Validator Responsibility and Retention of a Fair Market

It is in the best interest for users and the network alike to maintain a project’s integrity as a provider of decentralized finance, responsibly handling assets entrusted to the network and providing a fair market. The community must be built on a synchronized development through both credibility and technology by all parties involved.

It is a common practice by many projects to neglect or disregard the security structure that should be the foundation of any network that handles users’ finances. Often putting forth new code or innovative investment opportunity to attract users before a proper, systematic decision making is in place to safely guide said utilities.

Crescent believes in an approach that allows users to feel completely secure and protected while using our network. As we have done from Genesis, all decision making is to be led by thorough research and analytics of the possible outcomes, considering numerous variables along the way. Being a team composed of veterans in not only blockchain but also traditional finance, we know that incubating a network that presents a fair market is crucial in DeFi project development.

In alignment with this architecture, the retention of a fair market and the responsible actions of validators is a subject that we do not take lightly as a result of the following observations:

  • Block proposers are capable of responsibly deciding or manipulating the network’s next block
  • Tendermint cannot determine the fairness or existence of censorship of the proposed blocks
  • This can result in a market that is disadvantageous to general users, allowing abuse, and exploitation of users’ assets
  • The Foundation must be responsible for making decisions that negate these attack vectors and present resolution to these observations

Although front-running issue is prevented through the batch system(all orders are treated equal in a block without time priority) of Crescent DEX, Censorship is a universal problem for most PoW and PoS blockchains, in which we aim to implement both social and technical methods to prevent these attacks.

Possible actions that jeopardize a fair market

  • Censorship is the unintentional / intentional removal or omission of certain/all transaction within a block
  1. This abuse revokes the users’ rights to a timely commitment to transactions and the biased transaction handling results in unfair market circumstances
  2. Crescent also encompasses unintentional operational configuration of validators that results in a statistical difference in transaction list in a proposed block compared to other public nodes
  • Private Transaction Broadcasting is when a block proposer broadcasts transactions directly to private nodes rather than public nodes
  1. These transactions are likely to have much more possibility over those of others to be in the next block (100% if block is accepted)
  2. A difference in broadcasting environment is detrimental to the retention of a fair market for all users

The Guardian Overwatch

As part of the responsibility of the Foundation to provide assurance to users, the following measures are in place to monitor malicious behavior:

Observer nodes will be operated by the Foundation which monitor all broadcasted transactions in Crescent Network

  • Validators are advised to peer with these nodes to pass over transactions within their mempools

A Validator scanner analyzes and compares list of transactions within the Observer Nodes’ mempools and proposed block in real-time

  • Repetitive and significant differences for certain validators’ proposed blocks can provide statistical evidence of potential transaction censorship, both malicious and unintentional

Inconsistent transactions will be investigated and the impact on market will be analyzed

  • When the negative impact on market integrity and users is analyzed, the community can decide the necessity of and appropriate consequences to be imposed on the validator

Facing the consequences

Resolution through communication will the the first and immediate action

  • The validator will be warned and obliged to provide statistics for explanation
  • A consultation with the Foundation will be done to resolve the issue

Grounds for validator exclusion through governance

  • If the issue is not solved even through acknowledgement and consultation, the validator will be determined to be a risk our principle of providing a fair market for users, resulting in a governance proposal to exclude them from the Liquid Staking Validator group

Integrity through transparency

  • The validator scanner will be open sourced, allowing any community member to view and verify the investigation algorithm
  • In the near future, real-time information from the validator scanner can be viewed on a upcoming website that shares validator activity and statistics

And Beyond

Crescent aims to implement Threshold Encryption in 2023 to further ensure the retention of fair market

  • This feature allows users to encrypt transactions before broadcasting, so block proposers cannot view the transaction content prior to block proposal
  • The transaction content is unveiled after a threshold of validators agree, which negates selective censorship

Beyond the aforementioned criteria, the Foundation will measure validators on various fronts including performance, sustainability, reliability, and more to provide the community with a transparent guideline for relevant decision making together. The policy can be found at Crescent’s Commonwealth (https://commonwealth.im/crescent-forum/discussion/5983-validator-3-strike-out-immediate-kickout-discussion)

As the case has been in the financial sector for ages, a fair market is also crucial to the longevity of DeFi. Asynchronism between security and innovation results in errors, and our team has understood this since the early development stages. We will work to provide an equitable environment through both social and technological means, adapting to the blockchain development space as we expand.

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