Autonity Blockchain: A Layer 1 EVM-Compatible Network

Blockchain technology has advanced significantly since Bitcoin’s launch in 2009, now supporting diverse applications in financial services and supply chain management, all benefiting from its transparency, security, and decentralisation. Among the innovative projects in this field is the Autonity Blockchain, which aims to tackle key challenges in the space.

Autonity is a public blockchain based on the Ethereum Virtual Machine (EVM), designed for the decentralised clearing of smart derivatives contracts. It employs a proof-of-stake consensus mechanism to create a decentralised ecosystem for speculating on or hedging against market risks using smart derivative products. This article offers an in-depth exploration of the Autonity Blockchain.

Overview of Autonity Blockchain

Autonity is a Layer 1 blockchain that utilises the Ethereum Virtual Machine (EVM) and operates on a proof-of-stake consensus mechanism. It is specifically designed for the decentralised trading of smart derivatives contracts, which are financial products deriving their value from underlying assets.

Autonity aims to create smart derivatives for every market risk participants wish to speculate on or hedge against, allowing anyone to trade these products in a completely decentralised environment. This facilitates price discovery and trade execution without central authorities.

Notably, Autonity offers public and permissionless access, enabling anyone to operate a node and participate in the network. The focus is on decentralised derivatives clearing, where the settlement and management of derivative contracts occur on a distributed ledger rather than through a centralised clearinghouse.

In traditional finance, a clearinghouse acts as an intermediary to manage risks and ensure the performance of trades. In contrast, a decentralised system verifies and settles trades directly between parties without a central authority, using smart contracts and blockchain technology to increase transparency, reduce counterparty risk, and lower costs.

This approach allows for a more open and flexible trading environment, improving efficiency and accessibility in the derivatives market. Autonity emphasises clearing and settlement processes, employing various staking types to enhance its operational capabilities. It uses a Byzantine fault-tolerant architecture secured by a delegated Proof of Stake consensus through the Tendermint algorithm, which enables immediate transaction finality. With this introduction to the project, let’s delve into the technical architecture of the Autonity network, exploring its approach and how it operates.

Autonity Blockchain Technical Architecture

Autonity blockchain, an Ethereum-compatible system, enhances the Ethereum protocol by incorporating unique features that support decentralised markets. Its technical architecture comprises three major layers: Protocol Smart Contracts, Consensus Layer, and Communication Layer, each contributing to the overall functionality and security of the network.

• Protocol Smart Contracts Layer: This layer manages core functionalities such as governance, staking, tokenomics, and accountability. Key contracts include the Autonity Protocol Contract, Liquid Newton Contracts (facilitating validator-specific liquid staking), the Accountability Contract (for fault detection), and the Oracle Contract (for median price computation). These contracts ensure the proper management and operational integrity of the blockchain.
• Consensus Layer: Central to Autonity’s technical architecture, this layer employs a Proof-of-Stake (PoS) consensus based on Tendermint Byzantine Fault Tolerance (BFT). Autonity’s dynamic consensus layer can be tailored to meet specific application needs, allowing for a range of consensus algorithms, including BFT variants like Tendermint. Validators propose blocks, and a dynamically selected committee secures the system by voting on these blocks, ensuring efficient and secure block finality. The consensus system prioritises high-stake validators and adjusts the committee at the end of each epoch based on staking and performance.
• Communication Layer: Autonity modifies Ethereum’s peer-to-peer communication protocols by using separate channels to handle transaction gossip and consensus messages. This segregation allows validators, peers, and other nodes to communicate securely, broadcasting updates about transactions and consensus states over distinct channels. This modification enhances the security and efficiency of the communication process within the network.

Additionally, Autonity incorporates several key components to further enhance its functionality. The Oracle Network provides decentralised price feeds, aggregating data to compute median prices of various assets. Validators participate in price voting rounds, ensuring decentralised control over price data.

The Accountability and Fault Detection (AFD) model focuses on identifying and addressing faults or wrongdoings (Byzantine behaviour) within the system. The Accountability Contract monitors validator behaviour, issuing penalties and slashing stakes for proven faults, fostering a more reliable and accountable environment.

Moreover, the Auton Stabilization Mechanism (ASM) features a decentralised system that manages the issuance and supply of Auton tokens (Autonity native utility token), thus supporting economic stability within the network, which will be discussed further in the article.

