PEX: Privacy-Preserved, Multi-Tier Exchange Framework for Cross Platform Virtual Assets Trading

In traditional virtual asset trading market, several risks, e.g. scams, cheating users, and market reach, have been pushed to users (sellers/buyers). Users need to decide who to trust; otherwise, no business. This fact impedes the growth of virtual asset trading market. In the past few years, several virtual asset marketplaces have embraced blockchain and smart contract technology to alleviate such risks, while trying to address privacy and scalability issues. To attain both speed and non-repudiation property for all transactions, existing blockchain-based exchange systems still cannot fully accomplish. In real-life trading, users use traditional contract to provide non-repudiation to achieve accountability in all committed transactions, so-called thorough non-repudiation. This is essential when dispute happens. To achieve similar thorough non-repudiation as well as privacy and scalability, we propose PEX, Privacy-preserved, multi-tier EXchange framework for cross platform virtual assets trading. PEX creates a smart contract for each virtual asset trading request. The key to address the challenges is to devise two-level distributed ledgers with two different types of quorums where one is for public knowledge in a global ledger and the other is for confidential information in a private ledger. A private quorum is formed to process individual smart contract and record the transactions in a private distributed ledger in order to maintain privacy. Smart contract execution checkpoints will be continuously written in a global ledger to strengthen thorough non-repudiation. PEX smart contract can be executed in parallel to promote scalability. PEX is also equipped with our reputation-based network to track contribution and discourage malicious behavior nodes or users, building healthy virtual asset ecosystem.