Currency Validation

Everyone plays by the same rules

One of the most important consideration is to ensure that each trading parties currency / Token is actually valid and that no cheating has occurred. This is done by examining the transaction history of your trading partners. Each users HoloDEX is in fact a smart contract (Code as law) that is signed with a cryptographic hash. This is the applications DNA. In order for my HoloDEX to communication with your HoloDEX the hashes must be the same. We must all use the same contract, or have the same DNA. Applications that do not have the same DNA are on completely different networks and cannot communicate with each other. This ensures that everyone is playing by the same rules. We are all executing the same contract.

An added layer of protection

Because everyone must play by the same rules as you, it is possible to validate another users transaction by examining their transaction history against your own rules. Think of it as a game of Monopoly. Everyone claims that they are following the same rules, but what if someone breaks the rules. Should someone cheat and steal some money from the bank, you can catch them by working backwards through every role of the dice, and every transaction made. If something does not add up, they have broken the rules. At this point you call them out for cheating and invite others to also examine the transaction history. A warrant is issued and the rule breaker is banned from playing the game.

Below is an example of a simple swap transaction between 2 parties. Each user’s HoloDEX examines the transaction history of the item being swapped to ensure it is valid.

Below is an example of a multi party transaction showing user X validating the transactions of all trading counter parties. While this example only highlights user X, in reality every user is also validating the transactions of their trading parties. This results in significant cross-validation of trading parties. Anyone breaking the rules will be found quite quickly.