1

April 2019

BBDUO Network

Stable Outlook

AAA AA A BBB BB B CCC CC C D

Low Risk Moderate Risk Large Risk High Risk

TO

KE

NIN

SIG

HT

Re

sea

rch

Token DUO

Tags Finance

IEO Time 2019.04.27

IEO Platform BitMax

IEO Price 1DUO=0.15USDT

Analyst | Bingyao Song, Zibo Wang, Zirui

TokenInsight provides customized services such as commercial due diligence, project analysis, industry research, and more. For more information, please contact bd@tokeninsight.com or visit tokeninsight.com

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

SUMMARY

① DUO Network is a decentralized derivatives trading platform. On

the one hand, it has created a unique set of risk avoidance methods for encrypted digital assets through risk classifications, including smart contracts for tokens defined by TokenInsight within in financing and multi-space projects. On the other hand, a series of encrypted asset options have been designed through a professional understanding of financial tools such as trading and portfolio analysis, including smart contracts designed for plain vanilla and binary token options. Issuance, trading and settlement of derivatives on DUO DEX are still under continuous development within the DUO Network and are expected to become realized soon.

② While working to develop a distrusted and transparent

independent derivatives market, DUO Network hopes to increase the liquidity and trading depth of digital assets through digital asset mortgage, smart contract liquidation and distributed quotation.

③DUO Network is classified under the field of Decentralized

Finance (DeFi), which refers to an open source finance project based on distributed networks. The aim is to build an open, compatible and low-access financial market, providing sufficient liquidity and various hedging tools for encrypted assets. DeFi is mainly characterized by anti-censorship, no access, information transparency, programmability and automatic execution of smart contracts.

TABLE OF CONTENTS

Summary of Key Points 2

Industry Analysis 4

Project Analysis 10

Token Economy 19

Project Progress 21

Team, Cooperation and Investment Institutions

22

Community Popularity 24

Annex 25

LIMITATIONS AND DISCLAIMERS

1. TokenInsight Inc. hereby makes the following statement in connection with the issuance of the rating report:

2. There is no relationship between TokenInsight Inc. (including TokenInsight Rating Project Team Members, and Review Committee Members) and the subject of this rating would affect the objectivity, independence, and impartiality of the rating.

3. The project team members of TokenInsight Inc. take their due diligence obligations seriously and have a good reason to ensure that rating reports followed the principles of objectivity, truthfulness, and impartiality.

4. This report is an independent judgment made by TokenInsight Inc. in compliance with applicable laws, regulations and reasonable internal credit rating processes and standards, and there are no changes in rating opinion due to improper influence of the rating target or any other organization or individual.

5. All information contained herein is obtained by TokenInsight Inc. from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical errors as well as other factors, however all information contained herein is provided “AS IS” without warranty of any kind. TokenInsight Inc. checks verifies, as necessary, the authenticity, accuracy, completeness, and timeliness of the information relied upon in the rating report, without making any representations or warranties, express or implied, as to authenticity, accuracy, completeness, timeliness and feasibility and appropriateness for any commercial purpose.

6. The inclusion of a credit rating or secondary market price analysis in this rating report should and can only be interpreted as an opinion and not as a statement of fact or a recommendation to buy, sell or hold any token.

7. The risk ratings indicated in this rating report are valid from the date of issuance of this report until the date of the next adjustment; at the same time, TokenInsight Inc. will periodically or irregularly track the ratings of the rating recipient to determine whether to adjust the credit ratings and will publish them in a timely manner.

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

3

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

4

01. INDUSTRY ANALYSIS

1.1 Digital Asset Market

In the absence of effective hedging tools in the market, the high volatility of digital currency prices impedes the healthy development of the overall industry"

Price fluctuation in the digital currency market is extremely volitile compared with that in the traditional financial market, while its product category, product quantity and asset scale are still in early stages of development compared with that in the traditional financial market. In contrast to traditional financial markets, derivatives are abundant in quantity and variety, which play an important role in hedging market risks and reducing the uncertainty caused by high volatility.

‣ Figure 1-1 Weekly Price Volatility and Trading volume comparison (2016/4-19/4) Source: Wind, TokenInsight

For digital assets, traditional financial institutions and centralized digital asset service institutions (including centralized exchange, custody and wallet, etc.) have all introduced various financial products, such as Bitcoin contracts from the Chicago Board of Trade, and leverage and contract services provided by digital currency exchanges. However, these product rules are often implemented on a centralized basis, which makes it difficult to ensure the safety of information disclosure and user accounts. In this environment, Decentralized Finance executed by smart contracts came into being.

