# 0xVault 200M Type-5 Ruby Whitepaper

## Introduction

In recent months, there has been a significant decline in confidence in traditional markets, largely due to the catastrophic collapses of Luna/Terra and FTX, which have undermined trust in cryptocurrencies. More recently, the collapses of Silicon Valley Bank and Signature Bank have further highlighted the need for a reliable and transparent alternative. In order to restore trust and ensure accountability, it is essential to have clarity and transparency in areas such as audit, accounting, and operation.

Several attempts have been made to bring "real world" assets on chain with some limited success. However, all assets are subject to ongoing costs, potential price volatility, and the risk of misreporting through the audit process.

To address these vulnerabilities and provide a true store of value, our tokenisation mechanism has secured a mandate with the owners of a large depositary of gemstones. Our audit process leverages blockchain technology to distribute accountability and responsibility, preventing any single individual from holding too much power.

We seek to provide investors with a secure and stable investment opportunity that is not subject to the same risks and vulnerabilities as traditional mechanisms.

### The Ruby Market
*‘The most well-known gemstone is the diamond, but it does not have the highest value concentration and has a rather low appreciation. The gemstone with the highest value concentration and a growth of 8-10% p.a., is the ruby. The ruby is followed by the blue sapphire at 6% p.a., and then the emerald at 5% p.a.’* - [PrivateBankerInternational](https://www.privatebankerinternational.com/features/guide-to-gemstone-investment/)

The ruby market is highly valuable, but often illiquid and shrouded in privacy. High-value rubies are typically traded through exclusive auctions to select buyers around the world, a process that can take significant time to organize.

Our solution aims to provide early liquidity and value retention mechanisms to miners, while also offering buyers significant discounts on their purchases. We propose fractionalizing rubies and creating a digital market that allows buyers with limited purchasing power to enter the market, effectively lowering the barriers to entry and driving demand for the product.

In addition to improving market accessibility, our platform will also incorporate a mechanism for redeeming the value of the ruby, providing added security to holders in the event of unforeseen issues in the market. Our goal is to create a secure, stable, and transparent market for fractionalized rubies, benefiting both miners and buyers alike.

### The Ruby

The item we are looking to bring on chain is a GIA certified Rough Ruby crystal (report number 2161933965), which has been independently assessed with a valuation of $199,731,600. The ruby measurements are 15.60 x 11.50 x14.50 cm with an approximate weight of 5.09kg and total carats of 15,270 (with a per carat valuation of $13,080).


### 0xVault Platform

The 0xVault platform is being developed to support sellers of high-value gems, providing them with access to early liquidity and value retention mechanisms through sale and buyback processes. Leveraging blockchain methodology, 0xVault will establish a transparent digital market for precious gems, improving market accessibility and promoting transparency.

In addition to providing early liquidity and value retention mechanisms, 0xVault also aims to create a digital market that offers transparent pricing information on a highly private market, benefiting physical market participants.

The platform will utilise:

* A Leverage Real-world asset tokenization engine
* The Transparency & Trust layer
* Decentralized hosting
* Decentralized liquidity
* Build trust model in permissionless environment

This will provide benefits for precious gem sellers of:

* Asset trust model
* Low cost, configurable liquidity
* New liquidity models
* Scalable for more rubies, other stones
* Primary sales strategies
* Secondary sales strategies
* Value retention strategies
* Vaults close when real-world asset is sold

## Token Sale Mechanism

Our Token Sale Mechanism has been designed with the aim of creating a liquid and transparent market for participants. To achieve this goal, the Token sale will combine several mechanisms which include:

* Private Sale: A private sale will be conducted for select parties in order to secure funding for the technical, legal, and operational infrastructure required to make this work at scale.
* Public Sale with On-Chain Sell Curve: The public sale will be executed over time according to an on-chain sell curve, providing full transparency of the ongoing sale price.
* Public Sale Buyback Guarantee: We will deploy a buyback guarantee over time to build exit liquidity for any token holder. The curve will broadly track the sale curve.
* Token Buyback Loop: A loop will be established to ensure that tokens bought back are fed into the sale curve, thereby supporting ongoing liquidity.
* User-Created On-Chain Trading Strategies: We will enable users to create their own on-chain trading strategies to grow liquidity and engagement in the token.
* On/Off-Chain Arbitrage Strategies: We will employ on/off-chain arbitrage strategies so that the price of the Ruby tokens can be arbitrated if there are off-chain price signals that users would like to follow.
* Token Wind Down with On-Chain Buyback Curve: A token wind-down will be initiated with an on-chain buyback curve, allowing token holders to exit when the ruby has been sold off-market.

