Confidential - Do Not Redistribute

Modulus® Launching Your Exchange

From legal preparation to exchange design, configuration, customization, beta testing, marketing, and launching your exchange, this guide will help you construct a preliminary action plan to start and operate your exchange business.

T. +1 (480) 525-7940 Scottsdale, AZ 85260 USA www.modulusglobal.com

Copyright © 2018 by Modulus Global, Inc. Modulus® Contents

About This Guide...... 4 Launch Process...... 5 The Modulus Exchange Solution...... 6 Obtain Legal Counsel...... 7 Legal Compliance...... 8 Choose Your Coins and Tokens Carefully...... 9 Geo-Fencing for Restricted Access...... 10 Determine Exchange Transaction Limits...... 11 Partner with a Payment Processor or Bank...... 12 Select a KYC Service Provider...... 13 Choose a Hosting Provider...... 15 Choose Your Cold Storage System...... 16 Implement Best Security Practices...... 17 Contact Third-Party Service Providers...... 18 Obtain Historic Market Data...... 18 Select Liquidity Provider...... 19 Define App Customization Requirements...... 19 Learn About Optional Features...... 20 Design Your Exchange Website...... 20 Purchase Your Modulus Exchange License...... 21

2 Modulus®

Begin Exchange Deployment...... 22 Optional Security Testing and Source Code Escrow...... 23 Start Beta Testing...... 25 Prepare Your Marketing...... 26 Branding Guideline...... 27 Modulus Philosophy on Trademarks and Brands...... 27 Referring to Modulus...... 27 Brand Logos...... 28 Branding Attributes...... 28 Let Modulus Write Your Case Study...... 29 Marketing Agency...... 30 Your Exchange Launch Event...... 31 Provide Helpful Customer Support...... 32 Maintain Ongoing Compliance...... 33 Your Modulus Maintenance Program...... 33 Modulus Exchange Solution Features...... 34

3 Modulus® About This Guide

This guide provides detailed information and a checklist of prerequisite items for getting started with the Modulus Exchange Solution. Additionally, it aims to help you construct a preliminary action plan for launching your exchange business.

All prerequisite items outlined in this guide should be provided to Modulus before you purchase or execute your exchange license agreement. Providing the items to Modulus in advance is the only way that Modulus can commit to, and include, a delivery timeline within your license agreement.

Please note that the information outlined in this guide is subject to change at any time and is not a substitute for legal counsel, which is critically important when launching an exchange business.

This guide does not promote or endorse any ICOs, coins, tokens, law firms, or third parties of any kind. Also, this document does not constitute a binding contract between the reader and Modulus.

Prior to engaging Modulus to create your exchange, you should first seek professional legal guidance and/or obtain the appropriate licensing for your exchange in the jurisdiction in which your exchange will be domiciled. Ensure you are also appropriately licensed in all foreign jurisdictions in which your exchange members and traders will reside or conduct trading.

As always, Modulus is here to help you along in your journey, so if you are faced with additional questions not answered in this guide, please feel free to reach out to us.

DISCLAIMER: EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE INFORMATION AND REFERENCES PROVIDED IN THIS DOCUMENT ARE PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, MODULUS EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR OTHERWISE, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. MODULUS ASSUMES NO RESPONSIBILITY FOR, AND MAKES NO REPRESENTATIONS WITH RESPECT TO, THE ACCURACY OF THE INFORMATION. MODULUS MAKES NO REPRESENTATIONS OR WARRANTIES THAT THE INFORMATION IS PROVIDED FREE OF ERRORS OR THAT THE INFORMATION IS SUITABLE FOR YOUR INTENDED USE. THE INFORMATION IN THIS DOCUMENT IS SUBJECT TO CHANGE AT ANY TIME WITHOUT NOTICE, AT THE SOLE DISCRETION OF MODULUS. NOTHING IN THIS DOCUMENT CONSTITUTES A WRITTEN AGREEMENT BETWEEN THE READER AND MODULUS.

This guide contains confidential information and trade secrets. The reader must be bound by a Non-Disclosure Agreement with Modulus Global, Inc. Copyright © 2018 by Modulus Global, Inc. Scottsdale, AZ USA. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of Modulus Global, Inc.

4 Modulus® Launch Process

Market Research Select Coins/Tokens Setup Geo-Fencing Create Marketing Legal Counsel Select Liquidity System Configure Remarketer Create Case Study Company Setup Select KYC Provider Setup Payment System Contact Influencers Team Formation Select Hosting Provider Customize Apps Test Exchange Technology Review Select Cold Wallet Develop Website Launch Exchange Fund Raising Choose App Features Set Exchange Limits License Acquisition Define App Style Customize Risk Engine

PREPARE CONFIGURE CUSTOMIZE LAUNCH

5 Modulus® The Modulus Exchange Solution

ost exchange solutions are not only slow and lack basic security features, they limit trading capacity and profitability. They come with costly revenue Msharing schemes and long-term contracts designed to lock clients in for several years. They’re also hard to get up and running, and even harder to scale.

