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Abstract

1. Challenges associated with blockchain market

1.1 Challenges associated with blockchain market: Why is dApp not

activated?

1.2 The pitfall of Orthodox Quantity Theory of Money

1.3 Uncomfortable truth: dilemma between ‘investment’ and ‘payment’

2. Solution by Brace

2.1 Solution: Stablecoin and Coin Burn

2.2 Background and types of Stablecoin

2.3 Growth of Stablecoin

2.4 3 usability of Stablecoin

2.5 Coin burn: Solution to appreciate coin for payments

3. Brace Ecosystem

3.1 Direction for Brace Ecosystem

3.2 dApp Payment

3.3 Key currency at Crypto Exchange

4. Brace System

4.1 Dual Coin System of KORB & Brace

4.2 Issuance and coin purchase

4.3 Coin Exchange

4.4 Coin Burn

4.5 Collateral Assets

4.6 Rewards

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4.7 Risk Management

5. Why Brace?

5.1 Comparison with other Stablecoins

5.2 SWOT analysis on Brace Protocol

6. RoadMap

7. Team & Partner

8. Coin Sale

8.1 Coin Issue

8.2 Coin Distribution & Use of Fund

8.3 Coin Sale

Abstract

“As Blockchain ecosystem grows, the value of coin naturally appreciates.”

This is the argument claimed by numerous blockchain projects while conducting

ICO 2 years ago. Lots of people participated in ICO as they saw rosy prospects.

People anticipated that the most of existing services would turn into blockchain,

and thus believed that the value of coin would increase as well. However, two years

later, it is hard to find a trace of blockchain in our daily lives now. No more than

10% of Ethereum dApp is active currently.

Although this is due to various reasons such as regulation by government and

the problem of blockchain expansion, there is a more fundamental reason to this

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problem.

For the activation of dApp, coins need to be actively circulated in dApp ecosystem

first. However, most investors consider coin an investment vehicle for capital gains

rather than a means of payment. Because of this, they would rather buy and sell

them at the Crypto Exchange than use them to make payments. Extremely high

price volatility is also a problem. Can users use the coin to make payments when

the price of currency changes drastically just over a few hours? Impossible.

Eventually, this has limited the coin circulation within the dApp ecosystem, which

led to the stagnation of the ecosystem. The current structure makes investors and

dApp project struggle with the dilemma between ‘investment’ and ‘payment’. (Brace

team calls this cryptocurrency ecosystem, cryptocurrency 1.0)

Brace wishes to solve this problem dApp project and investors face. Brace’s

solutions are as below.

One, Use Brace Protocol’s Stablecoin, not pre-existing cryptocurrency Coin(or Token)

as a payment method for dApp service .

Two, Use part of commission fee incurred by the process of burning to purchase

or burn coin/token issued by cryptocurrency foundation in order to maintain the

value of Stablecoin.

Brace uses Stablecoin as a payment tool by implementing it to the dApp

ecosystem, and will use part of commission fee incurred during the process of

burning to purchase dApp Coin(or Token) and burn. As more Stablecoin is used,

it can be expected that the dApp ecosystem expands and the value of coin

appreciates. Moreover, Brace will provide users who contributed in generating

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block by financing through the interest incurred from deposited collateral assets

for issuance of Stablecoin. Brace ecosystem wishes to activate dApp through

Stablecoin and create a virtuous cycle that appreciates the value of coin consistently.

1. Challenges associated with Blockchain market

1.1: Challenges associated with Blockchain market: why is dApp not activated?

Ever since Vitalik Buterin developed Ethereum in July 2015, blockchain-based

dApps were launched. Thousands of dApps have been launched along with the

growth of ICO market in 2017, and people anticipated that that the most of pre-

existing services would be changed to blockchain. However, after two years now,

we can hardly see a trace of blockchain in our daily lives. According to Dapp.com,

dApp information website, the total number of registered dApp and 24-hour users

is 2,925 and 118,919 respectively. On average, each dApp has only 40 users.

According to LongHash, cryptocurrency research institution, no more than 10% of

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Ethereum dApp is being used currently.

People in Blockchain business often compare current situation of blockchain

with the ‘early days of Internet era’. Not only lack of users results in poor quality of

services, but slow transmission speed also doesn’t allow improvement of service

quality. Institutional Infrastructure is still inadequate as well. While the United

States, Singapore, and Switzerland have defined the legal characteristics of

cryptocurrency and organized relevant rules and regulation earlier, others including

Korea are only enforcing administrative regulations without concrete legislation

enactment.

Nevertheless, there is a fundamental reason why dApp ecosystem could not be

activated. Most dApps consider coin issued by cryptocurrency foundation

payment vehicle for using services (Utility Coin). The corresponding coin was

provided to the investors for participating in ICO. Investors expect that the value

of coin will appreciate understandably when the dApp project they invested

becomes activated. It seems plausible, but this assumption has a critical logical flaw.

1.2 The pitfall of Orthodox Quantity Theory of Money

The quantity theory of money, Orthodox economic theory states that “when the

supply of currency increases, price level also rises.” In 1911, American economist,

I.Fisher explained this through the equation of exchange, ‘MV = PT’ where M is the

amount of money, V equals velocity, P is price level, T means transaction volume.

(Velocity means number of currency used. For instance, when money is used from

my account→ restaurant→discount store→ logistics company, the velocity is 3.)

Transaction volume can be replaced by production volume and in this case,

multiplication of P and T becomes nominal GDP of a country. In other words,

equation of exchange can be interpreted that nominal GDP of a country equals

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total demand of currency (MV).

MV = PT

M: Money Supply V: Velocity

P: Price level T: Transaction volume (production volume)

This equation is also applicable to dApp ecosystem. M means market cap of

crypto currency, V is velocity, P is price of dApp service, T is transaction of dApp

service. Accordingly, PT becomes GDP of dApp service and MV is amount of

cryptocurrency used for PT.

