AppCoins Distributed and Trusted App-based Transactions Protocol Paulo Trezentos Diogo Pires Aptoide Team ISCTE / Aptoide Aptoide December 11, 2017 Version DRAFT 0.50 Abstract Today there are 2.1 bn smartphone users in the world generating more than USD77 bn in annual gross revenue. Those numbers are projected to double by 2020. However, app stores are still riddled with inefficiencies and malware. In-app purchases (IAP) are not accessible to the low-end market, in-app advertising is plagued by too many intermediaries, malware is still prevalent and innovation is slowing down. The reasons are diverse: payment models are not suited for emerging countries and younger generations; there is no trust between the actors of the ecosystem; and there is a lack of standardisation defining clear interfaces and enabling market free entry for new players. The AppCoins network is an open and distributed protocol built on the Ethereum blockchain. It aims to mitigate the current inherent deficiencies of app stores. By marrying blockchain technology with app store technology, app advertising, in-app billing and app-approval can be drastically improved and sped up through disintermediation and redistributing the unlocked value to end-users and developers. \AppCoin" ERC20 token will be used by the developers to advertise their Apps to the users. From every advertising investment inside the app store, 85% goes to the user. The user has to use those coins to buy items (in-app purchase) inside the apps and games, generating the return of the investment to the developers. In parallel, the Advertising and IAB transactions are used to establish the reputation of the developer. The design of the AppCoins protocol rests on three main pillars: 1) transparency, 2) eq- uitability and 3) community-focused. Firstly, open and transparent standards facilitate trust and privacy. Secondly, revenue shares are redistributed away from unnecessary intermediaries to end-users and developers. Thirdly, through open-source code, knowledge is accessible to the community. The current problems in the app stores flows are further described in this document, as well as the risks contained in each of them. Concepts like \proof-of-attribution", use Ethereum network smart contracts and state storage, allowing cryptographically to reach an acceptable digital agreement between users and developers. This new AppCoins power app economy network will be launched within the next 12 months, leveraging on existing 200 million annual unique active users of the Aptoide app store. Token sale proceeds will be used to incentivise developers, OEMs and end-users. By 2022, Aptoide aims that 1.3 bn people use AppCoins powered app stores. CONTENTS Contents 1 Introduction and Problem Statement 3 1.1 Motivation . .3 1.2 Historical perspective . .3 1.3 Advertising . .4 1.4 In-App Billing . .7 1.5 App Approval . .8 1.6 Paper organisation . 10 2 Design of the Solution 11 2.1 Assumptions . 11 2.2 Client side support . 11 2.3 Fraud . 13 2.4 Protocol Overview and sketch . 14 3 AppCoins: Protocol Definition 18 3.1 Advertising . 19 3.1.1 Data Structures . 19 3.1.2 Algorithms' Pseudo-code . 20 3.1.3 Wallet Transactions . 22 3.2 In-App Billing . 23 3.2.1 Data Structures . 23 3.2.2 Algorithms' Pseudo-code . 24 3.2.3 Wallet Transactions . 25 3.3 Developer Rank . 26 3.3.1 Developer Reputation . 27 3.3.2 Data Structures . 27 3.3.3 Algorithms' Pseudo-code . 28 3.3.4 Wallet Transactions . 32 4 Blockchain Limitations and Proposed Approach 32 4.1 Blockchain limits . 33 4.2 Existing technology . 34 4.3 Ethereum and Bitcoin based . 34 4.4 Lightning Network . 34 4.4.1 Raiden . 35 4.4.2 Plasma . 35 4.4.3 OmiseGO . 36 4.5 Independent blockchains . 36 4.5.1 Nxt . 36 4.5.2 Tezos . 37 4.5.3 IOTA . 37 4.6 Proposed Approach . 37 1 CONTENTS 5 Related Work 39 5.1 Related Projects . 39 5.1.1 Basic Attention Token . 39 5.1.2 Kin . 40 5.1.3 Monetha . 41 5.2 Projects Affinity . 42 5.2.1 Advertising . 42 5.2.2 IAB . 42 5.2.3 Developer Reputation . 43 6 Acknowledgements 43 References 43 Legal notice to Investors 47 2 1 INTRODUCTION AND PROBLEM STATEMENT 1 Introduction and Problem Statement 1.1 Motivation In 2016, the Aptoide app store was used to install 1.1 bn apps in 200 million unique devices1. Although the Aptoide brand may - or not - be familiar to the reader before reading this white paper, one out of five young people between the ages of 16 and 25 worldwide uses Aptoide. In certain countries - like Brazil or Mexico2 - that number increases to one out of three. Over this incredible journey to earn the trust of Aptoide users, without any paid acquisition, we discovered that app stores can be much more. The app discovery can be much better. The financial transactions - like advertising and in-app purchases - can be much more efficient. The sharing can be much more powerful. The current state does not benefit