### Private sale

The Private Sale mechanism is an important component of our overall Token Sale approach, aimed at achieving a liquid and transparent market for all participants. Its purpose is to attract select parties who are willing to invest in the project and have a vested interest in its success, and to secure the necessary funds to develop the technical, legal, and operational infrastructure required for scaling up.

Private Sale investors are carefully vetted, and only accredited investors and funds with relevant knowledge and experience in the market and industry are invited to participate. This ensures that they have a deep understanding of the product and the potential risks and rewards associated with it, and are fully committed to supporting its long-term growth.

To reflect the higher risk associated with the Private Sale stage, the pricing is set below the public price. The terms and conditions, including vesting periods, are also carefully designed to align the interests of investors and project developers, and to ensure that all parties benefit from the project's success in the long term.

Once the private sale is complete the Ruby will brought on chain minting a set amount of ECR-20s.


### Public Sale

**Mechanism**

The Public Sale is designed to offer a fair and transparent mechanism for participants to share in the risk and reward of the ongoing pricing of the ruby, as well as the proceeds in its eventual sale.

To ensure a steady flow of liquidity and allow the price to adjust more naturally, the already minted tokens will be slowly released onto the curve over time, starting at the bottom and increasing linearly. This approach will enable the market to adjust to the sale liquidity, allowing the price to flow more freely.


As the price of the token fluctuates, there may be opportunities for market participants to arbitrage with the newly released tokens, which would apply selling pressure to bring the price back in line with the primary sale curve.

This transparent approach creates a more open market, and offers other market makers and participants the opportunity to trade around it, increasing liquidity for all involved.

### Financials

We propose to launch the Public Sale at a discounted price of $0.175 per token, which represents 17.5% of the assessed valuation. This discounted price allows buyers to purchase tokens at a lower cost, while simultaneously providing early liquidity for the Seller. The sale will continue until the curve reaches a valuation of $100,000,000, which is around 50% of the assessed valuation of $199,000,000. The reason for these discounts is due to the liquidity of the asset, and we believe this approach will attract more buyers and increase overall liquidity.

The tokens will be gradually released onto the curve, with a rate of 3.382 tokens per second, over a period of 18 months. This does not increase the overall supply of tokens, no new minting occurs, but simply makes them available to be bought. This measured approach fosters a more organic price discovery process and allows ample time for demand to catch up with the available sale supply. By introducing tokens at a steady pace, market participants have more opportunity to engage with the sale and contribute to the development of a robust secondary market.


### Public Buy Back

**Mechanism**

To ensure a stable and robust secondary market for token holders, we will reinvest the ongoing proceeds from the Public Sale into liquidity following a clear and transparent process. This will provide exit liquidity token holders and stabilize price fluctuations, while aligning the motivations of 0xVault and its holders instilling confidence.

To achieve this, we will set the buy curve 30% lower than the sale curve and map it out to buy back all tokens released from the sell curve. However, the buy curve will only set buy orders after sell orders complete on the sale curve, ensuring a fair and transparent process.


The differential between the sale and buyback curves will be reinvested into subsequent gemstones and platform development, ensuring continued growth and value for our community.

To allow market participants plenty of room to trade around this and execute their own trading strategies, the Buy curve will only be activated if the sale pressure is enough to hit 30% below the current primary sale release price.

### Financials

The buy curve will begin at a price of $0.123, which represents 12.25% of the overall assessed valuation of $199,000,000. This provides sellers with a source of liquidity and enables 0xVault to re-enter the market at opportune times. The buy curve will be active until it reaches 35% of the asset's valuation.


### Market liquidity growth

The 0xVault primary sale, buy, and buyback/sell loop on-chain strategies serve as a transparent and reliable means of creating a liquid market for tokenized Rubies. By providing clarity and openness, we aim to foster trust among new entrants, traders, and product builders.

