CSP DAO Project Review: Fusotao

8 min readMay 15, 2022

The Fusotao Protocol is a verification protocol for an orderbook-based matching system, using the method of “execute off-chain, verify on-chain”. Founders can build their own order book DEX based on our matching and verification protocol.

Fusotao proposes trust-free orderbook-based matching systems with zero-cost gas, low latency and high security. Through the method of off-chain matching, the process of order submission, certification generation, order matching, and more, operates on a centralized off-chain server, which allows traders to obtain the same fast and user-friendly trading experience as Centralized Exchanges. Through the method of on-chain verification, the user’s assets on the chain will be changed only when the transactions under the chain reach the verification on the chain. This way, the security of the user’s assets is guaranteed.

The Fusotao protocol mission is to support several founders to build their own order-book based DEXs on their blockchain by using the platform’s matching engine and verification protocol. In the near future, Fusotao intends to be a core component in promoting the development of DeFi using its high performance and high-security features.

TECHNICAL INNOVATION

Fusotao Protocol comprises a blockchain that acts as the verifier and an off-chain matching system — Galois, that serves as the prover. Fusotao is a side-chain linked with NEAR mainnet via a light-client bridge which is different from oracle. Currently, the platform has built the blockchain based on the substrate as a standalone blockchain, by partnering with the Octopus Network Fusotao can bridge to NEAR and other substrate-based application chains.

By utilizing the Fusotao integrated trading platform, users do not need to transfer coins to the platform, instead, they just need to authorize coins. Furthermore, after the authorization is done, only the state is changed from “free” to “reserved” state, and coins are still kept in the wallet. The “reserved” status of coins will not change until the off-chain prover outputs proofs.

The off-chain prover is a standard matching engine just like other CEX matching systems with an additional proving engine. The matcher will update the states within it immediately but the assets would not be changed until the proofs are verified.

DIFFERENCE BETWEEN THE DEX ON FUSOTAO AND THE TRADITIONAL DEXs

The existing DEXs or CEXs:

Slow trading speed, latency exists
Required to pay gas fee
DEX’s trading experience is not the same as CEX’s
Need to transfer assets to the exchange
Users are unable to control assets

Advantages for DEXs backed by Fusotao Protocol:

Zero GAS Fees for transactions in the DeFi World
Order-book based
Faster than Swap(off-chain matching)
The same trading experience as CEXs
Assets are always at the user’s control
The community can share transaction fees by staking TAO for the DEXs backed by Fusotao

COMPETITOR COMPARISON

Compared to AMM and ZK-Proof DEX, Fusotao has great advantages in user experience and performance.

HOW TO PARTICIPATE

Most of the protocol tokens will be distributed through community rewards and allocated to members who participate in the protocol.

Claim as a Matcher

Fusotao is a fully permissionless network, any TAO holder can claim as an exchange, start matching and proving, as well as earn rewards according to the proved transaction volume.

Becoming a Validator

Fusotao will cooperate with Octopus Network to ensure the security of Fusotao Protocol. Validators earn rewards by staking OCT tokens which serve as a collateral against their malicious behaviour.

Staking

Community users can directly share transaction fees via staking TAO Tokens for the DEXs backed by Fusotao Protocol.

Trade to Earn Rewards

Some token supply will be distributed to community users who trade on the DeFi built on Fusotao according to the combination of transaction volume and TAO holdings.

TOKEN UTILITY

TAO is the native utility token of the Fusotao protocol, which is both a NEP-141 token and a substrate native token. NEP-141 token is transferred through NEAR wallet, and substrate native token is transferred via the browser extension of Fusotao.

$TAO not only represents the rights of the holder, but also has actual value. TAO rewards can be obtained by participating in trading, verification nodes, community governance, and TAO staking. The native utility token can be used in the following ways:

Governance token
Gas fee
Staking for transaction fees
Trading rewards

TOKENOMICS

TOKEN ALLOCATION & VESTING

Community Rewards: 63% (Unlock across the 5 years following the mainnet launch date)

Development Team: 8% (Locked for 1 year after the mainnet launch date. Unlock 2% of the total amount yearly from the second year)

Investors: 12.5% (Three months after the mainnet is launched, 30% of the investor’s token will be unlocked at one time. In the following 12 months, the remaining 70% of the investor’s tokens will be unlocked linearly by month)

IDO on Skyward: 2.5% (IDO on Skyward Finance. Unlock immediately. 100% TGE)

Initial Liquidity: 4% (Fully used to provide initial liquidity on centralized and decentralized exchanges (TAO-USDT). Maintain liquidity on CEX for at least 6 months and 12 months for DEX. 100% TGE)

Testnet Rewards: 1% (Unlock immediately after the mainnet is launched. 0% TGE)

1Market & Advisor: 3% (Unlock monthly for 5 years after the mainnet launch date. Unlock 0.6% annually. 0% TGE)

Fusotao Foundation: 6% (Unlock monthly for 5 years after the mainnet launch date. Unlock 1.2% annually)

The Fusotao protocol is a completely decentralized and non-licensed community protocol, thus most of the TAO tokens will be generated by community mining and distributed to community members who maintain the operation of the Fusotao protocol and execute transactions.

More than 63% of TAO tokens will be allocated to the community. The community can earn rewards by trading or directly sharing transaction fees through staking tokens on the DEXs backed by Fusotao Protocol.

63 million TAO is distributed for community rewards. Within the 5 years after the mainnet is launched, 12.6% of the total token supply will be distributed each year.

Trading Rewards (Proof-of-Trading): Accounting for 48%. After the launch of the Fusotao mainnet, trading rewards will be unlocked for 5 years, with an annual unlocking rate of 9.6%.
Verification Rewards (Proof-of-Validator): Accounting for 7.5%. Octopus network provides verification nodes and ensures the Cross-Chain security of the Fusotao protocol. Community users stake OCT token in Octopus network for the Fusotao node to obtain validator rewards. After the mainnet launch, verification rewards will be unlocked for 5 years, with an annual unlocking rate of 1.5%.
Staking rewards (Proof-of-Staking): Accounting for 7.5%. After the launch of the Fusotao mainnet, it will be unlocked for 5 years, with an annual unlocking rate of 1.5%.