MV = PT

M: Market cap of cryptocurrency V: Velocity

P: dApp service price T: dApp service transaction

If dApp service becomes activated, PT (GDP of dApp) increases and MV should

also increase accordingly. One way to increase MV is increasing Market cap of

cryptocurrency. As most dApp projects limit the cryptocurrency issuance volume,

increase in cryptocurrency market cap can be expected through the rise in price

level.

The problem is Velocity. Even if the cryptocurrency market cap is constant, if

velocity increases, MV can increase. Ultimately, the belief of ‘If dApp GDP

increases, cryptocurrency price rises’ should be based on the assumption that

velocity is constant. However, velocity of money in real economy is not constant.

Below is the graph that depicts the velocity of USD M1 Money Stock since the

termination of Bretton Woods system in 1971.

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[Pic] The velocity of USD M1

Source: Federal Reserve Bank of St. Louis, fred.stlouisfed.org

In the long term, it can be seen that the velocity of USD M1 is fairly variable.

This proves that even if dApp service is activated, it does not automatically lead

to the price increase in cryptocurrency.

1.3 The uncomfortable truth: Dilemma between ‘investment’ and ‘payment’

Because of investors who expect the price increase, it is difficult for dApp

ecosystem to be activated. As mentioned earlier, Investors participating in dApp

ICO anticipate that the value of coin appreciates as dApp ecosystem grows. Hence,

they prefer to hold the coins rather than spending them. This is different from

original intention of ICO, which is purchasing dApp coin in advance, which will be

used in the future. Because of this, most of coins that need to be circulated into

the dApp ecosystem stay in the pocket of investors.

Even if the investors want to use coins, they face the problem of high price

volatility. The coins listed on the Crypto Exchange have extremely high price

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volatility. The price of the coins can change from 1~2% to 10~20% just in few

hours. Cryptocurrency holders need to be always concerned whether the price goes

up or down before using dApp service at all. This is why people hesitate using

cryptocurrency. Fundamentally, currency with high price volatility is not suitable

for means of payments.

In summary, most investors consider coin a means of capital gains, not means

of payments. Consequently, they expect the price of coin to rise when dApp

ecosystem grows. False expectations limits circulation of coin and eventually limits

the expansion of dApp ecosystem. Extreme price volatility is also a factor that

hampers the growth of dApp. Can people really use currency when its price

drastically changes within just a few hours? Impossible.

2. Solution by Brace

2.1 Solution: Stablecoin and coin burn

Brace Protocol wishes to solve the uncomfortable problem dApp projects and

investors are facing. Brace proposes solution as follows.

First, as means of payment for using dApp service, use Brace Protocol’s

Stablecoin, not the coin from pre-existing cryptocurrency foundation.

Second, Use part of commission fee incurred from purchasing and burning

through Stablecoin to purchase or burn coins issued by cryptocurrency foundation.

Stablecoin is a cryptocurrency that is linked with specific assets. This is an

alternative with stable price that can solve the problem of pre-existing utility coin.

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Besides, it can be used for various purposes from the perspectives of the holders

and currency issuing foundation. Coin burn is a mechanism that appreciates the

value of coin by increasing its scarcity. This is a realistic solution that can solve

investors’ dilemma of having coin for payments for the purpose of investment. In

the next chapter, we will take a closer look at Stablecoin and Coin burn mechanism

that Brace Protocol proposes.

2.2 Background and types of Stablecoin

Stablecoin is linked to the values of specific assets such as USD, EUR, Gold. As

it is linked to the price of corresponding asset, its price volatility is low compared

to pre-existing cryptocurrency such as Bitcoin (BTC), Ethereum(ETH). It’s called

Stablecoin because its price is ‘stable’.

It was 2014 when Stablecoin first came out. At that time, an American company

called Tether issued Tether(USDT), which was pegged to the US dollar on a 1:1 ratio.

It is very simple for users to get USDT. When one USD is sent to Tether, the

company issues 1USDT to the user. The user who received USDT can trade various

cryptocurrencies by sending it to an exchange that has USDT as a listed key

currency.

Stablecoin emerged as government started restricting the cryptocurrency trade.

Users who could not purchase cryptocurrency as fiat currency started trading

cryptocurrency with USDT. Consequently, Major exchange based on

cryptocurrency such as Binance, OKEx, and Huobi accepted USDT as their key

currency and this led to boosting the demand of Stablecoin.

As much as Stablecoin is linked to the value of a specific asset, the key point is

the method that can link it to the value of corresponding asset. Stablecoin can be

categorized to Asset Collateralized Stablecoin, Crypto Collateralized Stablecoin, and

Non-Collateralized Stablecoin.

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First, Asset Collateralized Stablecoin is Stablecoin issuance company depositing

assets(USD,EUR, Gold, etc ) to its account or account of trusts and issuing coins

that correspond to the amount of deposit. The first Stablecoin, USDT is the major

asset collateralized Stablecoin.

Second, Crypto Collateralized Stablecoin takes cryptocurrency as its collateral

asset. It’s a way to get Stablecoin which is linked to the value of real assets by

depositing BTC, ETH which the users hold to the issuance company as a collateral.

This is similar to the collateral loan where you get loan by depositing collateral

asset. Thus, if the price of collateralized cryptocurrency deposited drops, users

must deposit additional collateral to the issuance company. Otherwise, the

issuance company can sell the collateralized cryptocurrency and liquidize.

MakerDAO project is the typical example of collateral-backed cryptocurrency.

Third, Non-Collateralized Stablecoin is literally a method of linking Stablecoin to

a specific asset without collateral. The price can be maintained by utilizing the

algorithm of the principal of supply and demand. For example, If the price of non-

collateralized Stablecoin pegged to the value of US dollar drops below 1 USD, buy

and burn the corresponding coin in the market. In contrary, if the price of

Stablecoin exceeds 1 dollar, derive the price fall by increasing the issuance volume.

Basis and Terra fall in to the category of non-collateralized Stablecoin.

Currently, 99% of Stablecoin market cap is Asset Collateralized Stablecoin

according to Coinmaketcap. Asset Collateralized Stablecoin project is enhancing

its credibility through approval from the government affiliated supervisory office

and implementing transparent audit system through financial institutions and

accounting firms. It is expected that Asset Collateralized Stablecoin will lead the

Stablecoin market in the future.