The Modulus exchange solution is different. We designed it to empower you, not raid your profits.

Shattering Performance Barriers The Modulus Exchange Solution was designed to disrupt the industry and to provide our clients with a competitive advantage. Many exchanges can’t handle more than one or two million transactions per second. Our exchange solution easily outperforms them all by leveraging our two decades of experience and HFT source code frameworks. Additionally, our source code has been written in the Go programming language, which was designed by Google in 2009 as an alternative to standard programming languages like C and C++.

Built on Modern Technology The Modulus Exchange Solution is extremely secure, scalable, and customizable. It is capable of scaling to over 10 million transactions per second, which is faster than Binance and Nasdaq! The solution also features advanced security and integrations for KYC/AML, customer support, CRM, accounting, geofencing, and much more. The system also supports GDPR compliance. We provide built-in support for over 1,000 coins and tokens. Admins can add new tokens in just minutes. The solution can be hosted in your own cloud hosting account or on your own hardware at your hosting facility. With the Modulus Exchange Solution, you own and control your own data. Modulus will not have access to your customer data.

6 Modulus® Legal Counsel

Legal counsel should be the first step for starting your exchange business.

It is important to seek expert legal counsel to A few important questions to ask during this understand the regulatory demands of your meeting are: new exchange. Proper licensing will need • What experience do you have in this to be obtained in all jurisdictions in which industry? your company plans to operate. In many places, cryptocurrency exchanges operate • How long have you been in practice? without significant oversight, as government • What are your fees and how are they and regulation have not yet caught up with structured? technology, while in other places, including the US, cryptocurrency exchange operators • What is your track record of success? must be licensed Money Transmitter • Do you outsource any tasks or functions? businesses and must follow FinCEN, SEC, and • Can you provide references from other CFTC rules and regulations, among others. clients? Proper legal counsel is a must. It is typical that exchanges, because they fall into the currency exchange umbrella, must adhere to Know Your Customer (KYC) regulations, which have become more and more prevalent Know Your Customer (KYC) is the to combat money laundering. In the United process of a business verifying the States, for example, these rules have been identity of its clients and assessing in place since 2002 as a result of the Patriot Act. Regulations vary by jurisdiction, so be potential risks of illegal intentions. KYC sure to consult with an attorney familiar with processes are employed by exchanges the industry. of all sizes, no matter if dealing in fiat Note that a higher fee does not necessarily currencies or cryptocurrencies only. mean that a lawyer is highly qualified. Also, a Exchanges may be at risk of financial loss very low fee may indicate that the lawyer is and government fines if KYC procedures inexperienced or incompetent. We suggest are not followed as prescribed by law. that you interview several lawyers. Most will provide an initial consultation at no charge.

7 Modulus® Legal Compliance

hich jurisdiction will your exchange operate? Your selection will determine to which national, regional, and local laws your new firm will be subject. WModulus has covered the pros and cons of various countries at length. Switzerland comes to mind when considering which country has the most complete regulations in statute. Because the sector is still emerging, law is still catching up with technology. Many countries are without regulations at all, while others are still trying to figure out which direction they plan to go. Lawmakers are often unfamiliar with the industry, presenting another challenge for structured regulation, leading to, in some countries, a prohibition. If you are looking for a host country with the most advanced handling of cryptocurrencies, Switzerland will likely be at the top of your list. On the other hand, it is also among the most expensive countries in which to operate, so be mindful of your budget. It is important, when dealing with jurisdiction, to understand the laws in place which will regulate the business you wish to operate. In the crypto space, you’ll want to familiarize yourself with KYC and AML regulations and systems. If you’re looking for a “second-tier” jurisdiction, you may want to consider Canada, or European destinations like Estonia, Gibraltar, Liechtenstein, Luxembourg, or Malta. The Grand Cayman is also great. In Asia, you may consider Japan or Singapore. Alternatively, if you’re looking for a budget headquarters, you may find that Belize, which boasts the lowest licensing fees in world at only $35,000, suits your purposes. It is clear that countries across the globe are beginning to understand that cryptocurrencies are here to stay, and many are attempting to figure out the best way to license and regulate firms in the space. At Modulus, we feel that more regulation will only help the cryptocurrency market. Over the next few years, expect government officials to be less weary of the industry as they begin to better understand it and as they get a better handle on the technology behind it. For now, look at potential host countries’ records. Are they business friendly? Do they have a strong financial infrastructure? Are existing firms overburdened by zealous regulators? Answer those questions and you’ll be able to understand the mentality of the country’s leadership and predict the future with greater accuracy. It is critical that you plan to license your exchange quickly within the markets in which it operates, as regulators and banks are looking to licensure as a way separate legitimate clients from scam companies. If, in the beginning, you opt against licensure, you’ll want to self-regulate and ensure your exchange operates with regulation in mind. Ensuring that your exchange utilizes proper KYC and AML systems is vital.