BTC

Gold

S&P500

0% 24% 48% 72% 96% 120%

Weekly volatility 0-2% Weekly volatility 2%-5% Weekly volatility 5%-10%Weekly volatility >10% Ratio of asset transactions

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

5

INDUSTRY ANALYSIS

1.2 Market of Decentralized Finance (DeFi)

The digital asset derivatives market is growing, and the decentralized financial products characterized by providing open financial derivatives are increasingly abundant"

Traditional finance has undergone a hundred years of development and evolution, with a fine and clear division of labor. Central banks, commercial banks, investment banks, exchanges and regulatory agencies have each formed a relatively mature independent system. However, at the same time, this mature and developing market also faces serious problems such as high access threshold, low information disclosure and high counter-party risk. The birth of Bitcoin has started the transformation of the traditional financial market. De-intermediation-based DeFi projects are fully disclosed through the implementation of automatic transactions of smart contracts, decentralized custody, modular products and information. Compared with centralized digital currency finance, it does a better job of implementation due to the central foundation of blockchain technology.

1.2.1 Characteristics of Decentralized Finance

Decentralized Finance (DeFi) refers to an open source finance project based on distributed networks. The aim is to build an open, compatible and low-access financial market, providing sufficient liquidity and various hedging tools for encrypted assets. DeFi is also called open finance. This expression focuses on distinguishing traditional finance from a closed ecosystem designed by centralized service providers1. Open finance is an open and cooperative financial system that connects information islands together.

It's worth noting that the concept of DeFi is different from that of FinTech. The latter includes a wider range of emerging technologies to improve the efficiency of financial services, while centralized institutions often play a major role in promoting technical progress. Overall, DeFi projects have the following characteristics:

1. In fact, "openness and compatibility" is gradually permeating the traditional financial industry. The "open bank" which started to provide open API and accept third-party management modules in 2018 has made significant development in traditionally developed financial fields such as the United States, Britain and Singapore.

x

Traditional financial

institution

Centralized institution

Legal currency

Digital currency

DeFi

According to the attribute of operating assets, the business can be divided into legal tender business. According to the institution attributes, it can be divided into centralized

‣ Figure 1-2 Financial Ecosystem by Business Models and Organizational Form Source: TokenInsight

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

INDUSTRY ANALYSIS

① Anti-censorship, that is, there is no mandatory supervision, and any third party cannot prevent, change or roll back transactions.

② No access1, it is manifested in three aspects: No access for users, no access for developers and no access for nodes. DeFi has no access threshold from its development to use, making it possible for a wider audience to enjoy financial development dividends. This feature also reflects the highly respected idea of financial inclusion. According to a McKinsey survey2, 2.5 billion people in the world will have no bank account or credit score (Unbanked) by 2010, which is a potential market for DeFi that has been excluded from the traditional financial field.

③ De-trust is embodied in the programmability of DeFi products and the automatic execution of rules. DeFi executes code logic, which fundamentally distinguishes centralized financial products from DeFi projects. DeFi's transaction executor is not an entity (referring to a mechanism established by people or institutions), but rather smart contracts.

④ Linked global markets of information disclosure. Traditional financial market has been criticized for its centralization, closed information, low efficiency and fragmented markets. DeFi has developed advantages for openness, transparency and non-tampering of blockchain technology, creating a linked global financial market.

Compared with traditional finance, DeFi breaks the boundary of institutions as independent business places, turning financial products into a ubiquitous service with mixed operation. In order to clearly understand the characteristics of DeFi, the following table shows the comparison between DeFi projects, traditional financial institutions and centralized digital currency institutions.

6

1. Access threshold here refers to non-subjective resistance, that is, external influencing factors. 2. https://www.mckinsey.com/industries/financial-services/our-insights/counting-the-worlds-unbanked

‣ Table 1-3 Comparison of Characteristics between Traditional Finance and Open Finance

Traditional finance DeFiCentralized digital currency Finance

Asset typeLegal tender or digital currency Digital currency

Legal tender or digital currency

Market-oriented Regional market Global market Global market

Institution attribute Centralization Decentralization Decentralization

Credit systemTraditional credit reporting system

Decentralized credit system Self-built KYC/AML

Asset custody Custodian institution Smart contractSelf-supporting or custodian institution

Regulatory systemRegulatory agency and self-regulatory organization

No mandatory supervision

Comply with regulatory standards of the place of registration and the place of service of the institution

Source: TokenInsight

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

7

INDUSTRY ANALYSIS

1.2.2 DeFi industry ecosystem

In the field of DeFi, the lack of access to open systems and participants determines that the main division of labor within the industry is based on functions rather than (traditional finance) institutions. The following figure shows the project ecosystem and market participants within the DeFi industry. Nodes provide infrastructure for developers by maintaining a distributed ledger. Developers build various financial products, trading tools and other auxiliary tools by using open source DeFi projects. Users can access the DeFi market without admittance. The whole process is untrusted, disintermediated and public.