2.3 Growth of Stablecoin

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Issuance volume of Stablecoin grew drastically from the second half of 2017.

The market cap of UDT has increased from USD 220 million in July 2017 to USD

2.2 billion in February 2018. It has increased by tenfold just in 6 months. The is

the result of major countries’ strong restrictions on cryptocurrency trading.

Despite the cryptocurrency market began to fall since February 2018, the

demand of Stablecoin rather has increased. The market cap of USDT in September

2018 before Tether burned part of issued USDT, grew up to USD 2.8 billion. This

is due to the increase of preference in safe assets and demand of Stablecoin as the

value of cryptocurrency fell steadily.

[Pic] USDT market cap

Sources: Coinmarketcap

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500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

26-Feb-15 26-Feb-16 26-Feb-17 26-Feb-18 26-Feb-19

($MIL)

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In 2019, the transaction volume of USDT started to exceed that of Bitcoin.

Aggregated 24-hour transaction volume of major Stablecoin was close to USD

30billion in June last year, which was close to 50% of total transaction volume of

cryptocurrency.

[Pic] Comparison of daily transaction volume between Bitcoin and Tether in 2019

Sources: Coinmarketcap

[Pic] Aggregated transaction volume of major Stablecoins linked to USD in 2019

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1,000

2,000

3,000

4,000

5,000

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19

BTC

USDT

($MIL)

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1,000

2,000

3,000

4,000

5,000

6,000

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19

($MIL)

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Sources: Coinmarketcap, * USDT, USDC, TUSD, PAX, GUSD 합산 거래량

USDT’s remarkable growth gave birth to various Stablecoin projects. In

December 2017, Maker DAO launched decentralized Stablecoin DAI criticizing

Tether’s centralized system. In March 2018, TrueUSD(TUSD) emphasized on

managing users’ deposit transparently. In May, American Fintech firm (Circle),

invested by Goldman Sachs and Baidu(Chinese search engine) launched Stablecoin

called USDC.

Since then, Stablecoin project started to emphasize credibility of approval by

financial authorities. In September, Gemini Dollar and Paxos Standard introduced

Stablecoin approved by New York Department of Financial Services(NYDFS) for the

first time. These coins were registered to trusts in New York and audited and

monitored by financial authority to increase transparency.

At last, a global corporation started to issue Stablecoin in 2019. America’s

largest investment bank, JP Morgan Chase issued JPM Coin pegged to US

dollar(February 2019) on a 1:1 ratio. JP Morgan Chase is planning to use JPM Coin

for international remittance, b2b payment, mobile payment, etc. Starting with JP

Morgan Chase, global investment banks are also considering issuing Stablecoin.

In July, world’s largest social media, Facebook also launched Stablecoin, Libra

project through whitepaper. What is unique about Libra is that it is not linked to

currency of a single country, but to the value of assets that have low risks such as

short-term treasury bill or bank deposit. As Facebook has 2 billion users, the

impact it will bring to the financial market is expected to be tremendous.

2.4 Three usability of Stablecoin

It is because of its usability that Stablecoin craze started with USDT spread to

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the world’s largest investment bank, JP Morgan Chase, social media Facebook.

There are three usability of Stablecoin.

First, Stablecoin is suitable for online payment system. When payment is made

by credit card at online shopping sites, the payment process inevitably goes

through not only the credit card company but also intermediary (VAN) that

transmits card statement and approval details as well as payment gateway agency

(PG) that holds escrow account. During this process, commission charge incurred,

which is over 3% of payout is passed on to the seller. Easy-payment companies

AliPay and WechatPay changed this unreasonable payment structure and grew as

global companies. Blockchain based Stablecoin cannot be forged nor falsified, and

can have Escrow function by utilizing smart contract. Commission charge can be

also significantly reduced as the third party is not necessary on the payment system.

Consequently, it is expected that the blockchain based Stablecoin will generate

another innovation in payment system. According to Statista, market research

institution, it is forecasted that the market size of global e-commerce will grow up

to 45 trillion US dollars in 2021. This figure is 246.2% growth compared to 2014.

Second, Stablecoin can be used as a main currency for cryptocurrency exchange.

As described earlier, Stablecoin emerged when investors who could not trade

cryptocurrency started to see USDT as a substitute. Major cryptocurrency-based

exchange such as Binance, OKEx, Huobi acknowledged the situation and has been

providing various Stablecoin including USDT.

Third, Stablecoin is recognized as a stable asset in cryptocurrency market. Global

cryptocurrency market has entered the recession for a year starting from 2018.

Consequently, transaction volume has greatly decreased. However, the demand of

Stablecoin has rather boosted. Before Tether burned part of USDT issued, the

market cap of USDT in September 2018 was 2.8 billion US dollars. It’s because as

the value of cryptocurrency fell steadily, people started to prefer safe assets and

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more investors wanted Stablecoin. In 2019, the transaction volume started to

exceed that of Bitcoin. Aggregated 24 hr-transaction volume of major Stablecoins

was close to 30 billion US dollars last June, reaching 50% of total cryptocurrency

transaction volume.

2.5 Coin Burn: Solution for appreciation of coin for payment purpose

In general, stock price of a company is affected by the profit the company makes.

Stock manifests the ownership of company and the more money a company makes

the bigger shareholders’ benefit is. In such case, the demand of corresponding

stock increases and the price also rises. It can be said that the vague belief that

the coin will appreciate as dApp ecosystem expands started from this. However,

because coin as a means for payment (or Token) does not manifest the ownership

of dApp ecosystem, corresponding mechanism does not work. Consequently, in

order to connect the value of coin and the expansion of dApp ecosystem, profit

made from dApp ecosystem needs to be returned to the coin holders in ways like

giving out dividend. However, as this is regarded as security coin, it will be

regulated by each country’s security law.

The most rational way to link the value of coin for payments and the growth of

dApp ecosystem is coin purchase and burn. This is a verified method in

cryptocurrency ecosystem currently. The most representative case of coin

appreciation by utilizing coin burning mechanism is Binance, global cryptocurrency

exchange.

