An introduction to Tenda

a better value system.

“Tenda’s mission is to sponsor social and economic collaboration and enable billions of people

to make a difference from what they do.” The Tenda World Consortium

This white paper outlines our plans for a Pan-African market infrastructure and a digital

reserve currency with the aim of unifying payment, clearing, settlement and depositories. It

will feature a fault-tolerant, scalable and consistent transaction processing platform for

digital value, assets and securities. It’s benefit overall shall be expanded access, lower costs,

safety and efficient transfers and flows that catalyse Continental Trade and Integration.

info@tenda.world

Table-of-Contents

Table of Contents

Synopsis ..................................................................................................................................... 1

Background ............................................................................................................................ 1

Problem statement .................................................................................................................. 2

So Why Tenda? ...................................................................................................................... 3

Introduction and Architecture .................................................................................................... 4

The Validators ........................................................................................................................ 5

The Consortium ...................................................................................................................... 7

The Transaction Processing Platform .................................................................................... 8

The Tenda Digital Currency ................................................................................................. 10

Tenda as a Market Infrastructure ............................................................................................. 11

Accounts ............................................................................................................................... 11

Payment ................................................................................................................................ 11

Clearing, Verification and Delivery ..................................................................................... 11

Settlement ............................................................................................................................. 12

Depositories .......................................................................................................................... 12

The Enabling Axioms ............................................................................................................... 13

Regional Framework ............................................................................................................ 13

Legal Framework ................................................................................................................. 13

Institutional Framework ....................................................................................................... 15

Consensus Framework ......................................................................................................... 17

Page | 1

Synopsis

Background

Africa is home to many of the world’s biggest opportunities with a tremendous economic

potential estimated at $50 Trillion by 2030.

The continent has the largest concentration of young people in the world, who make up a

staggering three quarters of it's population. It is on target to account for more than half (54%)

of the global population growth in coming decades and be home to 1.7 billion people, whose

combined consumer and business spending will total $6.7 trillion.

An overwhelming 93% majority of Africans today have access to a mobile phone service, but

less than two thirds have access to modern water and sanitation systems. Mobile telephone

networks have grown faster than any other area of core infrastructure over the past decade,

increasing by nearly a quarter. Sewerage, on the other hand, has remained relatively stagnant,

with availability growing by just 8%. Less than one third of Africans currently have access to

piped water. For people across Africa the mobile phone is not just a means for

communication. It has become the primary channel for online activity, and a vital tool that

can enhance quality of life. The mobile technology enables access to several essential

services, including education, banking, health and safety. With mobile money and mobile

financial services, people can transfer and store currency effortlessly.

Since 2000, at least half of the world’s fastest-growing economies have been in Africa. Rising

household consumption is predicted to reach $2.5 trillion by 2030 on the backdrop of this

changing demographics and improving business environments across the continent boosted by

regional integration, particularly intraregional trade and investments. Africa’s farmers and

agribusinesses could create a trillion-dollar food market by 2030 if they can expand their

access to more capital, electricity, better technology and irrigated land to grow high-value

nutritious foods and feed the region’s fast-growing urban population.

Combine the continent’s soaring population with technology, improvements in infrastructure,

agriculture, health and education, and Africa could be the next century’s economic growth

powerhouse.

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Problem statement

Global transformation continues to happen at the speed of light leaving many late bloomers

especially Africa behind. Accelerating the pace of and achieving structural transformation

remains the only way out for our society; however the continent’s framework for structural

transformation remains weak on: – (i) coordinating investment and other development

policies, (ii) mobilizing resources and reducing aid dependence over time, and (iii) securing

fiscal sustainability by establishing fiscal legitimacy.

While the contribution of a regional monetary union in the pursuit of intra-group trade,

growth and development, and social and political cohesion is unquestionable, such integration

goals are impeded by the lack of:

“exchange rate union – that is, an area within which exchange rates bear a permanently fixed

relationship to each other…” and

“convertibility – the permanent absence of all exchange controls, whether for current or

capital transactions within an area”.

“factor mobility – the movement of labour and capital goods across borders is not restricted

so that it is easy for factors to move to areas where they can earn maximum remuneration for

the services rendered.