‣ Figure 1-4 DeFi industry division and participants Source: TokenInsight Sample Date: 2019.04.24

Open Distribute Ledger

User

Development Tools

Third party

Products

Developer

AnalyticsCredit

Stable coin

DEX

Node

No admission

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

8

INDUSTRY ANALYSIS

DEX Protocol

Derivative

Protocol/Prediction

Lending Protocol

Tokenlization Protocol

Fund Protocol

Bundling Protocol

Analytics

Collateralized

DEX

Margin Trading Options Future

Lending and Borrowing

Tokens

Fund

Portfolio

Centralized

Algorithmic

Browser/Data Analysis/Dynamic

monitoring

KYC/Identity

Cred

‣ Figure 1-5 DeFi Industry Ecology1 Source: TokenInsight

1. This classification system refers to Ewin Ong，https://github.com/ong/awesome-decentralized-finance#derivative-protocols

Auxiliary�tool

Development tool

Stable coin

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

9

INDUSTRY ANALYSIS

1.2.3 DeFi industry status Cryptocurrency, based on a decentralized network, has provided DeFi with the technical foundation and asset base, on which the open financial system has gradually matured. DeFi projects are still focused on Ethereum, which is still the main trading asset we see today. More than 90% of the 87 DeFi projects, according to TokenInsight, are based on the Ethereum blockchain. The rest are scattered over a few other platforms on projects such as Bitcoin and BitShare. With the development of underlying public chains, more and more DeFi projects are willing to expand their ecosystems and adapt to more blockchain network structures.

‣ Figure 1-6 DeFi Project type and Platform distribution Source: TokenInsight Sample Date: 2019.4.24

3%1%3%2%

90%

EthereumBitcoinStellarBitshareOther

Up to now, the area with the fastest development and the highest capital absorption in the DeFi field has been the digital asset mortgage loan agreements field, which accounts for 96% of Ether's total locked assets among projects recorded by DeFi Pulse. Decentralized trading agreements have also attracted much attention as they provide trading venues for long-tail tokens, among which star projects (like 0x and Hydro Protocol) have provided more than half of the trading volume for Ethereum's decentralized trading economy.

6%15%

8%

5%3%

12%

18%

4%

29%

OthersBundlingDEX ProtocolsDerivativeFundIndentityLending Protocal Stable CoinTokenIization

Lending

Derivatives

Assets

0M$ 90M$ 180M$ 270M$ 360M$ 450M$

0.95.80.910.5

400.9

Although these exquisitely designed and conceptual projects have indeed brought innovation to the financial industry, the actual number of users, trading activity and trading capital are still very low. Taking DEX's trading volume as an example, the total trading volume of DEX Q1 in 2019 accounts for less than 1% of the centralized exchanges according to TokenInsight statistics [4]; in the loan market and derivatives market, DeFi's trading scale is still in its infancy compared with centralized institutions in the digital currency market, and is less comparable than traditional market altogether.

‣ Figure 1-5 DeFi Project lock-in asset size Source: DeFi Pulse Data date: 2019.04.25

*Attention: This data is based only on the ten project samples from DeFi Pulse

1. More details on TokenInsight《2019 Q1 Cryptocurrency Exchange Industry Report》

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

10

1.2.4 DeFi development bottleneck

The DeFi trading scale compared with the traditional financial market; active users of DeFi projects in the crypto market compared face extreme competition and also DApps. Why don't the DeFi projects with advanced concepts and exquisite design produce phenomenal products, or under what conditions can DeFi users and trading volumes achieve explosive growth?

First of all, from the perspective of usage, DeFi still has problems such as complicated user pages, long transaction confirmation times and unfriendly development tools, which makes the entry threshold for financial products still a large problem seen in DeFi (expressed in the operational level). Secondly, from the perspective of trading rules, DeFi is limited by its product attributes, and its rate of return is slightly quieter than DApps (with the nature of funds). DeFi performs poorly in terms of topic making, customer acquisition ability and capital attraction. A deeper problem is that DeFi's underlying assumption is that the digital currency-based ecosystem has been relatively developed, that is, investors really regard digital currency as an asset rather than a short-term arbitrage object. This premise is not tenable in the short term. In addition, DeFi has not yet formed an alternative advantage to centralized services at the product level, and there is no access to compliant assets and no collateral for anchoring legal tender or physical assets. This leads to the limited use of scenarios for DeFi and the shortage of incremental markets.

In the long run, DeFi will inevitably encounter the following problems due to its decentralized nature: the lack of a relatively well-formed credit reporting system, and the limitation of interest rate adjustment mechanisms established by mortgage; the identity anonymity increases the possibility of financial crimes, and DeFi will face severe regulatory pressure.