Binance uses 20% of profit made every quarter to purchase and burn BNB coin

issued by Binance. By the second quarter of 2019, Binance completed total 7 coin

burns, and total amount of burned coin was 11,654,358 BNB. To burn coin, project

needs to buy the corresponding coin. This naturally facilitates the demand of coin

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causing the effect of price increase. In case 20% of profit is used to buy and burn

like Binance, the purchasing power grows as profit increases. Binance increased

scarcity and facilitated the demand of BNB coin through coin burn policy. As a

result, the price of BNB coin in 2019 was the only one among market cap top 10

cryptocurrencies to exceed the previous highest point recorded in January 2018.

[Pic] ] BNB Coin Price trend

Sources: Coinmarketcap

Brace Protocol improves the efficiency of payment by promoting the usage of

Brace’s Stablecoin in other dApp ecosystems. Then, part of commission incurred

during the process of purchase and burn is used to buy and burn dApp coin. This

is the solution that can activate dApp ecosystem and solve the dilemma of investors

who hold coin for payments for the purpose of investment.

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3. Brace Ecosystem

3.1 Direction for Brace Ecosystem

Brace Protocol proposes using Stablecoin for payments in dApp ecosystem

primarily to solve the problem dApp and investors are facing. Part of commission

charge incurred here is used to buy and burn coins issued by dApp foundation.

The rest of commission charge profit is provided to users as a point concept in

order to facilitate Stablecoin payments.

Besides, Brace is planning to utilize Stablecoin for the purpose of investment

funds of angel investment union and key currency of Exchange.

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On the other hand, Brace Protocol’s Stablecoin aims to link it to the currency of

all the countries. It will start with Korean Won(KRW), but will soon expand to USD,

EUR, SGD, JPY, etc after reviewing each country’s regulatory issues closely.

3.2 dApp Payment

Let’s take a look at a case where Brace Protocol Stablecoin is used as payments

within pre-existing dApp ecosystem(dApp). If the pre-existing dApp operator

allows using KORB in the pre-existing dApp, the pre-existing dApp user can

purchase goods and services provided by pre-existing dApp with Brace Protocol’s

Stablecoin, KORB instead of coin issued by pre-existing dApp, which has high price

volatility.

Pre-existing dApp operator can use Brace Protocol’s Stablecoin, KORB provided

by user for providing goods and services to purchase other goods and services, or

sell at the Exchange where KORB is listed, or request to burn KORB at the Brace

platform. ( Depending on the technology development and legislation, not only

the burning can be requested , but also the user will be able to exchange through

direct request in the foreseeable future.)

In case of request of burning KORB, instead of collecting KORB the pre-existing

dApp holds, Brace platform will provide payment reserves that was deposited at

the time of KORB issuance, and burn the collected KORB. The pre-existing dApp

operator who requested burning provides 1%(as it is platform policy, which will be

fixed by mutual contract)of KORB that was requested to burn as a commission fee

to Brace platform.

Brace platform uses part of burning commission fee to buy coins issued by

pre-existing dApp that requested burning, and provides the rest of profit from

commission fee to the users as a point concept in order to activate the pre-existing

dApp ecosystem and facilitation of Stablecoin usage. In case of using KORB, as

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the user buys the coins issued by pre-existing dApp, it can maintain the virtuous

cycle that helps retaining the pre-existing dApp ecosystem.

Brace platform will first focus its capabilities on collaborating with less than 10

pre-existing dApp(Utility Cryptocurrency foundation) to maintain the virtuous cycle

successfully. Later when Brace platform is successfully operating and relevant

legislation is settled, it will fulfill the necessary requirement and expand the types

and scope of pre-existing dApp that is collaborating with Brace platform.

Below is the diagram that depicts the process of circulation of Brace Protocol’s

Stablecoin in the dApp ecosystem. (The contents on Brace burn that was not

mentioned in this chapter will be discussed in the ‘4.4 Coin Burn’ chapter.)

[Pic] Flow diagram of Brace Platform and Stablecoin(KORB) linked to dApp

3.3 Key Currency at Crypto Exchange

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Brace Protocol’s Stablecoin can be used as a key currency at Crypto Exchange.

According to CoinMarketCap, the number of exchanges that have USDT as its key

currency is 71(as of September 18th, 2019) and the number of cryptocurrencies that

is traded with USDT is 57. As USDT is recognized as the key currency of

cryptocurrency, crypto exchange expanded USDT fair trade and consequently, its

transaction volume is growing steadily. USDT transaction volume has been

exceeding that of BTC by and large.

However, there are risks in using Tether as key currency from the perspective of

the exchange and investors. Asset Collateral Stablecoin follows the price of

corresponding asset by its collateral value. Let’s assume that the price of USDT is

pegged to US dollar on a 1:1 ratio. This was not artificially pegging USDT price to

US dollar. Investors trading USDT think that the value of USDT and US dollar is the

same. Consequently, if the price of USDT exceeds US dollar, investors sell USDT,

and if the price of USDT is less than US dollar, then purchase USDT. This is based

on the belief that Tether will always exchange USDT to US dollar.

However, Tether does not own as much US dollars as issued USDT. According

to the result of investigation by New York Prosecutor’s office, Tether has only 74%

of issued USDT as cash and cash equivalent (short-term securities). If there are

100 USDT in the market, this means that the actual US dollars Tether owns is only

74. In fact, as the credibility of USDT became problematic, the price of USDT at

Kracen plummeted once to 0.85 dollar in October, 2018.

The collateral rate of Brace Protocol’s Stablecoin is 100%. Therefore, it can be

seen that the value of 100KROB is pegged to 100 KRW. Investors can trade Brace

Protocol Stablecoin without being bounded by the credibility issue. Also, the more

Brace Protocol’s Stablecoin pegged to KRW is used instead of USDT pegged to USD,

the more the demand of Korean Won increases. This prevents foreign currency

transfer and has positive impact on Korean Won. Exchange that cannot accept

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USDT or cannot handle fiat currency can use Brace Protocol Stablecoin as the key

currency so that they can provide better trading options to the investors.