8 Modulus®

Choose Your Coins and Tokens Carefully

While Modulus can technically provide thousands of different coins and tokens, it would be inadvisable to list them all on your exchange. Your legal counsel must analyze each and every coin and token to ensure that listing them on your exchange will not violate any laws or regulations. For example, in the US, if a coin or token fails the “Howey Test,” it is deemed to be a security, which makes it illegal to offer on an exchange without proper registration. It is important to seek legal counsel to understand the regulatory demands of each coin and token, not only in the jurisdiction in which your exchange is domiciled, but also in all foreign jurisdictions in which your exchange members or traders will reside or conduct trading. The responsibility of analyzing your listings falls squarely on you, per the terms of our license agreement. Note that Modulus does not endorse or promote any coin or token.

9 Modulus®

Geo-Fencing for Restricted Access

A geo-fencing service is provided to prevent access from users within certain geographies where it may be unlawful to access your exchange. The service includes VPN and Tor network detection capabilities. This service is also required to prevent access from embargoed and restricted destinations. By default, countries subject to U.S. embargoes or trade sanctions are restricted from the exchange unless formally authorized by the U.S. Government. The current list of restricted countries is: Belarus; Central African Republic; Cuba; Democratic Republic of the Congo; Eritrea; Iran; Iraq; Lebanon; Libya; North Korea; Somalia; Sudan; Syria; Venezuela; Yemen; and Zimbabwe. Embargoed destinations are subject to change.

10 Modulus® Determine Exchange Transaction Limits

If processing fiat payments, your exchange may need to implement a transaction limit system to comply with money transmitter business laws and regulations, as well as to help mitigate risk when dealing with new clients. Be sure to discuss your exchange limits with your lawyer.

Example:

Daily Limits Deposit Withdrawal KYC Requirements Level 1 500 500 Name, date of birth, country of residence, phone number Level 2 5,000 1,000 Government issued ID, proof of address (e.g. utility bill) Level 3 10,000+ 5,000+ Biometric identification or other verification

11 Modulus®

Partner with a Payment Processor or Bank

Your exchange will need a payment processor or banking partner if you plan to accept or transmit fiat currency. Not all payment processors and banks are equal. Many payment processors do not support payouts, and most payment processors and banks refuse business to cryptocurrency exchanges. Also, fee structures, among other things, will vary widely between companies. You will need the lowest transaction rate possible in order to be competitive with other exchanges. Additionally, some processors build hidden fees into their contracts, so be sure you understand the contract before signing. Other differences between processors include settlement time and compliance with PCI DSS, a set of best practices to ensure cyber security. Note that, in the United States, federal law does not require compliance, though many state laws do. Be sure your payment processor is PCI-compliant to safeguard your new enterprise against cyber threats. This is another example of the importance of understanding the intricacies of industry regulation. At the time of this writing, Fidor Bank, CT Payment, and USAG have been reported to accept business with cryptocurrency exchanges. Note that Modulus does not recommend, endorse, or partner with any bank or payment processor, but it will integrate the API of your choice.

12 Modulus® Know Your Customer

Select a Know Your Customer (KYC) Service Provider

There are many KYC service providers available. You should choose a KYC provider that satisfies all of the legal requirements for the jurisdictions in which your exchange will operate. Legal counsel should be sought for help with selecting the right KYC provider. Below is a partial list of KYC providers. Modulus does not promote or endorse any specific KYC provider. Your KYC efforts must be consistent, thorough and accurate. Your process must be documented and available for inspection by regulators. The process must be SMART (Specific, Measurable, Achievable, Relevant and Timebound), scalable and proportionate to the risk and resources. Choose a service provider that conforms to all your local laws and regulations. The following page lists several KYC service providers. You should contact the service providers of your choice to request information so that you may evaluate their services for your exchange.

There are many KYC service providers. Most KYC service providers offer global services, however a few providers focus only on certain geographies and jurisdictions.

13 Modulus® KYC Providers

Jumio.com Trulioo.com Palo Alto, CA Vancouver, Canada Founded 2010 Founded: 2011 Subsidiary: Jumio India Pvt. Ltd. Subsidiary: The Global Data Company Ltd. Multinational. Used by Coinbase and LinkedIn 4.5 billion person multinational database

Threatmetrix.com IdentityMindglobal.com San Jose, CA Palo Alto, CA Founded: 2005 Founded: 2009 Parent organization: InsurQuote Parent organization: None Focused on security threats, not only KYC Multinational. Aggregates data sources

4stop.com ShuftiPro.com Köln, Germany Somerset, United Kingdom Founded: 2016 Founded: 2017 Good API support, aggregated data Inexpensive KYC with fair service

au10tix.com MitekSystems.com Nicosia, Cyprus San Diego, CA Founded: 2006 Founded: 1983 Parent organization: ICTS International Parent organization: MKR Group, Inc.