We also plan to increase liquidity through the following means:

* Users can create their own on-chain trading strategies to further engage with and grow liquidity in the token.
* On/off-chain arbitrage strategies will be implemented to enable users to take advantage of off-chain price signals and ensure that the price of Ruby tokens remains fair and accurate.

We will support the development of these products using proceeds from the token sale, and we expect existing platforms to be used in conjunction with infinite off-chain trading strategies. This will increase market liquidity and establish a strong foundation for future gemstone sales.

### Wind down

This token is not intended to exist indefinitely. Its lifespan will be tied to the marketing and sale of the physical ruby. When the ruby is sold, a buyback of all tokens will be initiated. The proceeds from the sale will be placed in a vault, and users will be free to sell their tokens for these proceeds at the vaulted price. The buyback will then become a user-initiated model rather than a forced model.

This means that there may be some potential for future trading value or market activity for the ruby tokens, but it will not be supported through any further actions by 0xVault.

## Audit process

Our audit process leverages blockchain technology to distribute accountability and responsibility, preventing any single individual from holding too much power.

Auditing is important for financial products as it helps identify potential fraud or errors, and provides transparency to investors and stakeholders. It helps build trust and credibility in the financial system.

It is important to create trust regarding this product so that buyers feel comfortable buying into and holding this product. Therefore, in order to do that, we are very transparent around auditing of the Ruby itself and the process of auditing.

The process of auditing the Ruby is as follows:

1. Obtain a GIA report - this certifies that the ruby is real and documented.

The GIA report is issued by the Gemological Institute of America, which is a nonprofit organization that is considered the world's foremost authority on diamonds, colored stones, and pearls. GIA provides research, education, and laboratory services to the gem and jewelry industry, as well as to the general public. The GIA report provides detailed information about the characteristics and quality of the ruby, including its color, clarity, cut, and carat weight. It is an important document that verifies the authenticity and value of the ruby.

2. Present the SKR - safekeeping receipt.

The SKR is a document that serves as proof of ownership and provides information about the gemstone(s) held in safekeeping by a third-party custodian, such as a bank or a gemstone storage facility. The SKR can be used to verify the identity and authenticity of the gemstones and is often required for insurance purposes or as collateral for loans. The SKR also includes details about the conditions under which the gemstone(s) are being held, such as the temperature, humidity, and security measures in place.

3. Valuation assessment.

Third-party geologists will be used to perform a valuation assessment of the Ruby. The geologist will visually inspect the ruby to determine its color, clarity, and cut. They will also assess any inclusions, blemishes, or other imperfections that may affect its value.

Next, the geologist may use a refractometer to measure the ruby's refractive index, which can help determine its authenticity and origin. They may also use a spectroscope to analyze the ruby's spectral signature, which can provide information on its chemical composition and any treatments it may have undergone.

Finally, the geologist will consider the ruby's size, weight, and overall market demand to determine its value. This valuation assessment process requires expertise and knowledge of gemology, as well as an understanding of market trends and demand.

The Ruby has already had an assessment, by a GIA certified assessor, with a value of $199,731,600.

## 0xVault Technology Stack

The 0xVault technology strategy is focused on connecting, leveraging, and partnering with best-in-class decentralized real-world asset blockchain technology. This enables us to sell DeFi-worthy products based on Real World Assets without making centralization trade-offs.

### Smart contracts for asset tokenisation

0xVault asset tokenization system is based on the Gild Lab technology, which focuses on bringing real-world assets on-chain in a liquid, transparent, and decentralized format. More information about the technology can be found on the GildLab website (https://gildlab.xyz/) and GitHub (https://github.com/gildlab), which cover the technologies, safeguarding, roles, and strategies involved.

A crucial feature of this technology is that the entire tokenization, management, and transparency process is on-chain, limiting the ability for mismanagement and foul play. Moreover, following the principles of decentralization, the contracts and corresponding technologies allow any interested party to examine exactly what is happening on-chain, enabling them to build their own understanding of the nature of the underlying asset.

### Blockchain ecosystem for deployment of tokens

0xVault tokens can be deployed on any EVM chain today, and will be available on any Rust blockchain within 2023.

It uses ECR-1155 and ECR-20 interfaces or the equivalents on non-EVM chains.