On the other hand, in case of using Brace Protocol Stablecoin as the key

currency of the exchange before Brace Protocol establish its own MainNet, Brace

Protocol plans to provide certain rewards to the exchange based on the transaction

volume, etc. (This part will be discussed more in detail in the ‘4.6 Rewards’ chapter)

4. Brace System

4.1 KORB & Brace dual coin system

Brace Protocol uses Brace, KORB dual coin system for activation of Brace

ecosystem. Detailed function of each coin is as follows.

Brace

- When possessed, it can be rewarded depending on the contribution to the

ecosystem

- Value appreciates with Brace ecosystem

- Coin that encourages purchasing Stablecoin (KORB)

- Listed on Exchange

- Operating fund for Brace ecosystem

KORB

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- Stablecoin used within Brace ecosystem

- Pegged to KRW on a 1:1 ratio (plans of pegging to currencies of every

country and issue Stablecoin for each country)

- Depending on the contribution to the ecosystem, provide rewards(refer to

3.2 dApp payment and 3.3 Key currency of Exchange)

- Listed on exchange

4.2 Issuance and coin purchase

There are two ways to purchase Brace and KORB, which are through Brace wallet

and through the exchange. As Brace and KORB will be listed on exchange, coins

can be purchased from the holders of Brace and KORB through the exchange, and

as this is a transaction between private entities, it has nothing to do with Brace

Protocol. What needs to be explained is the method of purchasing through Brace

wallet. User activates Brace wallet program and goes through a simple

identification process before purchasing coin. Then, through the purchase menu,

send ETH or USDT and receive Brace and KORB. When Brace and KORB are

purchased through the Brace wallet, there won’t be any commission charge. (when

the regulation issue is resolved, coin exchange system through fiat currency is to

be introduced as well.)

[PIC] Coin exchange by utilizing Brace platform

When purchasing coin through Brace wallet, user can choose issuance ratio of

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Brace and KORB either 5: 95 or 0:100. The reason issuance rule of Brace and KORB

is set to 5:95 is as follows.

First, it is to give opportunities to purchase Brace that is appreciating along with

the growth of Brace ecosystem. Second, the reason issuance ratio of Brace and

KORB is 5:95 is that (set relatively less of the issuance volume of Brace) the less

issuance of Brace is compared to KORB, the better it is for the appreciation of Brace.

Brace coin holder can get rewarded by staking Brace after the launching of MainNet.

The less the volume of issuances is and the more the source of rewards there are,

the more rewards the user can get. (refer to 4.6 for details).

More detailed formula is as follows.

The volume of Brace issued (⋋) = (Ψ * 0.05) / (ƴ/ƹ)

Ψ: Price of coin,

ƴ: Issued KORB coin,

ƹ: available Brace for circulation (out in market after dismissal of lock up)

First, according to the 5:95 ratio, multiply price of coin by 5%. Real volume of

Brace issued can be fixed when this calculated value is divided by issuance

variable(ƴ/ƹ). Issuance variable is calculated by dividing issued KORB coin by

available Brace for circulation. According to this formula, the more user requests

coin exchange, the less issuance volume of Brace compared to that of KORB will

be.

On the other hand, Brace platform sets issuing price of Brace on a reasonable

level. This is different from the market price of Brace that is traded in Exchange.

This helps stabilizing the price preventing extreme overvaluation or undervaluation.

Nevertheless, if the market price of Brace noticeably falls short of the issuance price,

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Brace platform can set the issuance ratio of Brace and KORB to 0:100.

4.3 Coin Exchange

There are 3 ways to exchange Stablecoin to fiat currency or cryptocurrency (ETH.

USDT)

1) Pre-existing dApp operator requesting Brace platform to burn KORB

received for providing services.

2) Buying other cryptocurrency at the exchange using KORB as the key

currency (only applicable to the exchange that uses KORB as key currency)

3) Exchanging to ETH or USDT through Stablecoin exchange menu of Brace

wallet.

1) is when KORB is circulated within the pre-existing dApp ecosystem. Pre-

existing dApp can use KORB for payments within their platform, and can request

Brace platform to burn KORB received. Although commission charge incurred by

burning KORB is scheduled to be 1% of KORB that was requested to burn, it can

be adjusted later.

2) Can be easily understood if you think of USDT. According to

CoinMarketCap, there are 57 cryptocurrencies that can be traded with USDT.

This means that USDT can be traded to 57 different kinds of cryptocurrencies.

When KORB is used as the key currency of exchange, it can be exchanged to

other types of cryptocurrencies just like USDT. Because KORB holds 100% of

collateral value as cash and cash equivalent, its credibility is higher than that of

USDT. Brace Protocol will continuously increase the number of cryptocurrency

that can be traded to KORB based on the high credibility and transparent

operation policy.

3) is not relevant to the fundamental operational scope of Brace Protocol.

Users using Brace wallet can always exchange KORB saved in the Brace wallet to

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other cryptocurrency at the exchange where KORB is listed. Despite of this,

some of Brace wallet users might not be used to using cryptocurrency exchange,

and might want to exchange within the Brace wallet more conveniently. When

users holding KORB in the Brace wallet request, Brace platform exchange KORB to

ETH or USDT directly at the exchange and provide it to the users. Exchange uses

the market price at the point of exchange. Meanwhile, if the market price of

KORB is lower than exchange price during the process of exchange, excessive

capital gain can be achieved. For example, pre-existing dApp can acquire KORB

by triggering fake transaction and requests to exchange it to ETH or USDT using

Brace wallet. Ordinary users can also try to exchange using Brace wallet after

purchasing KORB in bulk at low price at the exchange. This creates risks of

massive collateral assets leaking, which were deposited in the bank while KORB

was issued. Brace Protocol prevents such risks by adjusting exchange

commission fee variably. The commission rate is charged more than the

difference of the exchange price and the market price.

