees that, to the fullest extent permitted by any applicable law, it will not hold the Foundation and its Affiliates liable for any direct, indirect, special, incidental, consequential or exemplary damages (including but not limited to loss of income, revenue and profits, or goodwill, or data) or injury whatsoever caused by or related to his/her partaking (or inability to partake) in the Auction or the use (or inability to use) of the Smart Contracts under any cause of action whatsoever of any kind in any jurisdiction.

The Validator Candidate acknowledges and agrees that, to the fullest extent permitted by any applicable law, the risk of taking part in the Auction rests entirely with the Validator Candidate.

The limitations set forth in the Clause do not and will not limit or exclude liability of the Foundation for fraud or intentional, willful or reckless misconduct.

Release

To the fullest extent permitted by applicable law, the Validator Candidate releases the Foundation and its Affiliates from responsibility, liability, claims, demands and/or damages (actual and consequential) of every kind and nature, known and unknown (including, but not limited to, claims of negligence), arising out of or related to disputes between the Parties and out of or related to the acts or omissions of any third parties.

Disputes: Binding Arbitration

Any Dispute shall first be endeavoured to be settled through amicable negotiations in good faith by the Parties. If the Validator Candidate and the Foundation cannot agree how to resolve the Dispute within thirty (30) days after the date a notice is received by the applicable Party, then either you or the Foundation may, as appropriate, commence arbitration proceedings. The Dispute shall subsequently (and exclusively) be submitted to three arbitrators. The nomination of arbitrators and the rules of arbitration shall be in accordance with the Rules of Arbitration of Liechtenstein (“Schiedsordnung der Liechtensteinischen Industrie- und Handelskammer”). The seat of the arbitral tribunal shall be Ruggell, Liechtenstein. Language of the proceedings shall be English. The arbitral award is final and binding upon the parties. The arbitration fees will be borne by the losing party unless otherwise awarded by the arbitral tribunal. The Parties undertake to carry out the arbitral award in accordance with the modalities of said reward.

Notices

Notice to the Foundation shall be sent by email to the Foundation at contact @ trustlines.foundation

Notice to you shall be by email to the email address you provide to us.

Your notice must include (i) your name, postal address, email address and telephone number, (ii) a description in reasonable detail of the nature or basis of any possible Dispute, and (iii) the specific relief that you are seeking.

Governing Law and Venue

These Terms will be governed by and construed in accordance with the laws of Liechtenstein, without regard to conflict of law rules or principles that would cause the application of the laws of any other jurisdiction.

Any Dispute that is not or cannot be subject to arbitration will be resolved by the courts of Liechtenstein.

Severability

If any term, clause or provision of these Terms is held unlawful, void or unenforceable, then that term, clause or provision will be severable from these Terms and will not affect the validity or enforceability of any remaining part of that term, clause or provision, or any other term, clause or provision of these Terms. Such unlawful, void or unenforceable clause or provisions shall be replaced by valid and enforceable clause or provisions, which most closely achieve the commercial intent and purpose of this Agreement.

Miscellaneous

These Terms constitute the entire agreement between the Parties relating to your acquisition of Auction from the Foundation and supersede any other agreements, statements or information provided by the Foundation and/or its Affiliates. the Foundation may assign its rights and obligations under these Terms. the Foundation’s failure to exercise or enforce any right or provision of these Terms will not be construed or understood as a waiver of such right or provision. the Foundation will not be liable for any delay or failure to perform any obligation under these Terms where the delay or failure results from any cause beyond our reasonable control. This Agreement and the (trans)actions envisaged therein does not create any form of partnership, joint venture, or any other similar relationship between the Parties. Except as otherwise provided herein, these Terms are intended solely for the benefit of the Parties and are not intended to confer third-party beneficiary rights upon any other person or entity.