enough the developers or the user. It only benefits Google and Apple. In a closed market, they can impose margins and their own distribution rules. The proposed protocol in this document is a call to the community. It is a call to developers, to other app stores, and to users. It is a call to work together towards a free-entry app store market. A market that unlocks the world of in-app purchases to billions of users. A market that benefits the talented developers providing them significant revenue and transparent ways to reach their users. AppCoins envisions a world where app stores compete by innovation and service level. The same way open source and community helped Aptoide to reach 100 million users in 4 years, we are certain that blockchain is the technology that will enable this revolution, providing trust and transparency. If you share this vision, join us on this journey [26], collaborating in the protocol, developing open source software and spreading the word. Changing the app store ecosystem and breaking monopolies. 1.2 Historical perspective App stores are a distribution channel between the developer and the end user. Although soft- ware distribution exists since there is software development, the current model of smartphone became popular with the launch of Apple's App Store in July 2008 and with its pre-load in iPhone 3G. In the same year, but later in August 2008, Google announced the launch of Android Market [42], the app store for Android. These initial app stores followed a centralised model where one entity is responsible for assuring the core features of software distribution: file delivery, app discovery, financial trans- actions and app approval. This centralisation comes with its inherent drawbacks such as little to none transparency and being closed source. As the smartphone user base grew, the centralised model started to reveal additional flaws: a lack of trust and economic inefficiencies. Another weakness of the centralised app economy is the intransparency behind rule-making and enforcement. For instance, apps are commonly censored if they compete with the app 1Aptoide web site is considered the #692 most visited site in the world by SimilarWeb (Sept 2017). 2Aptoide Top 5 countries: Brazil, Mexico, US, India, Italy 3 1 INTRODUCTION AND PROBLEM STATEMENT store owner's economic interests. In addition, collected personal user data (e.g. user age, preferences, apps installed, etc) can be exploited for other purposes. A lack of transparency erodes trust among the participating stakeholders: developers, advertisers, users and Original Equipment Manufacturers (OEM). Moreover, the central authority behind the app store reaps a disproportional high share of the created revenue in the smartphone value chain. Further, centralisation also stifles competition and innovation. The AppCoins network redefines the following three app store core processes: • Advertising inside the app store: Developers advertising to users to install their app or game. There are different advertising models depending on the intended action: CPI (Cost per Installation), CPA (Cost per Action), CPM (Cost per Thousand Impressions) and others. There are different technologies and platforms to support it: Ad networks, Exchanges and RTB (Real Time Bidding). • In-App Purchase (IAP): When users want to unlock premium features inside the app or game, the purchase mechanism is tied to the respective app store. To enable payment transactions, the developer has to either integrate the SDK from the app store or use its API. • App approval: To offer the app in the store, developers have to go through a stringent approval process in which the submitted app is screened by anti-virus and anti-malware tools, as well as static and dynamic code analysis platforms. Some app stores also rely on manual app testing. Not only Developers and OEM manufacturers, will benefit of app stores supporting the AppCoins protocol. Users will benefit as well: 1) easier to transfer money between users in a peer-to-peer way 2) possibility of earning coins by installing and giving attention to a game or even evaluating the quality and safety of an app 3) be censorship resistant and avoiding the censorship potential of a centralized approach. In the next subsections, each of the flows and problems are analysed. 1.3 Advertising The flows presented before are not interacting with each other. Resources and information generated by each flow are siloed from each other. The numerous intermediaries mushroomed to address the lack of trust and integrate the various players in the fragmented market. In the following subsections, we will analyse each of the flows individually and the main problems faced today. For a developer or a publisher, the most natural place to advertise an application or game is where the users are looking for that kind of content: the app store.