[Pic] KORB repayment request process using Brace wallet

4.4 Coin Burn

As described earlier, burning KORB can be requested to Brace platform by the

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pre-existing dApp. let’s take a closer look at this. As Brace and KORB were issued

on 5:95 ratio respectively at the point of issuing KORB, when burning KORB, both

KORB and Brace will burn. In issuing KORB, the issuance ratio of Brace and KORB

could be chosen between 5:95 or 0:100, but when burning, Brace and KORB will

burn at 5:95 ratio. In other words, Brace platform burns 95% of KORB requested

to burn, and the exchange purchases and burns the same value of corresponding

Brace for the remaining 5%. For instance, when burning 95million Won worth of

KORB, the exchange purchases Brace worth of 5 million Won and burn them with

KORB.

Also, when dApp requests of burning KORB, Brace platform provides payment

reserve that was deposited at the time of KORB issuance for the part of remaining

KORB excluding the commission fee. Moreover, the half of commission fee

received from the pre-existing dApp will be used to buy coin issued by pre-existing

dApp at the exchange. Therefore, it is possible to maintain the virtuous cycle of

stable ecosystem that pre-existing dApp wishes to establish by using KORB.

Moreover, the remaining half of commission fee is provided to the user who used

KORB for payments as a reward concept. The currency used to provide is KORB.

This is to promote KORB as a means of payment.

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4.5 Collateral Asset

Brace platform liquidates ETH and USDT inflowed by issuing KORB and Brace at

the exchange. Liquidated asset (collateral asset) is deposited to a bank as fixed

deposit or DeFi plaforms. By safely depositing all the assets inflowed by issuance

of KORB, 100% pegging is achieved. This allows the value of Stablecoin to be

substantial and stable.

Also, as there is a possibility of withdrawing reserve payment frequently by the

request of burning KORB, it will be deposited to fixed deposit and ordinary deposit

separately on a 5(ordinary):95(fixed) ratio. Moreover, to be able to check whether

the asset is safely secured in the bank, anyone will be able to check how much is

deposited in the bank.

The interest profit made when depositing assets in the bank or DeFi platform

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will be used as the financial resource for providing rewards such as node rewards

to activate and maintain the Brace ecosystem. Details of rewards will be discussed

in the next chapter.

4.6 Rewards

Rewards to the users who contributed to the Brace ecosystem fall into 3 types.

Also, it can be divided to the rewards before the introduction of MainNet and after

the introduction.

1) Rewards for using dApp

Rewards for using dApp means the rewards given to the users of pre-existing

dApp who used KORB instead of token issued by the pre-existing dApp when using

pre-existing dApp. Corresponding rewards will be determined reflecting the level

of contribution, and the main variable that affects the level of contribution is the

context and the number of transactions made by using KORB.

Financial resource for the dApp rewards is the commission fee incurred when

the pre-existing dApp requests Brace platform to burn KORB. As explained in 3.2,

1% commission fee will be charged to the pre-existing dApp who requested

burning(the rate can be changed later). The cost of purchasing coin issued by pre-

existing dApp from the exchange will be excluded from the commission profit that

will be used to provide rewards for using dApp. The currency for payments is KORB.

2) Key currency rewards at Exchange

Only applicable before launching MainNet of Brace Protocol, when KORB is used

as the key currency at the exchange, it will be rewarded based on the transaction

volume. Exact volume of transactions of KOB per user at the exchange is unknown.

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(There are cases where exchange makes transaction with its own account for the

purpose of providing liquidity) Consequently, there will be a limitation for Brace

Protocol in fixing the amount of rewards directly through real-time transaction

tracking and auditing. Brace Protocol sets the rewards price based on the

information of transaction volume per user received from the exchange with whom

Brace Protocol had a contract in regards to using key currency. For any cheating

activity from the exchange, Brace Protocol will check the payment record through

consistent auditing. Formula below is the proposal that platform recommends so

that the exchange can reward the user.

(TP + SP)

DPV = ---------------------- * 100

Total(UTP + USP)

DPV: Amount of Rewards from exchange

TP: KORB transaction volume score

SP: Brace staking score

UTP : exchange’s KORB transaction volume score given to

the all users

USP: Total score given to the all Brace staking users

Financial resource for exchange’s key currency rewards is provided from Brace

Protocol’s airdrop and marketing volume. Currency for payments is Brace.

3) Brace Staking rewards

After the launching MainNet in the future, for block of MainNet blockchain

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to be produced consistently and maintain the MainNet, Authority node and staking

Brace is essentially required. Thus, by reasonably rewarding the user who was

chosen as Authority node and who did staking Brace, Brace Protocol’s MainNet can

be consistently maintained

Staking volume can be up to 20% of total transaction volume of Brace, and the

application will be accepted on a first come first serve basis. When financial

resource for staking rewards increases later, the figure of 20% will gradually increase

to secure enough resource for block generation and distribute staking rewards to

more users at the same time. When accumulated application volume exceeds 20%

of total transaction volume, exceeded volume will be put on the waiting list. Once

Brace user completed staking, he/she cannot keep staking when there is someone

on the waitlist, and has to wait for his/her next turn. Rewards is paid out from the

point of staking on a daily basis. (Considering increases of staking users, the actual

payment will be able to be made on a daily/weekly/monthly basis) There is no

limit in terms of staking period. When staking is terminated, the mining

opportunity will be given to the next person on the waiting list.

When MainNet is launched in the future, mining will be conducted in a way of

PoA: Proof of Authority and rewards system will be arranged accordingly. More

specific node system and rewards standard is as follow.

a. First, accept the Authority node application. Anyone can apply for node

regardless of Brace, KORB holding volume, and the holding status. Brace

Protocol is to select node by the order of application except for the

malicious node, but the detailed method of selection will be determined

and announced by Brace Protocol. (malicious node is the one that

negatively affected proper block generation when it was active as a node

previously.)

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b. When node is selected, users who did Brace staking will choose the node.

However, staking Brace needs to be allocated at the same ratio with the

total node. For instance, if the total number of nodes is 20, staking coin

ratio must be 1% per node. Consequently, even if Brace staking users

assign a specific node, it can be assigned to different node automatically.

c. Brace staking users and respective node are matched and mapped.

d. Nodes are in charge of block generation for a single day. Speed of bock

verification of POA method will be incomparably faster than that of pre-

existing POW method. Brace Protocol will maintain 10-30 nodes in order

to keep appropriate number of nodes. Also, depending on the activation

level of ecosystem, block generation time will be controlled.

e. Through the rewards algorithm based on the mining result of node, staking

users get rewarded. The users will pay optimum ratio of mining rewards

fee to the nodes from the rewarded money.