“reserve currency – the presence of an internally convertible currency within the union.

Page | 3

So Why Tenda?

A significant change in technological and business models is under way in the financial

services industry. Consumers are increasingly looking for simpler and more efficient

alternatives to share value, and regulators have begun to encourage domestic market

infrastructures to adapt their systems in response to this demand.

Africa demands an ambitious vision scaffolded by an aggressive strategy of transformation of

economic and social structures. The continent’s historical account refers to a time when a

robust Reciprocal Exchange economy sustained the society through culturally enforced

agreements to give goods, services, information, or money in exchange for future

compensation in kind. The system proceeded according to well understood, rules that

specified the level and direction of transfers of goods and services.

Anthropologists originally analysed this phenomenon as prevalent in "primitive" or tribal

societiesi, however more recently, researchers have found that reciprocity is pervasive in

"modern" societies as well. All over the world, people engage in reciprocal exchange: from

contractors in New York City's garment industry, to entrepreneurs in Singapore, electronic

manufacturing in Shenzhen and shantytown residents in Latin Americaii.

Much closer home, Reciprocity is witnessed in the number of table banking groups, value of

overseas and domestic remittances, informal trade and manufacturing, on-demand casual

labourers, micro-lending and credit, savings and credits cooperatives, family run agricultural

enterprise, the women who travel kilometres to fetch water and firewood, pastoral farmers

that collectively wonder for miles in search of pastures, prevalence of domestic workers as

well as infant, elderly and special-needs home care givers.

There is virtually no aspect of African social, economic and political life that is not in one

way influenced by this first principle of value sharing as a form of economy. Indeed, the Pan-

African founders rallied the African society to “harambee” as a way to formally store,

account or transmit the spirit of reciprocity and bootstrap herself from potential into action.

It is imperative for society to collaborate in invention, innovation, production and distribution

in order to overcome the uncertainty and futility brought about by change. We believe this

spirit is native to Africa and her peoples, our will is resilient, and we have the enabling tools

to build a better value system for ourselves, so let’s do it!

Page | 4

Introduction and Architecture Distributed Ledger Technology (DLT) is at the centre of a massive innovation across the

financial market infrastructures, i.e. payment systems, central securities depositories,

securities settlement systems, central counterparties and trade repositories. The technology

increases the efficiency, security and transparency of transactional activities. DLT makes

possible a broad set of transformative applications with the potential to drastically boost

regional integration, particularly intraregional trade and investments. Africa is poised to be

the first major financial ecosystem in the world to fully explore the benefits of the “Internet of

Value” through the Tenda Platform.

In this whitepaper, we provide a brief overview of how Tenda is pioneering an innovation to

place a digital form of the Continent’s leading Central Bank currencies on a regulated

consortium blockchain. The result is the entry of a financial market utility providing rails for

the flow of value and a system that ensures sharing that works in the best interest of society.

The eventual goal is to enable Pan-African market infrastructures that unify payment,

delivery, settlement and depositories in a real-time, flexible and data-rich way and a digital

reserve currency that is simpler and more efficient.

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The Validators

In the TENDA Platform, transactions are validated by approved accounts, known as

validators. Validators run software allowing them to propose, commit and seal transactions in

blocks. The process is automated and does not require validators to be constantly monitoring

their computers. It, however, does require maintaining the computer (the authority node)

uncompromised. Validators will start to create blocks and generate the network security. A

step is one part of the authority round and each validator can seal one block in each round.

The validator receives all the fees paid for the transactions they commit and generate a block

from at each step.

Validators are persons defined in the NPS Act 2011, and Regulations 2014. For the initial

Validator assignment ceremony, 5 initial keys will be created by a master of ceremony. He

will distribute those keys to individual validators. Each validator will change a key to a new

subset of keys using a client-side Decentralised Application “Dapp”. After the initial

distribution of licenses, an additional validator can be added through the voting process on the

built-in Governance DApp. A majority of votes will be needed from validators to be accepted

into the smart contract with a list of validators.

Technical Responsibilities:

a) Ensure node is secure by practicing safe key management

b) Maintain node requisite software version

c) Monitor node to ensure its availability and participation in consensus

d) Monitor network in general and communicate with other Validators, network entities

if problems arise.