The ECR-1155 tokens represent both the Ruby and the documentation related to its auditing. The ECR-20 tokens will be used to signify ownership of the Ruby and will be distributed to buyers for trading purposes.

### 0xVault dapp for purchasing and selling tokens

The 0xVault dApp will be built using decentralized principles and hosted on Fleek and IPFS with a pin hash for decentralized hosting. It will most likely be written in a single bundle which means no SEO but is less susceptible to centralized attacks and can be run by anyone on their local network.

Initially, the dApp will allow users to interact with the Ruby primary sale curve, followed by the buyback curve to sell tokens. More complex strategies will be introduced step by step, including arbitrage, perpetual orders, and relative orders for token holders and traders. As more gemstones are added to new vaults, multi or cross-asset strategies can be developed.

### Hosting

Decentralized hosting is a key aspect of 0xVault technology, as it enables the platform to operate in a truly decentralized manner. To achieve this, 0xVault uses a combination of Fleek and IPFS, which allows the platform to be hosted without relying on a centralized hosting provider.

This means that a centralized hosting provider could not shut down the switch, 0xVault would still be operational. Additionally, anyone can run the technology and audit activity, which provides an additional layer of transparency and trust.

The platform operates an IPFS node, which has certain constraints around the data that can be pinned. The platform also provides support for indexing, which allows for efficient searching and retrieval of data. In the future, 0xVault plans to extend its support to other blockchains, which will further enhance its decentralized hosting capabilities.

### Liquidity

0xVault's approach to liquidity is built on top of the Rain Protocol Order Book and Rain interpreter. This allows us to design, develop, and release liquidity strategies that can clear without any centralized (CEX) liquidity or be bound by a single liquidity curve (AMM DEX). We can execute transparent, on-chain liquidity strategies without having to pay the cost of market inefficiencies of upfront liquidity costs to conform to existing models of liquidity that were built for digital, not real-world, assets. Yet, we can maintain a decentralized, transparent, and trust-based approach at the same time.

We can delve deeper into these technologies here: https://github.com/rainprotocol/rain-protocol/tree/develop/contracts/orderbook and https://docs.rainprotocol.xyz/blog/order-book-proposal.

This unique and emergent approach to liquidity is designed to:

* Build trust and transparency in the underlying liquidity of the token
* Allow a bridge between off-chain and on-chain markets
* Support healthy market participants trading the token on top of this underlying liquidity
* Avoid economic rent or value loss based on inefficient strategies
* Return all value to market participants and grow the ecosystem.

## Transparency via Blockchain

The blockchain offers an ideal platform for creating a secure and transparent market for fractionalized rubies, given its low barriers to entry, ease of auditing, and efficient trading capabilities. To successfully tokenize the ruby market, it is crucial to establish the right mechanisms for managing asset trading and ensuring transparency, which is where the CertifiedAssetConnect contract methodology comes in.

CertifiedAssetConnect is a hybrid NFT/ERC20 solution on the Ethereum blockchain that connects custodial assets to decentralized fungible tokens. Custodians mint and burn NFTs (ERC1155) representing these assets, while connected ERC20 tokens allow for trading.

As a custodial contract, CertifiedAssetConnect places significant trust in custodians, certifiers, and handlers to maintain the system's integrity, given that the assets are off-chain. The contract can be configured to allow for varying levels of centralization or decentralization depending on the desired administrative structure.

ERC20 tokens can be traded freely by non-custodians within the limits of an optional KYC integration, using standard interfaces from the heavily audited Rain protocol. To ensure the total supply of ERC20 tokens matches the value of all existing NFTs, custodians can only burn an on-chain NFT by burning an equivalent amount of the ERC20 token in the same transaction, maintaining a consistent token supply and valuation across the system.

To establish trust between custodians and non-custodians, certifiers must be appointed to audit and certify the claims made by each minted NFT against real-world assets. The certifier publishes certifications that expire at a specific date/time, and custodians are incentivized to maintain the system through regular audit cycles.

In the event of a system-wide freeze, limited transactions may be needed to repair the internal ledger to a state that a certifier will approve. Handlers can be appointed to receive and send frozen funds in a controlled manner, either through rule-based smart contracts or trusted entities controlling a wallet directly. By utilizing the CertifiedAssetConnect methodology, we can establish a secure and transparent market for fractionalized rubies, benefiting both miners and buyers.