Rewards as a result of staking is linked to the mapped mining result of node.

Rewards formula is as follows.

Single day rewards volume of

specific group included in 20% of

staking

= financial resource of daily *

rewards

number of specific

Authority mining

-------------------------------

total number of mining

From daily rewards volume provided to a specific group (20% of staking is

grouped and mapped as much as the number of Authority Node), rewarded as

much as the ratio of my staking volume. But, mining commission cost on the

mapped node is reduced by optimum ratio. Optimum ratio must be a reasonable

amount for motivating node participants. The bigger compensatory resources

become, the more attractive the rewards mining participants receive will be.

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Financial resource for Staking rewards is generated additionally by depositing

asset in the bank or DeFi platforms for the stability of Stablecoin. While

compensations for staking BRACE are daily rewarded, in case of fixed deposit,

discount rate of present value will be applied to the interest generated at the time

of maturity to arrange the money on a daily basis. (The compensations will be daily

or weekly rewarded if utilizing DeFi platforms which generate interest every day)

Moreover, as more coin is purchased through the Brace wallet consistently, issuance

volume of KORB will be more than that of Brace (refer to ‘4.2 issuance and coin

purchase’ chapter), and because of this, financial resource for staking rewards

increases more than the total volume of Brace, leading to the increase of expected

value of staking rewards. This can play as a factor that encourages purchasing

KORB with Brace wallet. (As Brace and KORB are issued on a 5:95 ratio, users who

wish to buy Brace for the price of issuance have to buy KORB as well.)

Meanwhile, after Brace ecosystem reaches the maturity stage and when

domestic and international laws and regulations are settled, staking and rewards

system for KORB will be also implemented for promoting KORB. Rewards ratio for

two coins will be announced by Brace Protocol and by implementing the

governance system, it will be determined finally by the vote of coin holders.

4.7 Risk Management

Acquired assets from issuance of KORB or Brace through Brace wallet will be

safely deposited in the bank. (refer to 4.5 for details) Despite of this, there could

be unexpected incident such as bank run. Whether it’s internal or external, risk

management is mandatory. (Since Korea went through currency crisis before, it is

very unlikely that another crisis will occur any time soon.)

Brace Protocol arranged safety device for black swan like bank run. The details

are as follows.

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1) Diversify in deposit to financial institution with high financial stability

Deposit collateral assets to various financial institutions that have received relatively

high credit rating from global credit rating companies. (Moody’s. S&P, Fitch). Also,

choose financial institution after considering its financial stability with BIS Capital

adequacy ratio, Non-performing loan ratio, Return on assets, Liquidity coverage

ratio.

In case of depositing into DeFi platforms, the points followed will be considered,

but not limited to;

1. Whether following the law in the jurisdiction of the company’s location.

2. Reliable insurances

3. The size of companies and the number of their members.

2) Input capital that Brace Protocol foundation holds (20% volume from 45%

of Brace)

In an emergency like Bank run, input capital of Brace Protocol foundation directly.

Corresponding capital means capital owned by Brace Protocol foundation, not

collateral asset on KORB issuance. Brace Protocol foundation plans to diversify in

investing its own capital to low-risk, medium-return assets such as real estate in

case of emergency.

3) Safety valve of contagion effect – Stablecoin exchange rule

To alleviate contagion effect on bank run (the risk that financial difficulties at one

or more bank(s) spill over to a large number of other banks or the financial system

as a whole), there will be a minimum exchange rule. This is to have a safety valve

for the contagion risk. Monthly exchange amount cannot be bigger than the sum

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of payment reserve and maturity principal amount.

4) Low interest rates

As the interest rate goes down, there will be a risk of decreasing financial resources

for staking rewards. Recently, there was 60% loss of principal amount of DLS sold

by domestic financial institution. This is due to the decrease of rate of return of

underlying asset, 10 year treasury bond of Germany to -0.7%. Trump, the

president of the United States also made a statement instigating negative interest

to FRB to stimulate economy. There is a high possibility that the global economic

growth will be decreased. Consequently, interest rate is also expected to be

decreased. When Brace Protocol believes that depositing in the bank is not safe

to secure the value of Stablecoin, it will discuss this matter with Brace Protocol

participants sufficiently and may select an asset that is considered safer than bank

deposit as collateral. Also, when it is believed that the financial resource for

staking rewards is not sufficient, it will be partially supplemented by profit made

from operating Brace Protocol foundation fund.

5) 담보자산 운용의 투명성과 신뢰성

Brace Protocol은 담보자산 운용의 투명성을 보장하고 신뢰성을 높이기 위해 제3

자의 관리∙감독을 받는다. 관리∙감독기관은 대한민국 정부로부터 허가 받은 세무

회계 감사법인이다. Brace Protocol은 매월 은행에서 잔액증명서를 발급받고

KORB의 발행량에 상응하는 담보자산을 보유하고 있는지 관리∙감독기관의 확인

을 받는다. Brace Protocol은 관리∙감독기관으로부터 담보자산에 이상이 없다는 문

서를 Brace Protocol 홈페이지나 월렛에 게재한다.

최근 암호화폐 거래소 임원이 고객의 자산을 무단으로 인출한 사건이 종종 발생

하고 있다. 향후 Brace Protocol은 담보자산을 인출하는 이벤트가 발생할 경우에

도 관리∙감독기관의 승인 없이는 출금을 할 수 없는 시스템을 갖출 계획이다.

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5. Why Brace?

5.1 Comparison with competing Stablecoins

Stablecoin projects similar to Brace Protocol are Libra and Terra. Both projects

have dual coin system. One is Stablecoin that has its value pegged to a specific

asset, and the other is coin that is used for mining and can enjoy the profit made

in the ecosystem.

