V. SoftNote - Tectum components

Introducing SoftNotes, a system designed to ameliorate the scalability issues of Bitcoin whilst preserving its pristine positive qualities. In 2020 SoftNote were invented, SoftNotes are digital banknotes that represent ownership of Bitcoin wallets and carry access to Bitcoin inside, fully visible on any Bitcoin explorer. The SoftNote system possesses the decentralization, security and transparency of Bitcoin but also offers high scalability from the lighting-fast Tectum blockchain. As a result, Bitcoin can now be transferred instantly, anywhere, without fees or delays. SoftNotes holding Bitcoin are truly the ultimate monetary system. SoftNotes, are designed to ameliorate the scalability issues of Bitcoin whilst preserving its pristine positive qualities and are digital banknotes that represent ownership of Bitcoin wallets. SoftNotes are transported on the fastest blockchain in the world - Tectum. The SoftNote system possesses the decentralization, security and transparency of Bitcoin but also offers high scalability from the lighting-fast tectum blockchain. As a result, Bitcoin can now be transferred instantly, anywhere, without fees or delays. SoftNotes holding Bitcoin are truly the ultimate monetary system.

1. SoftNote Overview

The SoftNote bill is the Flagship product of Tectum’s service and product offerings. SoftNotes provide Bitcoin with a viable method to scale to hundreds of thousands or even more than a million transactions per second. SoftNotes take a radically different approach to competitive Bitcoin scaling solutions such as the Lightning Network, and as a result suffer none of their limitations but offer several novel advantages.

Firstly, the SoftNote system is significantly simpler in its design than Lightning Network, with less points of failure and vulnerability. SoftNotes add a layer of privacy to Bitcoin that the Lightning Network cannot match, owing to transactions not needing to be ultimately settled on the main BTC chain, and not involving Lightning watchtower nodes. Finally, since SoftNotes do away with the traditional batching methodology of layer twos and replace it with an approach involving transfer of ownership of Bitcoin wallets, they may happen independently of an internet connection, with final cryptographic finality being made later when internet becomes available.

A SoftNote is essentially a bearer instrument representing ownership of a Bitcoin wallet address, or some amount of BTC liquidity sitting within a wallet address. SoftNotes are pre-filled with a defined amount of liquidity to be transferred at lightning speed using the Tectum blockchain. A softnote can be handed over using different methods ranging from a QR code, email, text message or even physically printed on paper. When the handover of a softnote occurs the new recipient will receive a new pin that is automatically generated and is known only to them. Since this handover has taken place off chain, it is virtually frictionless, untraceable, and anonymous. This means that Bitcoin can be used in a peer-to-peer manner, with ownership moving off the main Bitcoin chain, speeding up its processing speed to a virtually unbounded capacity and with zero fees.

SoftNotes are a digital product representing a store of value; however, when unfilled with currency, have no intrinsic value. SoftNote bills are categorised and distinguished by unique serial numbers and denominations. When TET is used to mint SoftNotes, the user is given unfilled SoftNote bills, which must later be filled with liquidity if intended to function. The SoftNote system creates the ability to penetrate the retail market with cryptocurrency payments and can be regarded as ‘the first transactionless payment system’. This transactionless nature facilitates instant payment capabilities and a zero-fee policy for the end user. We define transactionless as referring to the fact that no recording of traditional transactional data takes place on the Tectum network. The SoftNote in ‘non-wallet’ form also demonstrates most traditional ‘physical cash’ properties. It can be printed on paper, doesn’t require the confirmation of its native network and does not require the internet to conduct payments and has no sender fees or geographical boundaries.

Softnotes can be used as a payment on a person-to-person basis or through a messenger application such as WhatsApp as a picture file. However, unlike physical cash, it utilises a passcode for transfer purposes and thus disables it from being accessed by an unauthorised possessor. On the wallet, SoftNote bills function in a digital cash-like manner and therefore intuitive person-to-person transfers can take place.

SoftNote bills are:

• Transaction-less in that they replace a traditional blockchain transaction with a ‘handover’ procedure.

• User-less in that they do not require the recipient to be an existing user of the Tectum blockchain.

• Network-less in that handover may be don’t independently of an internet connection.

• Wallet-less in that the SoftNote itself can function as a self-contained wallet and does not require the user to use any third-party wallet applications, generate a wallet address with a unique private key or even use the proprietary Tectum wallet application.

2. SoftNote bills use three chains of blocks on the Tectum base layer.

i. Genesis chain (large and slow)

ii. Payment chain (lightweight and fast)

iii. Dynamic chain (clusters)

3. The end of the SoftNote lifecycle

Neobanks typically pay 1 – 1.5% interest per month on deposits and offer an alternative to legacy centralised banking infrastructure. They are an emergent banking sector where they may allow unlicenced entities to operate using their banking licences, meaning that they are essentially a wholesale merchant service for Fintech enterprises. As an example, Solaris bank in Germany offers a wholesale debit card to fintech start-ups. These type of product offerings can assist Tectum leverage its SoftNote system in innovative new ways. Using a Neobank as a liquidity provider, SoftNotes filled with Bitcoin or stable coin value can be converted to virtual debit cards at the point of burning. This creates a crypto to fiat off-ramp that may not require KYC and gives greater flexibility to users of the SoftNote platform, particularly merchants accepting SoftNotes at the point of sale.