## Deploying the On-Chain Asset

### Phase 1
The ruby is chosen and measured by its carat. (if there are better metrics to quantify comparison of rubies that would be useful eg carat x quality. If there isn't a metric we could make one.)


### Phase 2
Initial admin Deploys the contract and sets up roles appropriately.


### Phase 3
After the roles are set up the super admin revokes powers to remove possibility to foul play by the super admin.


### Phase 4
The connector now brings the ruby onchain through minting the ECR 1155 and ECR 20 tokens. The ratio between 1155s and 20s depends on the unifying metric quantity of the 1155, in this case carrat.

For example, our Ruby as a carat of 19, this information is stored in the 1155. The 20s are minted at a 1-10 ratio with carat meaning 190 tokens are minted.


### Phase 5
The tokens are currently frozen as the certifier has not completed certification.

The certifier would do an IRL audit on the ruby to make sure has been accurately described, correctly stored, the agreed ownership structure has been set up ..... ect

They gather the results of the audit and if happy they update the data of the 1155 in question to record this asset in its audit history. They also set the 1155 has being certified and the time span before the next audit.


### Phase 6
Now the certification has taken place the tokens can be freely traded.


### Phase 7
Winding down.

In the event that Ruby sells we will first bring the sale income (minus fees) on chain and secure in a vaulting system.

We will then simultaneously open the vaulting system to allow users to trade their tokens for their share of the sale value, remove 0xVaults liquidity and trading strategies out of the market, and replace the Ruby associated NFTs with a proof of sale NFT.

This will allow users an easy way to access their returns whilst minimising secondary market effects.


### Blockchain Roles

#### Connector
Connectors “connect” off-chain assets to onchain tokens. I.e. They mint matching 1155 NFTs and ERC20 tokens.

There is a single connect function on the contract that takes an amount of 1155/20 to mint and some data that feeds into audit reports for certifiers to review. Most likely the data would be something like an IPFS hash that can be fetched and processed by scripts rather than literal audit data.

For example, say a connector was minting a barrel of whiskey in a warehouse. The data about the barrel could contain all kinds of information relevant to an audit, but only the LPA (litres of pure alcohol) amount would be used to mint the 1155/20 tokens.

Typically a connector would also be a disconnector but it is not required.

#### Disconnector

The opposite of a connector. They “disconnect” off-chain assets by burning onchain assets

The disconnector must hold both the NFT and enough ERC20 tokens to cover the full amount associated with the NFT in order to complete the burn. This guarantees that the aggregate amounts across all NFTs and issued ERC20 tokens are 1:1 at all times.

Disconnecting an asset is permanent/irreversible but a connector can always reconnect a previously disconnected asset with a new amount and associated audit data. In this way connected assets cannot be changed but they can be burned and re-minted with updated information prior to audit.

Partial disconnections are disallowed so it is recommended to connect assets in the size and configurations that they are typically acquired and disposed of. For example, a real estate fund would be better served connecting/disconnecting houses than entire suburbs.
Typically a disconnector would also be a connector but it is not required.

#### Handler
Handlers are the only accounts that can send and receive either the NFT or ERC20 tokens in the event of a system freeze due to lapse in certification.

A handler need not be appointed immediately or ideally ever. In the case that the audit process breaks down and the certification cannot be granted the certifier should provide a remediation plan. The remediation plan should list a minimal set of actions that a handler can take to restore the system to a certifiable state as quickly and directly as possible.

The handler can be either a nominated EOA (externally owned account) or a smart contract. The latter could be more trustworthy as it is purely rules based, but the former may be more practical in a time sensitive situation.

It may be required that the handler is also appointed as a connector and/or disconnector to repair discrepancies in the onchain and off-chain overall asset supply.

Once the system is repaired and certified the handler role should be revoked/renounced.

#### Certifier
The certifier can call the certify function to either extend or override the current certification period. By default a new certification will only maintain or increase the current certification expiry date, but a certifier may pass an additional parameter to force a specific (potentially shorter or even past) date.

Certifiers are expected to pass in additional data to reference an audit report that justifies their certification.