1.3 Decentralized Derivatives Field In the DeFi field, the loan and derivative agreements are often the most concerning. The following table shows the information comparison of higher quality projects in this field. ‣Table 1-7 Comparison of Major Derivatives Agreements

Duo Network dY/dXSparrow Exchange

Market Protocol

Financing situation

3.6 Million (undisclosed by investment institutions)）

10 Million A16z Polychain

Du Capital (undisclosed) Undisclosed

Products Loan and options Loan and forecasting Loan Commodity

Appropriate platform Ethereum Ethereum Ethereum Ethereum

Supporting assets ERC-20,ETH ERC-20,ETH ERC-20,ETH,BTC

,BCH Commodity, equity and digital assets

Development phase Beta On mainnet Beta Beta

Limitation Scale of cyclic asset management

Insufficient scalability; low pricing competitiveness

Technical and use barriers; capital intensive

Limited rate of return

Source: TokenInsight

INDUSTRY ANALYSIS

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

11

02. PROJECT ANALYSIS

2.1 Project Overview DUO Network is a decentralized derivatives trading platform. On the one hand, it has created a unique set of risk avoidance methods for encrypted digital assets through risk classifications, including smart contracts for tokens defined by TokenInsight within in financing and multi-space projects. On the other hand, a series of encrypted asset options have been designed through a professional understanding of financial tools such as trading and portfolio analysis, including smart contracts designed for plain vanilla and binary token options. Issuance, trading and settlement of derivatives on DUO DEX are still under continuous development within the DUO Network and are expected to become realized soon.

While creating a transparent independent derivatives market, DUO Network will increase the liquidity and trading depth of digital assets through digital asset mortgage, smart contract liquidation and distributed quotations.

2.1.1 Collateralized Autonomous Token (CAT)

CAT has made a unique set of standards for the issuance, exchange and settlement of encrypted derivatives. It is expected that derivative contracts will be fully mortgaged by the assets on Layer 1, all profits and losses will be executed and arbitrated by smart contracts, while each derivative can be traded through ERC-20 tokens. In other words, the CAT mechanism can convert every derivative contracts into a token that can be traded, making trading derivatives as simple as trading cash. Participants can review on Layer 1 at any time, eliminating the risk of centralized platforms. Features of CAT include:

Mortgageable

The value of CAT is guaranteed by the digital assets held in its asset custody smart contracts (see 2.1.3 and 2.1.4 for details).

Divisible

Single asset custody can create two or more CAT payment categories, each representing a partial interest in collateral (underlying assets). The splitting method is flexible and can be based on risk level or other option payment structures.

Alternative

CAT and corresponding collateral can be converted in two directions. Users can create different categories of tokens by depositing collateral in an asset custody smart contract, or convert it into collateral throughout their life cycle. This mechanism ensures that the net asset value between CAT and its underlying collateral can be converted equally, and allows the market to self-correct price misrepresentation.

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

Autonomy

It simplifies the distribution and settlement procedures to reduce management costs and access further threshold. Distributed price oracles (see 2.1.2 for details) can reflect the value of underlying assets fairly and objectively, prevent price manipulation, promote further transparency and autonomy of the market.

Tokenization

All CATs are ERC-20 compatible. By allowing storage and trading in most existing wallets and exchanges, derivatives positions can be freely transferred without restriction from any centralized place.

The existing decentralized exchanges in the market cannot fully match CAT's innovative functions mentioned above, so the DUO Network plans to develop a new decentralized exchange based on 0x's protocol to build a new way to create a market for CAT and provide users with a more ideal trading environment with better features and performance.

Inherent attributes of CAT require that the custodian must be able to access the user's wallet address and adjust the balance directly according to payment trigger conditions of the contract. On the whole, at present only 0x Protocol can meet the most requirements of CAT system and allow DUO Network to build its own repeaters. DUO Network is also paying close attention to other blockchain technologies that can improve the trading speed and support the exchange of cross-chain assets, hoping to realize high-speed cross-chain trading on CAT exchanges in the near future.

12

PROJECT ANALYSIS

Table 2-1 CAT Exchange Candidates

ExchangeNo Deposit

Price discovery

Order Book

TrustlessMaker Free Entry

Compatibility

CentralizedExchanges

Need Market Off-chain Free

DEX.top Need Market Off-chain Free

Etherdelta Need Market Off-chain Free

IDEX Need Market Off-chain Free

Bancor Not Need Magic Formula

No No free

Airswap Not Need Dealer No No free

Kyber Not Need Dealer No No free

0x Protocol Not Need Market No Free

Source: DUO Network Whitepaper

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

13

All CAT-based transactions are divided into the following four steps:

‣ Figure 2-2 CAT Mechanism & Lifecycle Source: DUO Network, TokenInsight

2.1.2 Price oracles The core of derivatives pricing and trading is that whether the derivatives can hedge the risk of underlying assets. Simply obtaining data from one platform may lead to third-party risks, such as data manipulation, etc.

DUO Network chooses how to gather data information from multiple platforms: three sets of price feeds are set independently on AWS, Azure and GCP, running the same price extraction and aggregation algorithms, followed by smart contracts to find a consensus price information from the three sources. Users can view the data sent to smart contracts either via Layer 1 or through the website of DUO Network.

DUO currently uses the trading information of Bitfinex, Kraken, CoinBase/GDAX and Gemini's ETH/USD exchange API to extract prices. The consensus mechanism based on proof of stake (POS) ensures that the price of underlying assets are not affected by short-term or recent abnormal transactions.