4. Comparison between SoftNotes and cold (paper) wallets:

SoftNotes are sometimes comparted to a traditional ‘paper’ or ‘cold’ wallets. There are however some important differences that make SoftNotes superior as a medium of exchange of crypto currency than paper wallets. What makes SoftNotes different from a Bitcoin paper wallet:

- Cold wallets have one unique private key that is known to both the sender and the receiver.

o The private key cannot be re-generated meaning that the sender may withdraw funds from the wallet before the receiver has a chance to move the funds to a secure address.

- Cold wallets do not have a friendly end user interface which allow for an easy transport of value. This means that the interface is too cumbersome to function as a method of payment particularly in a retail context.

- SoftNotes have an immediate and accessible proof of funds, whereas a cold wallet requires the user to verify liquidity on chain themselves with a slower and more cumbersome user experience.

- Cold wallets fundamentally hold cryptocurrency, whereas SoftNotes are designed to both hold and move cryptocurrency with minimal trade-off in security and privacy. In fact, security is enhanced by virtue of the SoftNote generating a new cryptographic pin code at the point of ownership transfer.

- Cold wallets have only one type of interface – QR code or wallet address, and the associated private key.

In summary SoftNote bills allow for high velocity exchange of monetary value whereas cold wallets can only securely store value.

5. SoftNote bills have three categories of interface – Imported/Balance-Based, Exported/Native and Hybrid mode interfaces.

1. Balance-Based mode, or Imported modes of operation model:

Note that: ‘Imported’ in the context of Balance-Based SoftNotes refers to SoftNotes that are imported to the Tectum SoftNote wallet.

- The Balance-Based mode is designed for retail and micropayment applications. This mode tokenises the SoftNote and exchanges balances between the recipient and the payer. Balance based mode is designed to help Bitcoin break the retail barrier.

- Tectum Wallet (Balance Based mode): Once imported, SoftNote balances in various crypto currencies enter ‘Balance based mode’. This means that they are aggregated into a total balance per crypto currency, rather than showing the nominal balance of each SoftNote bill. For example, 100 SoftNote bills at 0.01 BTC each become an aggregated balance of 1 BTC in the On-Chain SoftNote wallet.

- SoftNote Ultimate: Is a QR code which gives access to your balance with the help of a pin code which is known only to the user. Merchants can accept payment from users by scanning the QR code and having the user input their pin into a Tectum proprietary Point of Sale device or Software. The system will then mint a SoftNote of the appropriate denomination and transfer to the merchant.

2. Native or Exported modes of operation model:

Note that Exported in the context of SoftNotes refers to SoftNotes that have not been imported into the Tectum Wallet in Balance-Based mode. Four types of Off-Chain interfaces. The Native mode is made to support enhanced anonymity and privacy for Bitcoin users.

- Wildcard interface – that is, a SoftNote printed onto paper or stored as an image. Handover of a Wildcard SoftNote requires no access to connectivity of any kind for either the sender or the reciever, but does trade off some security, as the receiver cannot generate a new SoftNote Pin code until connectivity is obtained.

- The proprietary SoftNote wallet

- The SoftNote Vault. The SoftNote Vault is an off-chain wallet that does not store the SoftNote owners Tectum user ID and is therefore user-less.

- Offline interface – Where a SoftNote user has no access to the internet but does have access to a phone line, a sender and receiver may meet in person. The sender has a SoftNote serial number and its associated pin code. The receiver accepts the printed SoftNote QR or serial number and subsequently dials a toll-free number to access a phone interface. The phone interface presents a verbal automated response that allows the receiver to enter the sender’s SoftNote serial number and pin. The system will then allocate a new pin code known only the receiver and the transaction is complete.

3. Hybrid mode of operation model

This is a hybrid mode between balance based and native mode designed for maximum convenience whilst retaining as many of the privacy advantages of Native mode as possible.

- Hybrid mode uses SoftNote bills in their original native form but implements balance-based mode when values go below the smallest nominal denomination for SoftNotes. For example, for a payment of $1.05 then $1 may be sent as a native SoftNote, and the remainder send via a balance-based mode. When sufficient balance-based remainders are acquired, they are reconciled and exchanged for a full SoftNote. Hybrid mode is the most advanced implementation of the SoftNote system. Hybrid mode is under development (as of April 2023), and currently the SoftNote wallet (https://wallet.SoftNote.com/) operates based on the balance-based system, so that it may be used to facilitate retail payments. The native mode is implemented in the SoftNote vault (https://SoftNote.cash/en).