Understanding Autonity Blockchain Tokenomics

The Autonity network employs a dual-token model, comprising Auton (ATN) and Newton (NTN). Auton (ATN) is the native utility token of the Autonity network. It serves as the protocol’s unit of account for transaction fees, denominated in gas fees. The coin’s divisibility up to 18 decimal places allows for precise transactions. To enhance its usability across various applications on the Autonity blockchain, a stabilisation mechanism has been implemented to reduce market volatility against major fiat currencies.

Meanwhile, Newton (NTN) serves as the native staking token for Autonity’s proof-of-stake consensus mechanism, playing a crucial role in network security and reward distribution. This token is tradable on both centralised and decentralised exchanges and can exist in three distinct states: unbonded (transferable), bonded (locked and non-transferable), and unbonding (temporarily locked until the unbonding process is complete, after which it reverts to the unbonded state).

Additionally, Autonity employs a liquid staking model with Liquid Newton (LNTN) as the liquid staking token. This model allows stakeholders to manage their investments in delegated stakes to validators within the Autonity system. Liquid Newton tokens are minted and burned in accordance with the delegated stake to validators.

These tokens are validator-specific, reflecting the holder’s share of the total delegated stake bonded to a specific validator, and entitle holders to staking rewards as long as their staked validator remains active in the consensus process. Liquid Newton can exist in two states: unlocked, which permits transferability, and locked, which prohibits transfers during the unbonding period.

The conversion rate between Liquid Newton and Newton for bonding and unbonding is managed by the validator’s contract, ensuring token fungibility over time. During bonding, the minted amount reflects the corresponding Newton’s value, and upon unbonding, tokens are burned, with Newton redeemed based on the holder’s share, which may vary due to the validator’s slashing history.

Notably, the Autonity network implements the Auton Stabilization Mechanism (ASM) to maintain the stability of the Auton token (ATN). The ASM aims to regulate the market price of Auton tokens by adjusting the supply of Auton and Newton tokens to align with a target value. Users can earn Auton tokens by staking Newton tokens or by minting them through Collateralised Debt Positions (CDPs).

In this process, users deposit Newton tokens as collateral to mint Auton tokens, which accrue interest. New Auton tokens are created when users take out CDPs, while tokens are removed from circulation (burned) when users repay their debt by depositing Auton back into the ASM. The system incorporates risk management through defined collateralization and liquidation ratios, ensuring that debts can be settled through collateral sales if needed. This mechanism promotes the stability of Auton, making it a solid foundation for building further applications and services on the Autonity blockchain.

Staking on Autonity Blockchain

Autonity uses a liquid staking and Penalty-Absorbing Stake (PAS) model. In this model, a validator’s self-bonded stake is prioritised for slashing penalties before any delegated stake. When slashing occurs, the self-bonded stake is slashed first until it is depleted, followed by any unbonding stake.

Delegated stakes are only slashed if the slashing amount exceeds the self-bonded stake, with both unbonding and bonded stakes of the delegator being slashed proportionally. This approach differentiates the risk profiles of self-bonded and delegated stakes, as self-bonded stakes act as loss-absorbing capital during slashing events.

Staking participants can acquire Newton stake tokens, which allow them to engage in the network and earn rewards based on their stake. The liquid staking model enables the creation of Liquid Newton tokens for delegated stakes bonded to validators, offering capital efficiency and composability. This model allows participants to transfer stakes while still earning rewards, although self-bonded stakes do not generate Liquid Newton.

Liquid Newton tokens are minted according to a validator’s delegated stake, with adjustments for any penalties that may affect the total stake. These tokens maintain liquidity as they entitle the holder to staking rewards and represent a share in the validator’s total stakes. Unbonding involves a specified waiting period and potential penalties for slashing events. It is important to note that Liquid Newton is minted solely for delegated stakes to maintain a consistent risk profile for validators.

Key Features of the Autonity Blockchain

The Autonity network offers distinct features that differentiate it within the space of decentralised systems.