1.Creation

Crypto Assets

3.Redemption

Custodian Smart Contract

CATs（CAT1，

CAT2...）

Wallet1

Wallet2

WalletN

......

4.Settlement 2.Market Marking

CATExchange

PROJECT ANALYSIS

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

14

2.1.3 Beethoven

Beethoven contract in CAT's two-tier architecture (see 2.2.1 for details) can divide the underlying encrypted assets into two categories (i.e., financing classified token):

A) Income CAT: To provide stable income for users; accumulate the net value of previously anchored underlying assets (legal tender, BTC, ETH, etc.) and obtain stable interest.

B) Leverage CAT: Provide the leverage capital gains associated with the underlying assets. It is conceivable that Class B holders borrow funds from Class A holders to invest in potential encrypted assets.

Beethoven's contract creation and related price conversion mechanism were tested on the Kovan test network in the third quarter of 2018. Products were launched on the trading platform of DUO Network in the fourth quarter of 2018.

‣ Figure 2-3 Beethoven Mechanism Source: DUO Network, TokenInsight

2.1.4 Mozart

In order to provide more diversified returns under CAT's two-tier structure, DUO Network also created another smart contract named Mozart, which allows investors to express bearish views on underlying encrypted assets and gives investors the opportunity to short assets. Mozart's contract can divide the underlying encrypted assets into two categories (i.e., multi-space classified token):

A) Short CAT: Short selling of encrypted assets (-1) and benefiting from the downward price of the subject matter.

B) Long CAT: Three times the leverage ratio, of which two times the leverage ratio is obtained from short CAT.

‣ Figure 2-4 Mozart Mechanism Source: DUO Network, TokenInsight

Ethereum

Custodian Smart Contract

Income CAT Leverage CAT0:2

Ethereum

Custodian Smart Contract

Short CAT Long CAT-1:2

PROJECT ANALYSIS

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

15

2.1.5 System architecture

Finally, the entire system architecture of DUO Network will be shown as follows:

‣ Table 2-5 DUO Network System Architecture Source: DUO Network Ecosystem White-paper

DUO Network obtains encrypted asset prices from different exchanges. Entering Pricing Oracle, a multi-data source ticker for derivatives clearing, is to calculate the final price for users to use. Users create CAT smart contract for different types of derivatives and corresponding custody contracts on the platform, and the smart contract management of the platform is characterized by a separation of responsibilities, one-time administrator address, hot upgrades and multiple signatures. After tokenization, the derivatives can be traded and cleared on the DUO DEX exchange conveniently and quickly.

2.2 Product Details

2.2.1 Classified token

The essence of structured funds in traditional financial markets are to meet the different risk preferences of different investors. The popular explanation is that the assets of A share and B share are invested as a whole, in which the B share holder pays the agreed interest to the A share holder each year, and the overall investment profits and losses after paying the interest are borne by the B share. For example, if you buy 2 shares of mother funds, you can split them into one A fund and one B fund, and the net values of A and B are both RMB 1. B takes all of A's money to speculate in stocks, and the leverage is 2:1 = 2, in this way, you can gain more profits in the rising stock market, but at the same time you have to bear higher risks.

PROJECT ANALYSIS

Pricing source

Price fixing machine

Deposit

Management system model

Derivative tokenization

Decentralized exchange platform

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

16

The volatility of encrypted assets is greater than that of traditional financial markets, and it is necessary to introduce market tools to transfer risks among participants and make the market more efficient. As a result, DUO Network gained inspiration from structured funds and designed a mechanism to convert underlying encrypted assets (such as Ethernet) into two-tier structures, namely, two types of CAT tokens, representing two different types of risk returns. Taking ETH as mortgage to issue two types of tokens as an example:

‣ Figure 2-3 Dual-Class Tokens Source: DUO Network, TokenInsight

In theory, the combined value of A and B should be equal to the corresponding ETH market price, but since ETH can also be traded in the open market, there may be deviation between market value and net value, thus generating arbitrage opportunities: when the combined price of these two classified tokens is higher than the market value of the corresponding ETH, traders can split the low-priced ETH into classified tokens and sell them at high prices in the open market to realize arbitrage and obtain ETH. If the sum of these two classified tokens is lower than the market value of the corresponding ETH, traders can carry out arbitrage by buying classified tokens at low prices and merging them into ETH at high prices. Open market arbitrage helps stabilize prices of A and B at the same time.

The main reason why users choose the B token is its ability to leverage attributes, so the B token needs to maintain a certain leverage ratio to be attractive. Accordingly, the user chooses the A token to value the protection effect of B token on his own principal. Once the net value of B is too low, the stable income of A cannot be guaranteed. In order to maintain the B's leverage ratio and ensure A's stable income at the same time, DUO Network has adopted the traditional mechanism of upward and downward discounts in the market to deal with the situations of leverage being too low and too high respectively.