Libra is the project that, Facebook, social media giant with 2 billion users is

operating. It is to enter the financial market for payments and remittance based

on blockchain using the characteristics of Stablecoin. Within the Libra ecosystem,

there is Libra Investment token other than Libra Stablecoin. Libra Investment token

is a security token that can enjoy the profit made in the Libra Ecosystem. The

holders of Libra Investment token can be nodes of Libra ecosystem and receives

dividends made from the deposited asset as collateral. Only selected members

can hold Libra Investment token. Membership fee is USD 10 million and currently

20 companies such as Facebook, Visa, Mastercard, Uber, Coinbase are members.

Libra is planning to have up to 100 members in long term.

Terra is Stablecoin project launched in 2018. Korea’s top social commerce

company, TicketMonster and the top O2O delivery app company, Baemin

participated in this. This is also a project that caught attention for being invested

from various institutional investors such as global cryptocurrency exchange, Binance.

Terra has Stablecoin, Terra and Luna, token that plays a role of maintaining the

value of Terra. Luna also is the token that can receive profit made from the

ecosystem just like the Libra Investment token. Terra project is targeting to replace

e-commerce market to blockchain based payment system.

What is worth investing in Libra project is Libra Investment token. However, to

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acquire this token, it requires USD 10 million as the membership fee and needs to

go through a process to be selected as a member. It is impossible for an ordinary

investor to hold this token due to its high entry barrier. This is not in line with the

spirit of blockchain where you are rewarded by how much you contribute to the

ecosystem.

In case of Terra project, anyone can hold Luna token and can be selected as a

node through DPos method. However, Terra is the project that started with top

tier players of pre-existing e-commerce such as Ticketmonster, Baemin, and Yanolja.

It seems to focus on establishing blockchain payments system collaborating with

such major commerce players in the future.

Brace Protocol’s goal is to solve the problem of already issued coin for payments

and activate ecosystem with Stablecoin. It is a way of securing partners indirectly

through dApp. While lowering the entry barrier of securing partners, direct head

to head competition with Terra can be avoided. Moreover, unlike Libra Investment

token, anyone can acquire Brace and participate as a node.

[Pic] Comparison of Brace and other major Stablecoin projects

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5.2 Brace Protocol SWOT analysis

Although cryptocurrency market suffered a downturn in the past 3 years,

Stablecoin is still growing. In 2019, USDT coin issued by Tether exceeded Bitcoin

in terms of transaction volume, and issuance volume has also exceeded 4.1 billion

USDT as of September 16th of 2019. Usability as a key currency at exchange and

means of payments is high, and emergence of its role as a safe asset in the period

of recession of cryptocurrency market leads to the demand increase of Stablecoin.

For Brace Protocol, this is an opportunity.

Nevertheless, competition is also getting fierce along with the growth of

Stablecoin. Not just existing cryptocurrency projects, but also the top players of

traditional financial market such as JP Morgan Chase and a giant with a company

value of 700 trillion Won, Facebook are trying to enter the market. Although this

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has an effect of improving the image of cryptocurrency overall, it is also true that

it’s a burden to a Stablecoin project.

As explained in the chapter of ‘5.1 Comparison with the competing Stablecoin’,

the strategy of Brace Protocol is differentiation in targeting market. Brace Protocol

activated dApp ecosystem by introducing Stablecoin as payment for dApp. Part

of commission profit made from this is used to buy and burn dApp coin. It’s killing

three birds with one stone; increasing usage of Stablecoin, helping expansion of

dApp ecosystem, and dApp coin appreciation. Especially, it can indirectly secure

the partners of pre-existing dApp. With such strategy, Brace Protocol will

overcome its weakness against competitors.

[Pic] Brace Protocol SWOT analysis

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6. RoadMap

Brace project is planning to introduce wallet and MVP products in 2019 and

plans to complete linking dApp ecosystem and Brace platform in the second

quarter of 2020. The first step completion of Brace blockchain will be in the

second quarter of 2021. This road map is subject to change by situations.

[Table] Brace Project RoadMap

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7. Coin Sale

7.1 Coin Issue

Brace is to be issued for the purpose of financing for constructing Brace project

and Brace ecosystem. Issuance plan, distribution, and the purpose of use of sales

volume are as follows.

ㅇ Token abbreviation: BRACE

ㅇ Platform: Ethereum (DPOA MainNet hereafter)

ㅇ Issuance price: 10 Won(KRW)

ㅇ Coin Sale:

- Sale volume: 11% of issuance volume(1.1billion) - Private Sale: 100 million - Public Sale: 1 billion

7.2 Coin Distribution & Use of Fund

Sale volume of Brace is fixed to 11%. It will be used for platform development,

marketing expense, fund for payment reserve, and investment on safe assets for

market emergency mentioned earlier. (relatively safe assets and goods)

ㅇ Total issuance volume: 10 Billion Brace

(The volume of Brace Issuance will be fixed according to the 5:95 ratio

requested by KORB issuance. The bigger the issuance volume of KORB

is, the less the issuance of Brace will be. In other words, it has a flexible

structure depending on the amount of the deposit.)

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[Pic] Coin Distribution & User of Fund

It has been witnessed number of times that the Team volume was released to

the market for a short span of time, which caused loss for the token holders. To

minimize the adverse effect of such situation, Brace Protocol can dismiss the 36

month lockup of Team volume only. As an exceptional condition, lockup will be

dismissed on a ratio based on Brace’s market value. If the value of Brace becomes

100 times the value of market within 36 months hopefully, all the lockups will be

dismissed.

As KORB is always pegged to the real asset 100%, there is no need to explain

another issuance plan or issuance volume.

7.3 Coin Sale

Sale volume of Brace is 11% of total issuance volume. 1% is allocated to private

sale, 10% is allocated to public sale. The volume allocated to the public sale will

be given with Brace:KORB on a 2:8 ratio. (This is different from the pre-existing

issuance ratio of 5:95. This is to secure initial operating fund for the ecosystem by

increasing Brace’s sale ratio) This ratio is applied to public sale regardless of Brace’s

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market price.

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8. Team & Partner

8.1 Team

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8.2 Partner