Regulation compliance

The Blockchain Edge Client architecture creates a network of LP nodes with shared access to on-demand capital, instead of a shared capital pool that requires upfront commitment. That is very capital efficient as the LP nodes have very little costs, and can profit from each transaction when they do deploy capital.

A very nice feature of the Blockchain Edge Client architecture is that we can create sub-networks of LP nodes for specific purposes through the relay servers. That allows network participants to voluntarily form sub-groups that adhere to additional rules, such as regulation compliance for certain jurisdictions.

For pool-based bridges, there is no way to create a sub-pool for KYCed LPs. So, you will need separate pools for KYCed and non-KYCed LPs, which would splint the pool, further reducing capital efficiency and increasing slippage.

For example, users in the US could create a relay server that is compliant with US KYC and AML regulations.

• It would only broadcast requests to and receive quotes from LP nodes that are KYCed according to US laws.

• It would only facilitate exchanges for user wallet addresses that are KYCed according to US laws.

The relay server maintains whitelists of LP nodes and user addresses. It could provide easy tools on the dapp web UI for LPs and users to register with the relay using their KYCed credentials.

Paradoxically, the Otomic approach for regulation compliance increases its ability to resist censorship. Otomic users and LPs can choose to participate in any relay server's sub-network without additional costs or commitments.