In other words, classified assets have their own leverage. In order to prevent excessive leverage ratios due to market fluctuations, the system will trigger upward and downward discounts after the ratio of net asset values of categories A and B change to a certain extent.

Ethereum

Smart Contract

A-level token B-level token1:1

Low risk Fixed income

ERC-20 protocol compatible

Low risk Fixed income

ERC-20 protocol compatible

PROJECT ANALYSIS

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

Examples:

Scenario 1: The price of underlying encrypted assets continues to rise from RMB 10 to RMB 15.

When the net value of underlying encrypted assets is 10, A:B = 5:5 = 1:1; when the net value of underlying encrypted assets is 15, A:B = 5:10 = 1:2. As you can see, as the underlying encrypted assets continue to rise, B's leverage ratio continues to decline. If the underlying encrypted assets continue to rise, B's leverage ratio will continue to decline. When it is reduced to a certain level, B's leverage disappears.

Scenario 2: The underlying encrypted assets continue to fall from RMB 10 to RMB 7.

When the net value of underlying encrypted assets is 10, A:B = 5:5 = 1:1; when the net value of underlying encrypted assets is 7, A:B = 5:2 = 2.5:1. As the underlying encrypted assets continue to decline, B's assets are decreasing. When the underlying encrypted assets fall to a certain extent, B's assets will not be sufficient to guarantee A's principal and earnings.

Therefore, facing Scenario 1, it is necessary to increase A's shares to restore B's leverage ratio, that is, an upward discount; facing Scenario 2, it is necessary to increase B's shares to restore A's security, that is, a downward discount. Thus, the ratio of A to B will return to 1:1 after upward and downward discount.

Users of the DUO Network can perform splitting operations by transferring ETH in a Beethoven contract. Beethoven contracts will automatically create an equal amount of A and B tokens upon receipt of ETH and deposit the generated tokens in their corresponding addresses. At the same time, Beethoven contracts will host ETH entered by all users, and any user can query the managed assets through third-party applications such as Etherscan.io. The contract creator is not granted the right to transfer the assets. Contract holders can exchange ETH by merging A and B tokens. The specific steps are as follows: users send equivalent A and B tokens to Beethoven contract, which will be converted into equivalent ETH and transferred to users. The above operations are used to control or arbitrage risks in the open market and the futures market created by CAT.

2.2.2 Options

Options give the contract holder the right to buy (call options) or sell (put options) of the underlying assets at a specific price (execution price) on a specific date in the future. European options can only be exercised on the expiration date, while American options can be exercised at any time during the validity period of the options. The third type, Bermuda options, can be exercised in advance within a predetermined time before its expiration. Call and put options, combined with different maturities, can hedge risks for users in markets where risks are linearly exposed. Both options and stable coins are to deal with the problem of high volatility within encrypted digital assets. But the combination of options is flexible and customizable, allowing investors to choose their own risk hedging levels.

Taking the encrypted assets to DAI/ETH as an example, a call option for DAI/ETH is equivalent to a put option for ETH/DAI. DAI is bullish and ETH is bearish in both cases. As long as there is a reliable transaction quotation, DUO Network allows all encrypted assets under the ERC-20 standard to be traded on the platform and will gradually realize cross-platform transactions in the future.

PROJECT ANALYSIS

17

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

18

DUO Network's team have relatively strong financial backgrounds. The team has designed a series of structural products using call options, call option spreads, barrier options and complete tail calls, and implemented a dynamic margin system to provide users with the most humanized and effective financial derivatives.

2.2.3 Product preview

Products tested in the previous phases have been launched on the website of DUO Network. In the future, the platform and products will be continuously iterated according to users' needs and technical progress.

‣ Figure 2-4 Dual-Class Tokens Source: DUO Network

2.3 Project Characteristics

DUO Network combines classified tokens with smart contracts" DUO Network is the industry's first decentralized application platform with a structured fund model and smart contracts as the core. It has also launched an innovative set of financial structured products for hedging digital assets and volatility management.

At present, the vast majority of blockchain economies in the market have strict token supplies, rapid user growth and trading volume, which leads to great fluctuations in the price of tokens and attracts a large number of speculators. Therefore, encrypted assets are not suitable for mainstream payment methods or for asset collateral.

PROJECT ANALYSIS

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

19

Active tokens, which rank high in market value, have two contradictory economic attributes in the existing market: on the one hand, users need to use tokens to pay contract operating fuel fees and the mining incentives to miners when enjoying smart contract services; on the other hand, encrypted digital assets with the highest market value are subject to large fluctuations in trading prices in legal tender and are usually long-term bullish by investors.

If the circulation attribute of encrypted assets can be separated from the asset attribute and provided to users with different needs, it will be a great contribution and innovation to the blockchain economy and the original intention of many stable coin designs. Existing solutions usually require mortgages for external assets (legal tender or gold), which goes against the original intention of a decentralized system. DUO Network uses smart contracts to break up the value of encrypted assets into two parts: one is a price-stable token to meet the needs of payments and low-risk users; the other is an investment product with leverage attributes, which meets the needs of high-risk users. Combined with flexible derivatives design, it not only meets the payment needs of users, but also meets the speculation demands of investors.