Functional Responsibilities:

a) Participate in on-chain Governance of the network; Governance is a collection of

DApps where ballots are proposed and voted on by existing Validators to manage the

network. The Ballot types include:

• Adding new Validators

• Removing Validators, i.e. for compromising security of network, malicious

behaviour, non-participation in Governance

• Updating/swapping of one of more Validator keys

• Changing the Approve Ballot Threshold

• Changing Consensus Proxy Contract

b) Participate in TENDA Network Community Forum

Eligibility Requirements

a) Shareholder interests; has both signer and sealer authority

b) Fiduciary duty; has both signer and sealer authority

c) Regulatory mandate; has both signer and sealer authority

d) Custodial duty; organisation has only signer authority

Page | 6

Consensus Protocol

TENDA’s Proof-of-Authority (PoA) consensus engine “AuRa” achieves consensus by

referring to a list of “authorities” (referred to as validators). These are nodes that are explicitly

allowed to create new blocks and secure “sign” the blockchain. They participate in the

consensus algorithm by validating the transactions and blocks and later sign messages about

them. The signing of blocks is done in rounds. Every validator gets a time slot per round

determined by the system clock of each validator in which he can create and sign one new

block. In case a validator is offline or not responding, he will be skipped. The validator

signing a block is called the primary. To be certain that transactions will stay valid and do not

get discarded because of chain reorganizations, the user should wait until the chain reaches

finality. Finality is defined in a way that at least 51% of the validators sign on the chain, and

then sign it again. This ensures that those blocks are set and not changeable.

Audit of the Aura Consensus Protocol, Published by Jean-Philippe Aumasson on August 12,

2017

Authority Round (a.k.a. Aura) is a proof-of-authority consensus engine in the Parity Ethereum

client, implemented in /ethcore/src/engines/authority_round in files mod.rs and finality.rs

(about 850 lines or Rust, including approximately 250 lines of tests). The goal of this audit is

to assess the security strength of the Aura and its implementation, and to find any security

shortcoming, in particular related to finality conditions. The version of the source code

reviewed is that at the commit b1517654e1212588238c989d00dd92128ea040fe.

The first part Protocol review is about the protocol logic, as understood from the

documentation and as implemented. The second part Code review is about logic and software

bugs in the implementation that are not directly related to the protocol’s logic.

Protocol review

1. Risks of synchronized time

2. Resilience to malicious nodes

3. Denial-of-service attacks

4. Finality conditions

5. Finality delay

Code review

This section reports on potential security risks in the implementation of Aura. We mainly

reviewed the mod.rs and finality.rs files and did not comprehensively review their

dependencies. The review covered the areas of:

1. Unsafe code

2. Step number cast from 64- to 32-bit

3. Potential integer overflow

4. Potential division by zero

5. Other possible improvements

6. Faster timings

7. Safer pseudo random number generator (PRNG)

Page | 7

The Consortium

Tenda Trustees

The Tenda Trustees are established by a Trust agreement between TENDA World and The

Tenda Trustees. It is the Management Body of the TENDA World Designated Payment

System and holds the legal title to all assets and powers of TENDA World. They are the

custodians to the financial assets of TENDA World, administer the distribution of any income

earned on these assets, and establish the common rules for the System participants.

The Tenda Foundation

The Tenda Foundation is established as a charity organization with the object to conserve

Society’s First Principles. It receives funding from the Tenda Trustees, in accordance to the

Trust Deed establishing the Tenda Trustees

Tenda World

The TENDA World is a Limited by Guarantee Company registered in the Republic of Kenya

owned by the Tenda Consortium. It is the Designated Payment System Operator for the Tenda

Platform and operates as Financial Market Utility (FMU).

Tenda Consortium Members

The eligible consortium members are made up of eligible Payments systems participants

authorized according to the NPS Act and Regulations and include:

• The Central Bank,

• A bank, an institution or a branch of a foreign institution,

• A payment service provider,

• A designated payment system operator,

• The Postal Corporation of Kenya

• The Kenya Post Office Savings Bank

• A building society

• Appointed agent, or a cash merchant, or wholesale agent, or a wholesale cash

merchant of a payment service provider.