IDology.com Opus.com Atlanta, GA New York, NY Founded: 2003 Founded: 1996 Multiple choice KB authentication Offers unique features

SynapseFi.com Arachnys.com San Francisco, CA London, UK Founded: 2014 Founded: 2010

Kyckr.com OcularTech.io Sydney, AU Unknown location Founded: 2007 Founded: 2018

14 Modulus® Hosting

Choose a Hosting Provider

Your exchange will be hosted on your servers. Most exchanges are hosted in the cloud, such as with Amazon AWS, Microsoft Azure, Digital Ocean, Hidora and other cloud hosting providers. You can also host your exchange on your own hardware, although additional setup and maintenance fees will apply. The recommended hosting provider is Amazon AWS, however the solution can be hosted anywhere. Modulus recommends hosting a mirrored failover instance of the exchange in a different availability zone or geographical region, in case of system failure. In this way, the exchange can be restarted in less than 30 seconds should an unforeseen issue arise with your primary exchange server. Also, be sure to consult with your lawyer regarding any possible geographic limitations for your hosting provider based on your company’s jurisdiction and legal requirements.

15 Modulus® Cold Storage

Choose Your Cold Storage System

Cold storage is one of the most important considerations for the security of a cryptocurrency exchange. Cryptocurrency exchanges are advised to keep at least 95% of their funds in a cold wallet at all times, so that in the event of a hack, no more than 5% of the funds could possibly be stolen. Some financial engineering is required in order to determine the optimal percentage of funds to keep in the cold wallet, and to determine the optimal timing for movement of funds between hot and cold wallets. Factors affecting these variables include: the behavior of traders and amount of volume on the exchange, the current blockchain settlement time, the response times of the wallet system (BitGo and Xapo may require a few hours for transfers), and other factors. Caution must be taken to prevent an inside hack. Some exchanges have been exploited by malicious employees. Therefore, your internal security policies must be based on industry best practices. We recommend obtaining a consultation with a firm such as Deloitte or AlphaSights for an insider risk assessment.

Resources https://www.alphasights.com http://www.modulusglobal.com/media/deloitte-insider-threat.pdf http://www.modulusglobal.com/media/fbi-insider-threats.pdf https://www.fbi.gov/news/stories/how-to-spot-a-possible-insider-threat

16 Modulus® Implement Best Security Practices

Cybersecurity risk management is critical for your exchange. Your exchange will be attacked on a daily basis. Fortunately, exchanges built with Modulus technology are among the most secure in the world, utilizing offline cold storage wallets, such as the Modulus wallet solution, BitGo, and Xapo; two-factor authentication via Google Authenticator, Authy, Duo, Yubico, and others; optional hardware security, such as AlienVault; DDoS mitigation via CloudFlare; encrypted databases; and trade surveillance. We have written extensively about the data breaches which have become infamous within the industry, including Mt. Gox and Bithumb (refer to our crypto exchange attack review below). The bottom line? Cryptocurrencies have become a ripe target for cybercrime and hacking, leaving exchanges scrambling to differentiate based on security.

Resources https://www.modulusglobal.com/media/crypto-exchange-attack-review.pdf https://www.modulusglobal.com/media/crypto-exchange-attack-review.xlsx Additional security resources: http://www.modulusfe.com/security/

17 Modulus®

Contact Service Providers

Several third-party service providers are required for the Modulus Exchange Solution. ZenDesk is pre-integrated for customer support. For the CRM, we recommend SugarCRM; however, almost any CRM can be integrated. The same goes for the accounting package, KYC/AML provider, payment processing company, bank, CDN service provider, hosting service provider, and other third-party service providers. We do not recommend engaging with any third-party service providers for use with Modulus until you have a duly signed license agreement with us and have made payment for your exchange license.

Historic Market Data

By default, your exchange will begin recording live market data the moment the exchange is activated. However, the financial charts will not have access to historical market data prior to that point in time. For most exchanges, we recommend purchasing historical market data from a source such as http://cryptoquote.io, which also provides real-time market data aggregated from various exchanges.

18 Modulus®

Select Liquidity Provider

We will Connect your exchange with a liquidity provider. The cornerstone of any successful exchange is liquidity. Without an order book and trading activity, potential customers will view a new exchange with skepticism. In order to bypass these issues, without facing the need to simulate activity via dummy accounts within the new exchange, we can connect your exchange into a network of existing exchanges through a liquidity provider. We can connect with any iquidity provider that provides an API. Note that Modulus does not recommend, endorse, or partner with any exchange or liquidity provider, but will integrate the API of your choice. Your exchange admin may also set rebates and cash incentives for market makers on your exchange.

Define App Customizations

A standard web and mobile app user interface (UI) is provided, which can be customized for your exchange. The color scheme and the logo can be changed easily, and you can develop a new UI using the developer API. Modulus can also customize the default UI for you. Customizations beyond those basic aspects will require a custom development engagement. You may provide Modulus with your Sketch or InVisionApp design files to request a custom quote and Statement of Work.