An audit process would typically look like:

The certifier runs a script to extract auditable information from the blockchain logs for all connects and disconnects
The certifier performs a real world audit of the offchain assets against the extract
The result of the audit is posted onchain with the certify function

Multiple parallel audits are supported as each certifier can submit their own reports without interfering with each other’s logs (with the exception of the forced expiry override described above).

If the certification ever expires then all assets are immediately frozen for all participants except handlers. This includes a freeze on connecting and disconnecting and for all admins!

Typically a certifier is only a certifier. They should be an “arms length” participant that can be trusted to be impartial. An impartial entity probably should not hold assets or other privileged roles as this could be seen as a conflict of interest.

#### Tierer

Tierers can define (or remove) standard Rain protocol ITier restrictions on transfers for both the NFT and associated ERC20.

ITier is an interface that allows for up to 8 membership levels (e.g. bronze, silver, gold, etc.) to be assigned efficiently to any address.

One common use case for custodial assets is to handle regulatory requirements such as KYC/AML restrictions. Rain protocol provides a standard Verify contract that is backend-agnostic to allow KYC/AML approvals to feed into ITier contracts.

ITier can also function as a “block list” rather than an “approve list” for more decentralised asset management. For example, USDC adopts this model, allowing all addresses to transfer by default and freezing only accounts explicitly flagged by law enforcement.

If a user already holds tokens and is removed from the requisite tier, either because they lost the tier or the tier contract itself changed, then their assets are frozen but remain on their address. There are two ways the assets can move from this point. Either the user is reinstated to the minimum tier or a confiscator takes the frozen assets (see below).

Tierers do not themselves define the users who can interact with the tokens, rather they define the contracts that do implement access restrictions, and the minimum tier that must be held for access.

A highly centralised system can tightly control and even change their tiering logic over time. A more decentralised system can set up tiering and then renounce the admins, or even completely remove tier restrictions.

#### Confiscator
As all offchain assets have some custodian there will be some regulatory environment that the custodian operates within. Typically this implies the possibility of legal actions such as sanctions being placed on token holders. Under extreme circumstances it may not be enough to simply freeze assets by removing the holder from the relevant tier contract. In some cases the assets may need to be confiscated from the token holder then somehow processed (e.g. burned, set aside or redistributed) by the custodian.

There is a confiscator role that can forcibly take frozen tokens, both the ERC20 and ERC1155. This is obviously a highly sensitive role and action so confiscators cannot forcibly take tokens from unfrozen assets. This provides some protection against some malicious actor compromising the confiscator and arbitrarily stealing assets from users. First some attacker must compromise the tier handling before they could manipulate the confiscation process. Ideally the real world entities managing the confiscation and tiering are independent and arms length for maximum security. If there is no tier contract set then the confiscator is free to confiscate any asset from any address, so this is potentially a less secure configuration.

Confiscation is a simple transfer, the confiscator calls the relevant function on the smart contract and the assets are transferred to themselves. Confiscation bypasses normal transfer access requirements so confiscations are still possible during a failed audit. The best defence against a rogue confiscator is a well maintained tier contract.

## Summary

The decline in traditional markets, along with the collapses of crypto and traditional banks, has led to a decrease in confidence in the financial system. To address this, the whitepaper proposes a tokenisation mechanism for gemstones, focusing on the valuable and illiquid ruby market. By fractionalizing rubies and creating a digital market, the platform aims to provide early liquidity, value retention mechanisms, and transparent pricing information. The 0xVault platform will establish a secure and transparent market for precious gems, leveraging blockchain technology to prevent fraud or errors, and to distribute accountability and responsibility. The proposed hybrid NFT/ERC20 solution will allow for the tokenization of assets and efficient trading capabilities, while ensuring transparency and trust in the financial system. Investors will have the opportunity to benefit from early access to liquidity and potentially higher returns on their investments through this innovative platform.

## Register Interest

If this project is off interest to you please reach out to us by filling in this form: https://2gmvha4d35y.typeform.com/to/zXZKuFPX

We have also attached our current SAFT below if you would like to partake in the current raise.

https://docs.google.com/document/d/13Xs0LtyiztkfSm6MKT6-ds4KwzpRypdOrCL6oP8zp58/edit