Tenda Trustees

The TENDA Trustees are established by a

Trust agreement between TENDA World

and The TENDA Trustees, to hold the

legal title to all assets and powers of

TENDA World. They are the custodians

to the financial assets of TENDA World,

administer the distribution of any

income earned on these assets, and

establish the common rules for the

System participants.

Tenda Foundation

The Tendea Africa Foundation is

established as a charity

organization with the object to

conserve society’s First Principles. It

receives funding from the TENDA

Trustees, in accordance to the

Trust Deed establishing the Tenda

Trustees.

Tenda World

The Tenda World is a Limited by

Guarantee Company registered

in the Republic of Kenya owned

by the Tenda Consortium.

It is the Designated Payment

System Operator for the TENDA

Platform and operates as

Financial Market Utility (FMU).

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The Transaction Processing Platform

The TENDA project is a continuing research and technology development effort to develop: -

(1) a robust, mission-critical, full-featured, transaction processing system that demonstrate

reliable properties of atomicity, consistency, isolation and durability; and, (2) fault tolerant

state machine replication protocols that provide strong safety and liveness guarantees.

Transaction processing is a computing paradigm designed to maintain a system's Integrity

(typically a database or some modern filesystems) in a known, consistent state by ensuring

that interdependent operations on the system are either all completed successfully, or all

cancelled successfully. A robust transaction processing system offers a generic way to

distribute a state machine across a cluster of computing systems, ensuring that each node in

the cluster agrees upon the same series of state transitions despite fail-stop failures or in the

presence of byzantine faults. Abstracting away from application specific details (such as how

to represent state and compute transitions), it suffices to build a totally globally-consistent,

totally-ordered, append-only transaction log. Traditionally, such a primitive is called total

order or atomic broadcast; and in urban parlance a “Blockchain”.

The TENDA.network is a codifying of the compliance requirements of NPS Act-

2011/Regulations-2014 into a practical computational architecture to produce a regulated

blockchain technology complete in design-specification, development and operations. The

compliance is implemented in the system-architecture, source-code, hardware and software and

in the configuration specifications. Subsequent change to the configuration specification can

only be done through the approval of its authorities.

TENDA platform is a consortium blockchain based on a hard fork of the Ethereum Virtual

Machine. Its system participants, payment instruments and procedures meet compliance

requirements of the NPS Act-2011/Regulations-2014 and are regulated accordingly. All

transactions are natively denominated in KShs and redeemable at par value. The primary

features:

✓ Transaction and contract privacy

✓ Inexpensive consensus mechanisms

✓ Network/Peer permissions management

✓ Higher performance

Tenda’s programming model is based on composition and execution of smart contracts. Smart

contracts are a mechanism for expressing computations on a blockchain. One of the

challenges of writing smart contracts is that the currently implemented semantics of smart

contract languages admits unexpected side-effects. Use of Formal verification methods

provides precise definitions for operational behaviour, and therefore can illuminate and

hopefully reduce side-effect behaviour. Generally speaking, TendaScripting provides an

intermediate-level programming language for smart contracts. The typical toolchain is to

compile a higher-level “predicate logic style” language through the Transpiler and then

subsequently to either extract formally verified code or executable bytecode, very much in the

tradition of optimizing and verified compilers. TendaScript aims to achieve both expressivity

and tractability, while enabling rigorous formal reasoning about contract behaviour, by

adopting fundamental design principles, based on separation of programming concerns. As

Financial Institutions increasingly use domain-specific languages (DSLs) for describing

complex financial contracts, in particular, for evaluation of contracts and for managing how

contracts evolve as the underlying observables gradually change with time and by decision-

taking, Tenda’s emphasis on formal methods can provide static guarantees, guaranteeing

safety and liveness properties before contracts are irrevocably committed to the blockchain.