PROJECT ANALYSIS

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

20

03. TOKEN ECONOMY

3.1 Basic Information of Tokens DUO Network issued 100 million tokens based on Ethereum and will never issue additional tokens. Additionally, its tokens are abbreviated as DUO. The DUO token has the following purposes within the DUO Network:

‣ Table 3-1 Utilities for DUO Network Token

Utilities Description

Price Oracle NodeNetwork participants can lock their DUO Tokens as a stack to become a node in our Price Oracle

DUO Protocol NodeNetwork participants can also lock their DUO Tokens as a stack to become a super node and be able to propose new custodian specifications

GovernanceAny DUO Token holders can vote proportionally on protocol decisions and developments based on their DUO Token balance

Conversion Fee

All custodian contracts in DUO Network charge a small percent of fees on CAT conversion, User can choose to pay fees in ETH or DUO. Payment in DUO will be discounted. Conversion proceeds in ETH will be primarily used to maintain the daily operation of the Network.

Price Service FeeExternal users can use our Price Oracle as a pricing service, charged in form of DUO Tokens

Community Reward

The Network provides its participants with an incentive scheme similar to mining on blockchains. The Network recognizes conversion arbitraging, and rewards participating users with DUO Tokens. The detailed reward scheme will be released at a later stage.

Source: DUO Network Whitepaper

As can be seen from the above table, DUO tokens have a series of functions such as mortgaging and voting in the DUO Network economy. Therefore, DUO tokens are an important component of the overall DUO Network.

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

21

TOKEN ECONOMY

3.2 Token Distribution and Issued Plan DUO Network has a clear explanation of the distribution and issuance plan for its token, but the use of specific parts and the locking mechanisms are not clearly stated.

‣ Table 3-3 DUO Network Token issued plan

Private offering public offering

Date 2018.05 2019.04

Amount 12,000,000 8,000,000

Percent 0.12 0.08

Price 0.3 0.15

Locked warehouse Six month No

Source: DUO Network White Paper

Sale20.00%

Advisors & Compliance5.00%

Team Incentive20.00%

Long-term Reserve25.00%

Community Incentive30.00%

‣ Figure 3-2 DUO Network Token distribution ratio Source: DUO Network White Paper

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

22

04. PROJECT PROGRESS

4.1 Project Progress DUO Network project roadmap is shown below. The project is progressing smoothly, TestNet has been releases on February 11, 2019. MainNet will be released in the first half of 2019.

DUO 2018

Q4

Public Exchange POC (ETH Kovan)

Classified token test

Bullish/Put option test

� �finished��

DUO 2019

CAT exchange MainNet release

Tokenized derivatives release

Cross chain assets (e.g. BTC)

✕processing

H1

H2

High performance CAT exchange

Global expansion (Europe, America)

Partnership with wallet and DEX

✕ u n d o n e

DUO 2020

Supervision sandbox

Unencrypted target

Cooperation with financial institution

✕ u n d o n e

A

‣ Figure 4-1 DUO Network Roadmap Source: DUO Network White Paper

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

23

05. TEAM, COOPERATORS AND INVESTORS

5.1 Team Information According to official data, the current DUO Network core team has 13 members, including 5 members from tits development team, 3 members from the management team, 3 members from the BD/OP team and 2 members from other teams. In addition, there are three consultants. The consultants include Steven Kou, professor of finance at Boston University, Xi Li, Yancheng Ren, early practitioners of finance in blockchain. These consultants have provided academic support in finance and blockchain technology's experience in combining traditional finance for technology-oriented teams.

‣ Table 5-1 DUO Network Some staff introduction

Name Position Introduction

Jerry Li CEO

National university of Singapore, Bachelor Degree; has served at UBS as a structured product sales, hedge fund Citi as senior analyst, AVP; in SS&C Technologies as AVP. 8 years working experience in the financial industry, experienced in the valuation of financial derivatives and hedge funds

Yizhou Cao CTO

National university of Singapore, Bachelor Degree; has served at UBS as a technical analyst and vice president assistant, served in Nomura. More than 5 years working experience in the financial industry.

Ting Gao Head of Marketing

Financial Engineering in University of California, Berkeley - Walter A. Haas Business School Master; has served in Citi as interest rate derivatives trader. 11 years working experience in the financial industry.

Lino Wang Head of Marketing

The George Washington University Bachelors; has served in Green box as CEO, at ZhenFund as fund market analyst. More than 5 year working experience in the financial industry.

Steven Kou Academic consultant

Professor of Boston University - Questrom School of business; has served in National university of Singapore as director of Risk Management Institute.Has published many books on economics and finance. Has won the Erlang reward. Researcher at the Institute of Mathematical Statistics.

