DAML Chain Whitepaper

Version 1.0 | October 2025

Abstract

DAML Chain is a blockchain emulator designed to demonstrate core blockchain concepts including proof-of-work consensus, cryptographic hashing, and decentralized transaction processing. Built with modern web technologies, DAML Chain provides a complete blockchain experience without external dependencies.

1. Introduction

Blockchain technology has revolutionized digital transactions by providing a decentralized, immutable ledger system. DAML Chain serves as both an educational tool and a functional demonstration of these principles.

1.1 Purpose

Demonstrate blockchain fundamentals in a practical implementation
Provide a platform for understanding proof-of-work consensus
Showcase the X402 payment protocol
Enable experimentation with blockchain concepts in a safe environment

2. Architecture

2.1 Core Components

DAML Chain consists of four primary components working in harmony:

            Blockchain Layer: Manages the chain of blocks, validation, and consensus.

            Transaction Layer: Handles transaction creation, signing, and processing.

            Wallet System: Manages addresses, balances, and cryptographic operations.

            Mining Engine: Implements proof-of-work consensus mechanism.

2.2 Block Structure

Each block in DAML Chain contains:

Index: Sequential block number
Timestamp: Unix timestamp of block creation
Transactions: Array of validated transactions
Previous Hash: Hash of the previous block
Nonce: Proof-of-work solution
Hash: SHA-256 hash of the block
Merkle Root: Root hash of transaction tree

2.3 Transaction Structure

Transactions follow the X402 protocol specification:

ID: Unique 16-byte identifier
From/To: Wallet addresses (daml prefix)
Amount: Transfer value in DAML tokens
Type: transfer, feature_unlock, or mining_reward
Metadata: Additional transaction data
Timestamp: Transaction creation time
Signature: SHA-256 digital signature

3. Consensus Mechanism

3.1 Proof-of-Work

DAML Chain implements a simplified proof-of-work consensus mechanism similar to Bitcoin. Miners must find a nonce value that, when hashed with the block data, produces a hash with a specified number of leading zeros.

            Difficulty: 2 (requires 2 leading zeros)

            Hash Algorithm: SHA-256

            Mining Reward: 10 DAML tokens

            Auto-mining Interval: 10 seconds

3.2 Mining Process

Collect pending transactions
Create new block with transactions
Calculate Merkle root of transactions
Increment nonce and hash block
Repeat until hash meets difficulty target
Broadcast validated block to chain
Award mining reward to miner

4. Cryptography

4.1 Hashing

All cryptographic operations use SHA-256, providing 256-bit security. Hashes are used for:

Block identification and linking
Transaction signatures
Address generation
Merkle tree construction
Proof-of-work validation

4.2 Merkle Trees

Transaction validation uses Merkle trees for efficient verification. The Merkle root provides a single hash representing all transactions in a block, enabling lightweight verification without downloading entire transaction data.

5. Wallet System

5.1 Address Generation

Wallet addresses use the format daml[16-character-hex], generated from cryptographically secure random bytes.

5.2 Initial Balance

New wallets receive an initial balance of 1000 DAML tokens to enable immediate participation in the network.

5.3 Balance Calculation

Balances are calculated dynamically by:

Starting with initial wallet balance
Adding incoming transactions
Subtracting outgoing transactions
Accounting for pending transactions

6. X402 Payment Protocol

The X402 protocol enables secure, verifiable payments with unique transaction identifiers. Each transaction is cryptographically signed and includes metadata for enhanced functionality.

6.1 Features

Unique transaction IDs
Digital signatures for authenticity
Metadata support for additional context
Real-time balance validation
Atomic transaction processing

7. Feature Unlock System

DAML Chain implements a token-based feature unlock system where users can purchase premium features using DAML tokens:

Analytics Dashboard: 1 DAML - Advanced analytics and insights
API Access: 1 DAML - Full REST API access
Premium Support: 1 DAML - 24/7 priority support

8. Network Statistics

The blockchain maintains real-time statistics:

Total number of blocks
Total transaction count
Total transaction volume
Number of active wallets
Pending transaction queue size
Current network difficulty
Chain validity status

9. Security

9.1 Chain Validation

The blockchain integrity is validated by:

Verifying each block's hash
Confirming proper chain linkage
Validating Merkle roots
Checking proof-of-work solutions

9.2 Transaction Security

Balance verification before processing
Cryptographic signatures
Double-spend prevention
Wallet existence validation

10. Persistence

10.1 Local Storage

The development version uses file-based JSON storage for blockchain persistence, saving to daml_chain_data/blockchain.json.

10.2 Cloud Storage (Vercel KV)

Production deployment utilizes Vercel KV (Redis) for distributed, persistent storage:

High-performance key-value storage
Automatic scaling
Data replication
Sub-millisecond latency

11. Technical Specifications

            Blockchain Type: Proof-of-Work

            Hash Algorithm: SHA-256

            Block Time: ~10 seconds (auto-mining)

            Difficulty: 2 leading zeros

            Mining Reward: 10 DAML

            Initial Wallet Balance: 1000 DAML

            Address Format: daml[16-hex]

            Token Symbol: DAML

            Decimals: 2

12. API Endpoints

DAML Chain provides a comprehensive REST API. See the API Documentation for complete details.

13. Use Cases

13.1 Educational

Learning blockchain fundamentals
Understanding proof-of-work
Exploring cryptographic concepts
Practicing blockchain development

13.2 Development

Prototyping blockchain applications
Testing payment systems
Experimenting with consensus mechanisms
Building blockchain interfaces

14. Future Enhancements

Smart contract support
Multi-signature wallets
Layer 2 scaling solutions
Advanced consensus mechanisms (PoS, DPoS)
Cross-chain bridges
NFT support
DeFi primitives

15. Conclusion

DAML Chain demonstrates the core principles of blockchain technology in a practical, accessible implementation. By combining proof-of-work consensus, cryptographic security, and modern web technologies, it provides a complete blockchain experience suitable for education, development, and experimentation.

References

Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System
Merkle, R. C. (1988). A Digital Signature Based on a Conventional Encryption Function
SHA-256 Specification (FIPS 180-4)
X402 Payment Protocol Specification