Page | 9

Transaction Nodes n(System Participants)

Validator 1 (Regulator Node)

Single Blockchain

Private StatePublic

State

Validator 3 (Management Body Node)

Single Blockchain

Private State

Public State

Validator 2 (Settlement Supervisor Node)

Single Blockchain

Private StatePublic

State

Validator 4 (System Operator Node)

Single Blockchain

Private State

Public State

Validator Nodes (persistent)

Load Balanced RPC Service

Block Explorer

Boot Node 2

Boot Node 1

Users

App Wallet

STK Wallet

SERIAL NUMBER

Card Wallet

Network Bridge

CDSC Service

REPSS/EAPS/KEPSS

MPRS Service

Validator 5 (Clearing Node)

Single Blockchain

Private State

Public State

SECURED PUBLIC NETWORK

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The Tenda Digital Currency

The Tenda is a Central Bank digital currency. That means, it is an e-money issued against

receipt of currency authorized by the Central Bank of Kenya and is 100% reserved against

cash and treasury holdings held in a Trust fund according to the NPS Regulations 2014.

Dematerialization (DEMAT) is the move from material to electronic bookkeeping. Actual

notes and coins are then removed and retired from circulation in exchange for electronic

recording. The dematerialization of money is not a new phenomenon. Belgian economist

Maurice Ansiaux, who coined the term “scriptural money” in 1912, defined it as a “currency

that moves from account to account rather than hand to hand”.

Today, when a wire transfer or debit transaction is performed, it does not correspond to any

material transfer of money – it simply involves a shift of credit from one bank to another

through scripts. Scriptural money of this kind now represents more than 90% of all money in

circulation.

The Tenda digital currency employs technology to extend its qualities beyond that of

traditional e-money, and has enhanced capabilities including:

Safety: Secure by cryptography,

Portable: stored natively inside any compatible purse as opposed to in one central ledger.

Modular: programmable into various types of financial instruments such as cheque, debit,

credit, voucher EFT, etc

Robust: embeds operational features such as Collections, deductions, directivity, reporting

etc.

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Tenda as a Market Infrastructure Tenda World is positioned as a Pan-African financial market utility responsible for facilitating

the efficient interaction of financial market participants through shared processes, to reduce

cost and various types of operational complexity and risk.

It’s a multilateral system accessible to eligible system participants with free entry/exit, similar

products, services and cost. The platform infrastructure fits the purposes of recording,

transferring, clearing, or settling payments, securities, derivatives, or other financial

transactions among financial institutions or between financial institutions and the system.

Accounts

Tenda accounts incorporate universal KYC features through its identity-based substrate. These

accounts support secure issuance and bearer functions of financial instruments. Every party

associated in a financial instrument can prove their balance to any other party, and no party can

alter the balance of any other party without their agreement and that of the validators.

Identity-based Accounts: Unique and derived off National registration and Personal

identification schema. Generate native KYC metadata.

Legal Entity Accounts: Unique and derived off Identity-based Accounts, Generate inherited

KYC metadata.

Payment

The Tenda represents quantities of a given unit type as deposit agreements, which are signed

by the bearer and validators. Portions of a balance may be transferred between users via several

asset-independent transaction types, including:

Transfers: An atomic movement of funds from one account to a different account, like a bank

account-to-account transfer.

Cheques: A payment which is not deducted from the payer’s account until the payee claims it.

Vouchers: A payment which is deducted from the payers account at the time of creation.

Invoices: A payment request which the payee can opt to pay from any of his accounts.

Cash: Digital currency which can be securely redeemed by the payee.

Market offers: Open agreements to exchange a given quantity of one instrument type for a

given quantity of another instrument type.

Smart Contracts: Customizable agreements between multiple parties, containing user-defined

scripted clauses, hooks, and data.

Clearing, Verification and Delivery

Tenda ubiquitous network enables the end-to-end exchange of any-to-any payments

instructions. This is made by way of full addressability of accounts and routing between

financial institutions, and integrations with trade, logistics, customs and revenue authorities in

relation to payment instructions.

Clearing: 24/7/365 in Real-time

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User Addressing: End-to-End account addressability and routing

Single Window: Delivery vs Payment, Cash on Delivery, Cash on Documents, Trade, Customs

and Revenue Authorities

Domestic Routing: EFT, ACH.

Regional Routing: EAPS, REPSS, IBAN.