1. Dynamic Consensus: One of the standout features of Autonity is its dynamic consensus mechanism. This allows developers and enterprises to choose the most appropriate consensus algorithm for their specific use case, balancing trade-offs between performance, security, and decentralisation. For example, a financial application requiring high throughput and low latency might opt for a Tendermint-based consensus, while another application might prioritise security and resilience with a different BFT variant.
2. EVM Compatibility: Autonity’s compatibility with the Ethereum Virtual Machine ensures that developers can easily port their existing Ethereum dApps to the Autonity platform. This not only reduces development time and cost but also allows for greater interoperability between different blockchain networks.
3. Enhanced Security: Security is a critical aspect of any blockchain platform, and Autonity incorporates several features to ensure the security of its network. These include permissioned access, robust cryptographic algorithms, and mechanisms to prevent common attack vectors such as Sybil attacks and double spending.
4. High Throughput and Low Latency: Thanks to its permissioned nature and optimised consensus algorithms, Autonity can achieve higher throughput and lower latency compared to traditional public blockchains like Ethereum. This makes it suitable for applications that require fast and reliable transaction processing, such as financial services, supply chain management, and IoT.

Autonity Blockchain Use Cases

Notably, the Autonity network supports various use cases, including:

• Financial Services: The financial services industry can greatly benefit from the high throughput, low latency, and enhanced security offered by Autonity. Use cases include cross-border payments, trade finance, and decentralised finance (DeFi) applications. The customisable consensus mechanism ensures that financial transactions are processed quickly and securely, meeting the stringent requirements of the industry.
• Supply Chain Management: Blockchain technology has the potential to revolutionise supply chain management by providing transparency, traceability, and efficiency. Autonity’s permissioned nature and robust security features make it ideal for tracking goods and verifying transactions across complex supply chains. This can help reduce fraud, improve inventory management, and enhance trust between supply chain partners.
• Internet of Things (IoT): The IoT ecosystem involves a vast number of connected devices that need to communicate and transact with each other securely and efficiently. Autonity’s high throughput and low latency are well-suited for IoT applications, enabling real-time data exchange and secure transactions between devices. This can enhance the performance and reliability of IoT networks in various sectors, including healthcare, smart cities, and industrial automation.
• Healthcare: In the healthcare sector, data privacy and security are of utmost importance. Autonity’s permissioned blockchain ensures that sensitive patient data is securely stored and accessed only by authorised parties. Additionally, the platform’s auditability and compliance features can help healthcare providers meet regulatory requirements while improving data interoperability and patient care.

Notable Milestones Achieved by Autonity Blockchain

Since the launch of the Autonity blockchain network, the project has achieved major milestones. In January 2023, Autonity announced the launch of its Piccadilly and Bakerloo testnets. These testnets are crucial for the Autonity project as it gears up for its Mainnet release. Users were encouraged to explore and interact with the testnets.

As part of the preparation for the mainnet launch, Autonity introduced the Piccadilly Circus Games competition. This event, conducted on the Piccadilly testnet across six rounds, aimed to engage the community in development and testing. The first three rounds focused on node and consensus infrastructure, while the last three emphasised economic mechanisms and use-case development. The competition provided a fun and challenging environment for community participation, contributing significantly to protocol improvements.

The first round began on March 15, 2023, and the final round concluded on August 7, 2024. Autonity announced that the Piccadilly Circus Games Competition ended successfully, with enhanced protocol functionality thanks to the community’s involvement. As Autonity nears its MainNet beta, participants can anticipate more challenges, bounties, and incentives.

In September 2024, Autonity unveiled its Ecosystem Booster Programme. This initiative supports innovative projects that enhance the Autonity ecosystem, offering grants and assistance based on a tailored milestone plan. Applicants must complete an application detailing their project, its benefits to the Autonity community, and the support needed.

The process includes an initial review by the Autonity Genesis Foundation (AGF), possibly followed by a call to discuss project specifics. A final decision on grant approval follows an internal review, leading to an agreement outlining mutual commitments. The programme emphasises various support avenues, including technical assistance and market positioning, to ensure project success. These milestones highlight Autonity’s progress and commitment to community engagement and ecosystem development.

Conclusion

The Autonity Blockchain is a breakthrough in blockchain technology, providing a flexible, secure, and scalable platform for diverse applications. Its customisable consensus mechanism, EVM compatibility, and enterprise-grade features make it appealing to developers and businesses seeking to harness blockchain benefits. The initiative has the potential to revolutionise industries and spur innovation by offering a reliable and effective infrastructure for decentralised applications as it develops.

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