19 Modulus®

Learn About Optional Features

Several optional features are outlined in the Software License Agreement in Exhibit A. Implementation of optional features must be discussed with Modulus prior to purchasing an exchange license, otherwise your exchange delivery date cannot be guaranteed. Certain optional features may have restrictions or conditions. For example, the Modulus token knowledgebase requires that a Modulus copyright notice be placed wherever the knowledgebase content is displayed. Be sure to discuss optional features with your Modulus customization and implementation team.

Design Your Exchange Website

No cryptocurrency exchange is complete without a website. You may hire a web developer to create your exchange website using a free Modulus-designed exchange website template, or you may hire Modulus to develop your website for you. Be sure to let us know your choice as soon as you purchase your exchange license, as website development requires more time than setting up your exchange or customizing your web and mobile apps.

20 Modulus®

Purchase Your Modulus Exchange License

We recommend purchasing and executing the Modulus Exchange License as soon as you make the decision to proceed. Until you have purchased your exchange license and until you have a duly signed exchange Software License Agreement from Modulus, your exchange will not go into our deployment queue, and we cannot begin work on your exchange. The Modulus Exchange Solution is a rapidly evolving product and the terms, prices, features, and other particulars may change at any time, without notice, until you have a duly signed agreement.

21 Modulus®

Begin Exchange Deployment

You may be requested to attend a kickoff meeting with your customization and implementation team to discuss third-party service provider options, hosting options, payment integrations, cold wallet implementation, security options, user interface customizations, website development, and other topics. You will have the opportunity to discuss any concerns or questions during this meeting. You should plan on spending thirty minutes to an hour for the first meeting. Additional meetings may be necessary. While having an IT person from your company on this call may be helpful, an IT person is not required.

Schedule Installation and Begin User Acceptance Testing

Once customization and development have been completed, it’s time for Modulus to install the exchange software on your servers. It is advisable (but not required) to have an IT person from your company working with our team during the installation process. Your IT person may need to provision your servers so that we may install the server software and configure your systems. Note that, in order to perform maintenance on your exchange, we may need to liaise with your IT person from this point forward. The User Acceptance Testing (UAT) period that is specified in the Software License Agreement begins once the software has been installed on the delivery date. During the UAT period, you will be allowed to run benchmark tests on your exchange to test performance. You will also put the exchange through its paces in a closed beta test before signing off with the delivery. The Modulus team will still continue working with your company, even after the UAT period ends, to provide support and maintenance.

22 Modulus®

Security Testing and Source Code Escrow

You may request external auditing of our backend and frontend source code by one of our preferred security partners. Our source code will also be placed into an evergreen escrow service for you when you purchase the security testing service. Please note that an additional cost will apply for these ongoing services. The initial code review process requires 30 man days. As part of the escrow agreement, a copy of the source code is deposited and held securely with a neutral third-party, ensuring that the source code can be accessed and released should the need arise. Code verification provides assurance that the source code deposited in escrow is correct and complete by ensuring that the materials can be built into the working system. The security service provider will observe the complete build of the exchange software onsite at Modulus and will document every detail of the environment and build process in a comprehensive report, which acts as a detailed handbook, describing all steps involved in building the source code into the working application. This information will be held securely in a safe deposit box, and will only be released after a qualifying event. Every two weeks, each deposit of the backend code and any generic frontend code will undergo Code Verification to provide assurance that the source code being placed in to Escrow can be rebuilt in to the latest working version of the application. The exercise is conducted onsite at Modulus by security engineers who possess current and active governmental security clearances. Cryptography Review: Cryptography Services will review multiple targets. The goal of this review is to determine if the design and implementation are able to meet your security requirements.

23 Modulus® Security Review

• Review of functional and design documentation describing the use of cryptography, with emphasis on security and functional requirements of the system.

• Analysis of the planned use cases and assurances desired of the cryptosystem in comparison to the design documents and libraries in use.

• Identification of threats to the cryptosystem and the risks associated with threats, such as ways for an attacker to:

o Obtain inappropriate access to cryptographic keys

o Obtain inappropriate access to sensitive and/or protected information

o Tamper or otherwise influence protected information • Analysis of implementation of cryptographic primitives, including the following:

o Selection of cryptographic primitives and algorithms

o Appropriate use of standard libraries or implementations

o Validation of parameters to cryptographic algorithms

o Use of random numbers for cryptographic operations • Analysis of cryptographic protocol sequences and data flows, including the following:

o Authentication and/or identification of protocol participants

o State management, with emphasis on invalid state transitions

o Malicious tampering, re-ordering, and replaying of protocol messages • Review of side channels in cryptographic primitives and protocols:

o Timing attacks at the protocol, primitive, and underlying library level

o Oracle attacks, such as the use of padding and compression oracles

24 Modulus® Begin Beta Testing

We’ve customized your exchange and deployed it. You’ve partnered with a KYC service provider, and a bank or payment processor (if required). And, you’ve taken great pains to ensure your exchange is following all rules and regulations. You have ensured that your venture is protected from cybercrime. Now, it’s time it to launch your exchange and test its full range of capabilities in a closed beta, which may serve as part of the User Acceptance Testing specified in the Software License Agreement. Ideally, the first phase of the closed beta should utilize simulated funds rather than real funds. Real funds should only be incorporated into testing after all numerical values have been verified by both Modulus and your testing team. After the closed beta test and User Acceptance Testing periods have ended, and any remaining issues have been fixed by Modulus, your exchange is ready to go live.