6. SoftNote private key security model:

SoftNote sovereignty is protected using an encryption method utilising zero knowledge proofs known as the ‘SCGS’ (SoftNote Cryptographically Guaranteed Soverignty’) model. SCGS is a way to being able to transfer ownership of the underlying private key associated with the BTC address linked to a given SoftNote without exposing the private key to any party. The only entity that may gain access to the underlying private key is the current SoftNote owner, and only if the SoftNote is burned which removes the SoftNote from circulation and exposes the private key of the underlying BTC wallet. Under the SCGS model it is impossible for any entity, including any node in the Tectum blockchain, to gain access to the SoftNote private keys maliciously or while providing the compute infrastructure powering the Tectum blockchain and SoftNote interface.

Note that for green stripe SoftNotes with a shared pool of BTC liquidity backing them, the underlying BTC private key is never exposed to any SoftNote owner during burning, as this would compromise the security of all the other SoftNotes linked to that address. In this instance, the Tectum system will move the liquidity associated with that given SoftNote to a new BTC address using its in-built BTC node at the point of burn. This will result in slower transaction finality in this scenario. Green stripe SoftNotes are intended for very small denominations of BTC and therefore are less likely to be burnt.

Under SCGS, a smart contract (SC1) generates BTC keys for a given SoftNote using a private key that is first encrypted using the first stage of double encryption with commutative ciphers. The BTC public key is not encrypted and both public and private keys (encrypted using the first stage of double encryption with commutative ciphers) are released onto the blockchain attached to the SoftNote serial number.

When a burn request is made, the burner's public key is sent to a second smart contract (SC2), which processes the second stage of double encryption with commutative ciphers using the burner's public key but decrypts the first stage of double encryption with commutative ciphers. This allows the burner to use their private wallet key to decrypt the second stage of double encryption with commutative ciphers and obtain the private BTC keys. This is considered burning the SoftNote. Once the SoftNote has been burnt, the serial number is re-assigned a new BTC wallet using the first stage of double encryption with commutative ciphers.

This process allows for the secure generation and transfer of BTC keys for a given SoftNote, with the added security of double encryption. The use of commutative ciphers in the encryption process ensures that the keys can be decrypted in any order, providing flexibility for the burner to use their private key to decrypt the encrypted information.

Overall, this approach allows for secure handling of BTC private keys for SoftNotes on the Tectum blockchain.

7. SoftNote security steps:

1) SC1: BTC keys are generated (using private access modifiers) for a given SoftNote however the private key is generated using the first stage of double encryption with commutative ciphers (using SC2 public keys), BTC public key is not encrypted.

2) Both public keys and private key (now encrypted with first stage of double encryption with commutative ciphers) are released onto the blockchain attached to SoftNote serial number.

3) When burn request is made, burners public key is sent to SC2, SC2 then processes second stage of double encryption with commutative ciphers using burners public key but decrypts first stage of double encryption with commutative ciphers.

4) Burner uses his private wallet key to decrypt second stage of double encryption with commutative ciphers and now has the private BTC keys. The SoftNote is now considered burnt.

5) Burnt SoftNote serial number is then re-assigned a new BTC wallet using stage 1

1. SoftNote beneficiaries:

SoftNotes have a beneficiary structure to encourage utilisation, minting, remunerate underlying Tectum blockchain nodes and incentivise liquidity providers. The structure of beneficiaries is as follows and each beneficiary is eligible for 20% of SoftNote revenues. Note that SoftNotes only generate revenues when they are received by merchants who are charged a 1% fee to receive them (undercutting competitors such as VISA and Mastercard).

- 1. Minter – the person that spends a TET token to create a SoftNote

- 2. Liquidity Provider – the user that transfers liquidity into the SoftNote

- 3. Changer – is a form of liquidity provision but instead of filling a SoftNote with liquidity, they provide a large number of small denominations SoftNote bills to the system as change.

- 4. ISO – person/entity that brings minter/liquidity provider into Tectum. This could be a business/government/person.

- 5. Tectum blockchain – entire blockchain cluster dedicated to servicing SoftNote operation gets 20% from every SoftNote paid in TEC. The subnet cluster that provides the transaction into the blockchain splits this reward with the master node and elect nodes that validate the transaction. The subnet cluster gets 50%, the Elect node gets 25% and the master nodes share the remaining 25%.

2. SoftNote NFTs.

SoftNotes may be used as a mechanism of storing and transporting NFTs. SoftNotes may be minted to represent ownership of some real world or digital asset, with the ownership of this asset being transferable like ownership of any other SoftNote. SoftNotes will allow these NFTs to be ‘reminted’ so that they become fractionalised over many individual SoftNotes, with each new SoftNote representing an ownership share in the original piece. This functionality allows for high value digital assets such as high value digital artwork, or the ownership rights to real world assets such as real estate to be fractionalised and tradeable on secondary markets, opening arbitrage opportunities as well as lower entry price exposure to high value assets. In addition, SoftNotes may be minted to display 64x64 pixel representations of digital images, viewable through native SoftNote interfaces. The underlying storage of NFT data such as high-resolution digital images may be stored within Tectum’s proprietary NoSQL storage solution within the Tectum blockchain infrastructure, with the SoftNote itself storing a hash of this data.