Two-tier Node Architecture
Leased Proof of Stake (LPoS)
Waves uses a modification of traditional PoS, Leased PoS, where token holders lease their balances to full nodes. Block creation/state consensus is completed by full nodes, and rewards are given in proportion to the number of tokens leased to the validating node. Token holders retain full custody during this process. Full nodes must locally own or be leased a total of 10,000 WAVES. Due to this balance requirement, transaction validation is somewhat centralized; as of late 2017, ~70% of all leased WAVES went to just four full nodes. Full nodes receive the Miners Reward Token (MRT) and transaction fees, denominated in either WAVES or custom tokens, as validation rewards.
Decentralized Internal Exchange
The Waves platform has a decentralized exchange integrated with the lite client, where users can trade each combination of available tokens. Due to insufficient transaction volume, Waves completes the order matching process in a centralized manner as of April 2017. Settlement remains on-chain, and users retain full custodianship of their tokens. Order fees are paid in the native WAVES token.
The blockchain consensus process is Waves-NG, based on the proposed Bitcoin-NG protocol. In Waves-NG, a new ‘block leader’ is chosen for each block interval in advance, and validates transactions prospectively as they are posted to the network. This is in contrast to protocols in which transactions are validated retrospectively, such as Bitcoin. Waves-NG improves scalability on the network.
There are three tokens associated with the Waves network:
WAVES is the primary network token, with access and block creation rights. It can be used to create new custom coins and to pay transaction fees for existing coins on the network. WAVES also determines block creation in the LPoS model. There is a fixed supply of 100 million WAVES, with 85 million distributed in the crowdsale and 15 million retained for the team, early investors, and bounties.
The Miners Reward Token (MRT) is an access and governance token accumulated to miners as a reward for block validation. It gives holders the right to vote on network proposals relevant to miners, such as block time, and incentivizes miners to operate nodes. Additionally, nodes can elect to accept MRT as transaction fees on the platform. A total of 10 million MRT will be released, with rewards decreasing every 50,000 blocks.
The Waves Community Token (WCT) is a governance token for crowdfunding campaigns (ICOs) launched on the Waves platform. Projects can exchange a portion of their native tokens with WCT holders for a variety of services, such as concept and token economics evaluation. Beginning in January 2017, WCT was released monthly to WAVES holders proportional to their local wallet balance. This distribution of 10 million WCT was completed in September 2017.
The project was founded in 2016 by Sasha Ivanov, a Russian physicist, founder of the instant cryptocurrency exchange Coinomat, and NXT community member. The project is associated with Waves Platform Ltd, a private limited company incorporated in England and Wales. The company retains some degree of centralized control, including the ability to de-list custom coins from the exchange. The project’s operational base appears to be Russia. Development of the project is open-source, and client code is available on Github. The MRT and WCT ostensibly provide governance mechanisms to the Waves community, although this aspect does not yet appear to have been utilized.