Target Your Customers Usually, it is best to focus on a specific customer persona for your exchange. That is to say, if your exchange offers both retail and institutional trading functionality, your PR plan should focus on one persona or the other, but not both.

Beta Testing Tips

• Open betas are not ideal. Typically, with open betas, either too many testers sign up or there are too few reports generated.

• The recommended minimum number of beta testers is 100.

• Allow enough time for your beta test. While the Modulus Exchange Solution is a turnkey product, you should still allow enough time to finish a full beta cycle before going live.

• Your beta should provide at least two or three releases before conclusion.

25 Modulus® Begin Marketing

Before your exchange is launched, you should connect with news outlets such as Coindesk and news.bitcoin.com, for example. You may also wish to connect with the Wall Street Journal, Investor’s Business Daily, the Financial Times, or The Guardian. Aim high! It is important to adequately plan your marketing activities, along with their costs, to ensure your initial budget doesn’t leave you scrambling to cobble together additional funding. Often, exchanges do not include a marketing budget, instead focusing on free social media marketing until a critical mass of traders is reached. Do not simply draft a press release and cross your fingers. Your exchange launch and ongoing marketing efforts will require an expertly designed PR plan. Have your PR firm research your space in-depth, and prepare a pre-launch, launch, and post launch marketing plan carefully. Build compelling, creative assets. Your website and marketing material should match the quality of your exchange. We recommend high quality graphics and video production (contact your Modulus representative for referrals, if needed). Also, your marketing should focus on your customers, not the technology. Sell the sizzle, not the steak. Rather than simply advertising that your exchange can process over 10 million transactions per second, also emphasize how the technology will affect your customers. Your exchange will be highly responsive and ready to scale rapidly. Your exchange will feature advanced trade surveillance functionality powered by machine learning, which will create a fair and friendly marketplace where your customers will not be affected by market manipulation, such as wash trading, layering, hammering, spoofing, momentum ignition, front running, and so forth. Next, be sure to choose your marketing channels carefully. Avoid low quality channels or channels where the audience may not be the right fit. Do not subscribe to “the more the merrier” mentality for marketing, as being featured within a low-quality channel can reduce your brand’s perceived value.

26 Modulus® Branding Guideline

If you wish to mention Modulus in your marketing materials or press releases, please follow our Branding Guideline.

Modulus Philosophy on Trademarks and Brands

Modulus trademarks and brands are Modulus intellectual property and are important and valuable assets of the corporation. Trademarks must be used properly. Follow our Branding Guidelines for using the Modulus trademarks and brands properly in all communications and documents. Also, please note that all creatives that include or reference Modulus trademarks must be reviewed and fully approved by the Modulus communications team.

Referring to Modulus

You may refer to Modulus products and services by their associated trademarks and service marks, so long as such references (a) are truthful, fair, and not misleading, and (b) comply with these Branding Guidelines, which may be modified by Modulus from time to time at Modulus’ sole discretion. Specifically: • Use the appropriate trademark symbol and trademark acknowledgment of Modulus’ ownership of the marks and/or logos in question.

• Do not incorporate Modulus trademarks or logos into your own product names, service names, trademarks, logos, or company names, and do not adopt marks or logos that are confusingly similar to Modulus’ marks and logos.

• Do not make misleading claims about Modulus products and services.

• Do not specify the programming language, technology stack, or architecture.

• Do not reference any Modulus representative by name in your marketing material, unless you have explicit written permission from Modulus.

• Do not tag or reference Modulus or Modulus employee social media accounts within your social media postings.

• Do not post any marketing that references Modulus without written approval. All marketing must first be approved by Modulus.

27 Modulus®

Brand Logos

Modulus logos can be downloaded from http://www.modulusglobal.com/media/branding.zip The “Powered by Modulus” logo instantly tells your customers that Modulus expertise and technology are critical components within your exchange. There are three color options for the logos. Choose the one that best fits the design of your assets. You must include the registered trademark symbol ® with the Modulus name or logo. The font for the Modulus logo must be Century Gothic. The red color must be #898989 and the gray color must be #DD0000.