Global Routing: Mobile Money, Swift, Branded Cards.

Settlement

Tenda’s ubiquitous treasury and depository facility supports real-time gross settlement and

netting environments. The benefits include safeguarding the final realizability of settlement

instruments, liquidity optimization and consolidation.

Settlement: 24/7/365 in Real-time Gross

Under 100% Cash Reserve Ratio: Tenda enables Atomic Transfer from sender to recipient.

The sender’ account serves also as the settlement account). The payment service provider is not

required to prefund a settlement account in order to facilitate such a payment instruction.

Under Fractional Reserve Ratio: Tenda enables gridlock resolution of Totally ordered

transactions and their settlement through simultaneous-batch processing.

It also enables deadlock resolution of Partially ordered transactions and their settlement through

liquidity-adjusted batch processing that is supported by either a corresponding DvP Securities

trade, or unsecured access to Term Loanable Funds.

Depositories Central Securities Depository (CSD) which transfers legal ownerships of securities against

payment suffer several inefficiencies. Several intermediaries such as brokers, custodians and

payment agents are altogether involved in facilitating the clearing and settlement of a trade in

a process that ends up being time- and cost-intensive, additionally, these intermediaries operate

back office systems that are incompatible with other financial market infrastructure and leads

to duplication of costs for record-keeping and reconciliation.

Tenda’s innovation is a record-keeping system that keeps track of securities ownership as well

as related transactions as a shared database. For securities trades to be settled, the transfer of

ownership and payment is atomically transacted on the blockchain, enabling a DvP mechanism

that assures realization of both funds and the asset. To this end, the parties involved in a trade

would transmit such a transaction to Tenda.network which is secured by designated validators

tasked with updating the information stored on the blockchain.

Entities that hold assets on behalf of depositors on the Tenda.network can use the platform to

issue Digital Certificates as negotiable instruments. Examples of such depositories includes:

Central bank currencies

Treasuries and Government Agency Bonds e.g. Annuities & Mortgage Backed Funds

Precious metals

Stocks and Exchanges Depositories

Moveable Property Security Rights

Page | 13

The Enabling Axioms The legal and institutional framework supporting the establishment and operations of TENDA

in Kenya is mainly grounded on the Constitution of Kenya, the National Payment System Act,

2011, Public Finance Management Act, 2012, and the Public Private Partnerships Act, 2013.

The relevant provisions from these legal instruments are summarized below.

Regional Framework

The recent coming into force of the African Continental Free Trade Agreement (AfCFTA)

establishes the largest free trade area in the world since the creation of World Trade

Organization in 1995. AfCFTA is expected to boost intra-African trade by 52.3 percent by

2022. It is foreseeable that there will be an immediate demand for a systemically important

payment system, that is robust and can provide a digital currency basket as a way to mitigate

against arbitrage and currency manipulation. A system that can support continental payment

flows with little intermediation.

Through Regional Economic Communities, Africa aims to establish monetary unions as part

of its broader integration agenda. The continent has a long history of countries sharing single

currencies. For example, the West African Economic and Monetary Union (UEMOA) has 8

countries using the CFA franc, previously pegged to the French franc and now to the euro.

The Economic and Monetary Community of Central Africa (CEMAC) with an additional 6

countries using the CFA franc. Lesotho, Namibia and Swaziland are pegged at par to the

South African Rand, which effectively means that they share the same monetary policy.

The need to enhance efficiency in payment systems within the East African Community

(EAC) and Common Market for East and South Africa (COMESA) regions has already

resulted in the development of two regional payment systems: The East African Payment

System (EAPS) and the Regional Payment and Settlement System (REPSS). The objectives

of those systems are to facilitate cross border payment and settlement within the EAC and

COMESA regions. Both are integrated in the Kenya Electronic Payment and Settlement

System (KEPSS).

Legal Framework

Legal Framework Under the Constitution of Kenya

Articles 11 of the Constitution of Kenya recognises the scientific culture of the Kenyan people

as foundational to the nation and our cumulative civilization. The state is charged with a

mandate to:– promote national and cultural expression through science, recognise the role of

science and indigenous technologies in the development of the nation, and promote the

intellectual property rights of the people of Kenya.