Source: DUO Network, Linkedin

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

24

TEAM, COOPERATORS AND INVESTORS

5.2 Investment Institutions and Partners

Investment institutions have a certain amount of capital" According to the official announcement of DUO Network, investment institutions that invest in DUO Network at present include ZhenFund, LD Capital, Node Capital, Bitrise and others, and some investment institutions have large capital volumes and real economic support. Sources of investment institutions include mainland China, Europe, etc.

‣ Figure 5-3 DUO Network Investors and Partners Source: DUO Network

‣ Table 5-2 Brief Introduction to Some Investment Organizations of DUO Network

Name Description

ZhenFund

ZhenFund is an early investment institution founded by Mr. Xu Xiaoping and Mr. Wang Qiang jointly with Sequoia China in 2011. ZhenFund has successively invested in more than 600 start-up companies and has acquired unicorn enterprises such as Meicai, Hero Entertainment, VIPKID, Yiqi Education Technology, Zhaogang, Logic Show, Yitutech, Little Red Book, Mia, ofo, etc.

LD Capital

LD Capital was founded by Yi Lihua, a well-known investor in blockchain, and is a well-known investment institution in blockchain. LD Capital has a global layout in blockchain and has successfully invested in more than 100 outstanding blockchain projects such as Qtum, VeChain, EOS, GXS, Achain, BeeChat, ELF, Ulord, etc., with multiple investments yielding more than 100 times returns.

Node Capital

Node Capital aims to connect key ecological nodes in blockchain through project investment and cooperation, integrate industry resources, build an ecological circle, and promote the healthy and steady development of blockchain industry. Up to now, Node Capital has invested in nearly 200 enterprises, covering many projects in the ecosystem such as news information, exchanges, blockchain technology development and application, blockchain data mining and analysis and third-party services, including Jinse Finance, Huobi, ChainUP, ColdLar, Scry, IOST, Zilliqa, etc.

Source: DUO Network, Crunchbase

TO

KE

NIN

SIG

HT

RE

SE

AR

CH

25

06. COMMUNITY POPULARITY

The community popularity has been improving in recent developments"

According to TokenInsight's monitoring of the community popularity of DUO Network, as of April 25, 2019, the number of Twitter followers of the DUO Network was 524 and the number of Telegram groups was 19,864. In the past week, the number of chats in the DUO Network telegraph group has increased considerably, and community activity has also increased accordingly. According to hot words from their official telegraph group, except for the word "duo" (project name), the words "IEO" and "sale" have been in high popularity recently.

‣ Figure 6-1 DUO NetworkRecent community fever(latest three months) Source: TokenInsight

‣ Figure 6-2 DUO Network Telegram word cloud Source: TokenInsight

APPENDIX‣ Appendix 1 Symbols and Definition of Risk Ratings

AAAThe technical foundation is extremely solid, the status of operations is extremely stable, the extent of influence on the project by unfavorable changes in the environment or un- certain factors is extremely small, and risk is extremely low.

AAThe technical foundation is very solid, the status of operations is very stable, the extent of influence on the project by unfavourable changes in the environment or uncertain factors is very small, and risk is very low.

AThe technical foundation is solid, the status of operations is stable, the extent of influence on the project by unfavourable changes in the environment or uncertain factors is relatively small, and risk is relatively low.

BBBTechnical feasibility is very good, the status of operations is stable, influence on the project by unfavourable changes in the environment or uncertain factors exists to a certain extent, and risk is controllable.

BBTechnical feasibility is good, the status of operations is relatively stable, the possibility of influence on the project by unfavourable changes in the environment or uncertain factors exists to a relatively large extent, and risk is basically controllable.

BTechnical feasibility is moderate, the status of operations is relatively stable, the possibil- ity of influence on the project by unfavourable changes in the environment or uncertain factors exists to a very large extent, and risk is to a definitely limited extent controllable.

CCCThe technical foundation or idea has certain problems, the application scenarios are lim- ited, the project is susceptible to influence by uncertain factors, both internal and external, and has relatively large risk.

CCThe technical foundation or idea has considerable problems, and application scenarios are highly limited, which makes for a project that has few internal or external factors to consider in the context of sound development, and carries a very large risk.

CThe technical foundation or idea has substantial problems, and lacks deliberation upon possible application scenarios. The token has almost no usage value, and the project suffers from extremely large risk.

D The project is riddled with problems and carries an extremely high risk of failure.

TO

KE

NIN

SIG

HT

R

ES

EA

RC

H

26

TO

KE

N

INS

IGH

T

TokenInsight Inc.

Global Token Data & Rating Agency

Official Twitter Account WeChat Mini APP

TO OBTAIN THE LATEST DATA AND RATING REPORTS IN

BLOCKCHAIN INDUSTRY:

Website | www.tokeninsight.com

Cooperation | bd@tokeninsight.com

OTHER CONTACTS

WeChat Official Account | Tokenin

Official Twitter | TokenInsight

Official Weibo | TokenInsight

Official Telegram | https://t.me/TokenInsightOfficial