Branding Attributes

Performance • Correct: Our exchange processes 10 million transactions per second. • Correct: Our exchange matches 10 million orders per second. • Incorrect: Our exchange processes 10 million trades per second. • Incorrect: Our exchange matches 10 million trades per second.

Features • Correct: Our exchange features trade surveillance based on machine learning. • Correct: Our exchange monitors for market manipulation using machine learning. • Incorrect: Our exchange uses artificial intelligence to identify market manipulation. • Incorrect: Our exchange features trade surveillance powered by A.I.

Technology • Correct: Our exchange is powered by Modulus. • Correct: Our exchange is powerful, robust, and secure. • Incorrect: Our exchange has been developed in the Go programming language.

• Incorrect: Our exchange has been developed in the Golang programming language.

28 Modulus® Let Modulus Write Your Case Study

A case study offers a way for Modulus to tell the world how valuable your exchange is. Your case study will include details about the technical performance aspects of your exchange, in addition to any unique features that your exchange has to offer. People enjoy reading a story, which is exactly why your case study should tell your exchange’s story from start to finish. This is an excellent opportunity for your customers to get to know your company. Providing your Modulus case study to your potential customers will highlight the fact that your exchange has been developed using the most advanced, most powerful, and most secure technology available. Please inform your Modulus sales representative as soon as possible if you wish to have your exchange featured in a Modulus case study.

29 Modulus® Marketing Agency

odulus offers its public relations and marketing agency to select clients, billed at cost, to help increase brand awareness. The marketing team staffs professional Mcontent writers who possess Master of Arts in Professional Writing and Master of Science in Marketing degrees. The staff also includes Copyblogger certified content marketers. The agency’s connections span from major publications such as the Wall Street Journal, Investor’s Business Daily, to Coindesk, Bitcoin News, CCN and other news outlets relevant to exchanges. The core of the agency’s success is the unmatched ability to distill the complexities of advanced financial technology and convey it in ways that are comprehensible and compelling to create messages that resonate with all stakeholders, including the media. Modulus also has on-demand access to high quality media production to complement our PR and marketing services. Our production partners maintain high-end equipment consisting of ARRI cameras and Zeiss Prime lenses, high-end audio and lighting equipment, award-winning script writers, experienced cinematographers, gaffers, and audio technicians, advanced postproduction and CG artists, and more.

30 Modulus® Launch Event

Please inform your Modulus representative about the exact date and time that you plan to launch your exchange, so a dedicated team from Modulus can be ready should you require our expert assistance.

Your exchange is powered by Modulus, which makes it one of the fastest, most secure exchanges out there. This means you need an equally excellent plan to accompany your exchange launch. You should get opinion leaders onboard with your exchange marketing efforts early, long before your launch event. Bloggers, thought leaders, and other industry players should be discussing your exchange for weeks, or even months, before the launch. Fintech journalists and bloggers know that Modulus has a history of releasing innovative products, so it helps to mention Modulus in your pre-release marketing. Draw out the suspense for as long as possible before the launch. Finally, stage an event for your product launch (at least an online event). Plan your event very carefully, weeks ahead of time, to ensure that it goes smoothly. Remember, your customer’s first impression might be the last impression.

31 Modulus®

Provide Helpful Customer Support

Customer support is crucial in making a successful cryptocurrency exchange. Your ability to shine in this area will determine your long-term success. Your exchange solution will include an implementation of a ticketing system such as ZenDesk or FreshDesk. Be sure to staff your support desk with knowledgeable, attentive, and helpful representatives 24/7, since many markets, especially cryptocurrency markets, never stop trading. Your support staff must satisfactorily resolve customer complaints and technical issues within minutes, not hours or days. Great customer support isn’t about the customer always being right. It’s about treating your customers like you’d treat your family. Your support staff must truly go out of their way for your customers to ensure that all their questions and concerns are addressed in a timely manner. Customers are more likely to make larger deposits and trade larger volumes on your exchange if they’ve had positive experiences with your customer support staff. Conversely, customers are more likely to leave your exchange if they’ve had a negative experience. Also, when you offer a great customer support, your customers are far more likely to recommend your exchange to a friend or colleague. Great customer support conveys strong moral values and beliefs in your company’s mission.

32 Modulus® Maintenance

Maintain Ongoing Compliance We cannot stress enough that it is extremely important to maintain legal compliance and follow all current and proposed laws and regulations, not only in the jurisdiction in which your exchange is domiciled, but also in all foreign jurisdictions in which your exchange members or traders will reside or conduct trading. Cryptocurrency laws are rapidly evolving globally, so it is very important to hire a full-time, in-house legal compliance team. Alternatively, you may outsource to reputable law firms to keep your exchange legal in all geographies where you will conduct business.

Maintain Your Modulus Maintenance Program Once your exchange is running, you’ll want to ensure that your Modulus Maintenance Program does not lapse, as the service includes critically important security patches, bug fixes, and product enhancements for your exchange. Cryptocurrency forks, emergency blockchain bug fixes and performance upgrades are vital to the security and performance of your exchange. The Modulus Maintenance Program is provided within your Software License Agreement and should be renewed on an annual basis. Contact your Modulus representative if you have any questions.