Under Articles 231, the Constitution of Kenya establishes the Central Bank of Kenya as among

the important Financial Officers and Institutions in Kenya. The bank is established with a

mandate to formulate monetary policy, promote price stability and issue currency in accordance

to an enabling Act of Parliament and subject to the values and principles of public service. This

Article creates obligations on Parliament to provide for the bank’s composition, powers,

functions and operations.

Page | 14

Legal Framework Under the National Payment System Act, 2011

The National Payment System Act 2011 was enacted by Parliament to make provision for the

regulation and supervision of payment systems and payment service providers, and for

connected purposes. Some of the guiding principles under this Act that have direct bearing on

this policy framework include provisions in sections 3, 7, 8, 17, 20, 22,23 of the NPS ACT

2011, and the NPS Regulations, 2014, together which establish the following principles –

Designation of a payment system, Under Subsection (3); The Central Bank may, by notice in

the Gazette, designate a payment system for the purposes of this Act, if it is of the opinion,

among others, that such designation is in the interest of the integrity of the payment system.

The Central Bank’s payment-system regulator role, Under Subsection (22); gives it powers to

issue directives, under Subsection (23); conduct audits and inspections, Under Subsection (17);

delegate its powers or authorize its functions to its officers, and Subsection (20); obtain

information relating to a payment system or payment instrument.

The Central Bank’s settlement regulator and supervisor role, Under Subsection (19); participate

in and enforce settlement arrangements, provide custodial services, including depositories.

The Payment-System Management Body, Under Subsection (7); The automatic recognition of

the management body of such payment system, and under Subsection (8); it’s role to manage

and regulate, in relation to its members, all matters affecting payment instructions.

The Payment-System Operator, Under Subsection (3), The notification to the operator of the

payment system, and the terms and conditions to which the designation may be subject.

The Payment-System Clearing House Operator, Under Subsection (8); The authorization of a

person to act as a payment clearing house system operator, under Subsection (10); The criteria

of the person to be allowed to clear on behalf of system participants.

The Payment-System Participants, Under Subsection (8); The authorisation of a person to act

as a system operator within the payment system; and Under Subsection (11); The criteria of the

person to be allowed to accept payment instructions from any other person.

Legal Framework Under the National Payment System Regulations, 2014

Business of an e-money issuer,

Business of an electronic retail provider,

Outsourcing, Interoperability and Agency, Under Regulation 23; Regulates outsourcing of

operational functions, Under Regulation (17); Appointment of agent or a cash merchant, Under

Regulation (18); Appointment of wholesale agent or a wholesale cash merchant to distribute e-

money to agents or cash agents, Under Regulation (20); Use of systems capable of becoming

interoperable with other payment systems in the country and internationally, Under Regulation

(22); Participate in a payment service provider management body for the purposes of facilitating

interoperability.

Maintenance of Records, Under Regulation (19); A payment service provider shall maintain

records

Governance, Under Regulation (25); Establish a Trust and a Trust Fund controlled with a broad-

based board of trustees, Hold the funds in the Trust Fund in Government of Kenya securities,

Donate any income generated from placement of these Trust Funds to a public charitable

organisation for use for public charitable purposes in accordance with Trust legislation and in

consultation with the Bank.

Page | 15

Institutional Framework

The TENDA network is controlled by validators who each have total transparency and exercise

majority control over the activity and functionality of the network. A Validator can only be a

person with statutory roles defined in NPS ACT/Regulations. They operate in their legally

mandate roles and are entrusted to maintain a node on the network that validates transactions

and commits new blocks to the blockchain. Validators receive a fees for provisioning blocks

and generating network security.

