Executive Summary of the SOX _TM Protocol

Features. SOX_TM - Systemics Open Transactions - is a protocol for passing value instructions over the Internet with the following features:

• low cost of operation - can be run on a PC
• flexible - not limited to ordinary monetary instruments, any particular currency, or a narrow range of value
• reliable - provides guarunteed delivery in both directions
• simple - protocol and design complexity is low
• open - protocols, source and running implementations are made available within the WebFunds open source project.
• verifiable - uses well-understood public cryptography concepts, and draws its algorithms from the open source Cryptix project.
• secure - no known attacks to steal value
• preserves privacy - marketing derived from trusted party information is strictly limited.

Payment Models. SOX implements, or is capable of implementing, the three fundamental payment methods:

1. Cheques. A payer can pass a transfer instruction to a payee for deposit. This method can be extended to provide micropayments (small payments that match the efficiency of the Internet).
2. Cash. Token money may be implemented via either special token modules that implement, for example, blinding formulas, or by transfer of secret keys (followed by a suitable user-driven rollover).
3. Direct. Payments written by the payer can be directly deposited on behalf of the payee.

SOX is effective down to $0.001, and can easily be extended to handle smaller values.

SOX was designed to handle monetary and financial instruments. The Ricardo architecture includes an Issuer and the open-sourced WebFunds client, both incorporating SOX as the protocol for communicating value instructions.

Ricardo forms the basis of a financial system, the other component of which is a trading exchange. The markets themselves are based on SOX implementing financial instruments using Ricardian contracts.

Trials have been conducted with zero coupon bonds, dollars, and metals, alongside a multitude of valueless instruments.

Building retail onto SOX is easy. Merchant sites have been demonstrated with pay-per-view (e.g., newspapers), purchase orders (e.g., sales of books), and pay-refund (e.g., overpayments and gambling). Other possibilities for SOX include:

• Loyalty systems. Unified with retail usage of SOX, this promises to be a particularly efficient use of Internet technology, filling the gap between privacy-preserving systems and marketing requirements.
• Discriminatory tokens such as single purpose vouchers (e.g., book tokens) or age-limited vouchers (under-18 gift vouchers).
• Internal monetary instruments in closed systems such as casinos, company transfer-pricing schemes, or "club" money.
• STATELESS CRYPTO

Value is held by a co-operative arrangement between an issuer of value and an owner of value. The issuer ascribes value to a registered public key, and the owner of that value controls it via the secret key. By definition, the holder of the secret key is the owner.

To maintain value, the issuer mounts an Internet server that receives instructions that are encrypted and signed. The server provided by Systemics uses a conventional accounting back-end to control the allocation of value; other methods are possible.

To control value, an owner uses software that issues SOX instructions over the Internet, such as that provided by the WebFunds open source project or their partners.

Communication is divided into two broad packet layers:

• Encrypted layer. The outermost packet structure simply encrypts the inner (request) packets for the recipient. Encryption uses a fast algorithm (e.g., triple DES, Rijndael) with a session key, which is encrypted for the recipient's communications public key (e.g., RSA or DH key exchange).
• Request layer. This includes details of the instuction, which is a primitive as listed below.
  • Register a public key as a value-holding entity. This entity can form the authentication part of an account, as the caller keeps the secret key private.
  • Transfer value from one account to another account. This generates a receipt for both sides, one of which is supplied to the initiator, the second is stored for later mail collection by the counterparty.
  • Collect mail. In order to confirm transactions over the often unreliable Internet, receipts are generated by the issuer, and can be collected using a secure protocol.

  Requests are signed by the owner of the key (RSA or DSA), where appropriate, and are stateless and idempotent for reliability. Additional requests are easy to add, and Systemics has fielded a Trading extension protocol which replaces the transfer value request, above, with custom requests such as trading requests.

In fitting with the inherent modularisation of Ricardo, SOX itself says nothing about the type of value that is being managed, providing a byte array to carry that data. In practice, within the Ricardo implementations, value is typed by Ricardian Contracts which are legal contract, digitally signed by issuers. The message digest (MD5 or SHA1) of these documents forms the identifier for the type of value.

More Information. Write to us or see the SOX Index.

Ricardo, SOX, and Systemics are trademarks of Systemics Inc.
CashBox is a trademark of Intertrader Ltd.
Cryptix is a trademark of The Cryptix Foundation Ltd.