33 Modulus® Exchange Features

This list outlines several existing and upcoming features of the Modulus Exchange Solution. Features that are planned for release in the near future are marked with an asterisk * and features that are marked with a dagger † indicate that third party services are required to use the feature. This features list is subject to change at any time without notice.

Website & Apps

• Includes a pre-built exchange web app, and an optional mobile app with a modern appearance designed for iPhone and Android. Features include 2FA, financial charts, optional technical analysis tools*, an optional chat room*, news & announcements feed*, push notifications* and more. Also includes a token knowledgebase for various cryptocurrency coins & tokens.

Onboarding, AML, KYC

• The customer onboarding system collects KYC information from clients (including name, date of birth, address) to ensure that only genuine users are permitted to sign up and use the service.

• Know Your Customer (KYC) verification service† processes identity checks, including name and address verification and ID document verification (depending on the KYC service).

• Anti-Money Laundering (AML) service monitors for attempted money laundering.

Security

• Passwords are not stored in the database.

• All sensitive user data is encrypted in the database.

• The system is generally not vulnerable to SQL injections.

• CloudFlare† is required for DDoS mitigation.

• A generic offline multi signature cold wallet / vault system is available. BitGo† vault storage service is optional (requires consulting services to implement).

34 Modulus®

• The system helps support GDPR compliance.

• A hardware licensing and watermark mechanism is included to prevent piracy.

• An optional geo-fencing service† is available to prevent access from users in certain geographies. Includes VPN and Tor network detection* capabilities.

Anti-Market Manipulation (AMM)

• Using machine learning, our real-time market surveillance system* monitors for suspicious trading activity, such as abnormally large trades, spoofing, layering, stuffing, hammering, and momentum ignition. Admins can choose to freeze accounts associated with suspicious trading.

Accounting

• The accounting dashboard keeps track of all manual and automated deposits and withdrawals.

Support Desk

• Integration with FreshDesk† or ZenDesk† for customer support can be provided (requires paid consulting).

Admin Functionality

• Admin dashboard displays various exchange statistics.

• Admins can generate a Proof of Solvency report to prove crypto reserves.

• Admins have access to a panic shutdown mechanism, which halts all trading.

• Admins can ban specific users from trading.

• Admins can add cryptocurrency tokens via the admin control panel.

Supported Tokens

• Supports popular blockchains and ERC20 tokens. Tokens can be added via the admin control panel. Through the implementation of full nodes, users can deposit funds into the exchange using many different types of tokens. Customer is responsible for legal due diligence on all tokens and may request Modulus to remove certain tokens at no additional charge.

35 Modulus®

High Performance Matching Engine

• Hosted and maintained on Customer’s AWS servers.

• Processes up to 10 M orders per second depending on configuration, setup, and hardware.

• Pre-trade risk management ensures users have enough funds available to trade.

Liquidity & Market Making

• The exchange can be connected to an external liquidity provider for added liquidity (requires paid consulting services). Market making algorithms can be added for automated market making (requires client review & approval).

• Rebates and cash incentives can be adjusted to attract market makers to the exchange.

Testing Utilities

• User Acceptance Testing verifies performance and integrity of exchange calculations.

• Test utilities are provided to verify there are no anomalies or inconsistencies with market data (trade prices match with UI displays).

Developer Support

• A documented Developer API is provided.

Order Types

• The software supports Limit orders, Market orders and Stop-Limit orders by default. Other optional order types may be added in the future.

Institutional Trading API

• An optional FIX server*† is planned for the future. Because FIX uses key value pairs, the system will filter for garbage input to prevent hacking. For example, the system will not allow invalid messages or messages with negative values, which could artificially add funds to an account.

• Dark Pool Trading* may be optional in a future release.

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Leverage Trading

• Optional Leverage* / Margin* Trading and Lending* may be made available in future versions.

Optional Features

• Optional features may include an affiliate system†, professional charting** with technical analysis tools (can be upgraded), auto-trading*, expert advisors*, market scanning*, trade alerts*, trading system back testing*, social media integration, social media sentiment analysis*, A.I.*, copy trading* and other features. Optional features require paid consulting to integrate.

Globalization

• Web and mobile apps support multiple languages (client-supplied translations may be required).

Updates and Maintenance

• Critical bug fixes (as defined and prioritized by Modulus) are provided free of charge. Product updates and maintenance are available under an Annual Maintenance Program.

** Optional historical and external real-time market data is available via cryptoquote.io. If external data is not licensed from cryptoquote.io, historical market data will begin recording at the time the exchange is launched, therefore historical chart data will be limited.e

37 web: www.modulusglobal.com email: [email protected] Modulus® Telephone: +1 (480) 525-7940 Fax: +1 (480) 525-7940