All Validators Share the below common responsibilities: -

1. Participate in on-chain governance,

2. Commit transactions to the network,

3. Seal transactions blocks.

4. Propose and vote on Ballots

The Validators

The System Participants

Central Bank of

Kenya (CBK)

Regulator

Central Bank of

Kenya (CBK)

Settlement

Supervisor

Tenda Trustee

Payment System

management

body

CBK: Swift, e-money,

Foreign Bank: IBAN, Branded Cards,

Local Bank: ACH, EFT, Local Cards, e-

money,

PCK: Government,

Payment System Clearing House Operator

Tenda World

Payment System

Operator,

E-money issuer,

Central Bank Of Kenya,

Financial Institutions, Mortgage Institution or Foreign Owned Bank

Payment Service Provider

Designated Payment System Operator,

Postal Corporation Of Kenya,

Kenya Post Office Savings Bank,

A Building Society

Payment System Participants,

Provide Third Party Payments

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Roles and Responsibility Matrix Entity Role Responsibility

CBK Regulator Validator: –

NPS Act Section 20, 22,23

Settlement System Participant NPS Act Section 19,

Validator Authority,

Host a TENDA-Node,

Guidance and Compliance,

Reporting

CBK, CDS or, CDA

Settlement Validator: –

Settlement System; NPS Act Section 9,

Validator Authority,

Host a TENDA-Node,

Securities Custodian,

Manage Total Supply,

Reporting

Tenda Trustee Management Validator: –

Payment System Management Body; NPS Act Section 7, 8, 16, NPS Regulation 21,22,25,

Validator Authority,

Hosts a TENDA-Node,

Manage income from Trust Fund,

Reporting

Tenda World Operator Validator: –

Designated Payment System Operator;

Designated Payment System; NPS Act Section 3, 9, 11, 20, 26; NPS Regulation 52

Designated Payment Instrument; NPS Act Section 6; NPS Regulation 52

E-money Issuer; NPS Regulation 17,18,19,20,25,

Small E-money Issuer; NPS Regulation 46,

Validator Authority,

Hosts a TENDA-Node,

Infrastructure, Systems and Operations,

Manage Transactions Ecosystem

Reporting

CBK, Institution, Postal Corporation of Kenya,

Clearing Validator: –

Payment Clearing House Operator; NPS Act Section 11., PCK Act Section 5.

Validator Authority,

Hosts a TENDA-Node,

Accept money or payment instructions from any other person for purposes of making payment on behalf of that other person

CBK, Institution, Payment Service Provider, Designated Payment System Operator, Postal Corporation of Kenya, Kenya Post Office Savings Bank, Building Society.

Payment System Participant: –

NPS Act Section 9

Payment Service Provider: – Custodian/Aggregator; NPS Act Section 11, 13; NPS Regulation 17,

Payment Service Provider: – Custodian/Aggregator; NPS Act Section 11, 13; NPS Regulation 17,

Hosts a TENDA-Node,

Provide facilities for clearing payment instructions to payment system participants

Hosts a TENDA-Node,

A wholesale agent or a wholesale cash merchant appointed to distribute e-money to agents or cash agents.

Provide mobile based access to TENDA accounts, Business/Commercial Operations,

Reporting

Hosts a TENDA-Node,

A wholesale agent or a wholesale cash merchant appointed to distribute e-money to agents or cash agents.

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Consensus Framework

Our overall goal is to build a replicated state machine, where clients generate and submit

transactions and a network of nodes receives and processes them. Abstracting away from

application specific details (such as how to represent state and compute transitions), it suffices

to build a totally globally-consistent, totally-ordered, append-only transaction log.

Traditionally, such a primitive is called total order or atomic broadcast; in Urban parlance, we

would call it a blockchain, while consensus is the means of attaining global consistency.

In a ‘traditional’ distributed system consensus algorithm setting we assume a relatively small

number of cooperating nodes that can tolerate some number of faults. But in an open

multilateral setting we have large numbers of mutually distrustful nodes operating in network

conditions likely to be less predictable. The fancy way of saying that a distributed system can

cope with active adversaries is Byzantine Fault Tolerance (BFT).

The surprising success of the cryptocurrency use-case for blockchain technology has led to a

surge of interest in deploying large scale, highly robust, Byzantine fault tolerant (BFT)

protocols for mission critical applications, such as financial transactions. In comparison with

traditional fault tolerant deployment scenarios, cryptocurrencies thrive in a highly adversarial

environment, where well-motivated and malicious attacks are expected (if not commonplace).

Tenda.dev is a continuing research and technology development effort, to design consensus

algorithms best suited for deployment in scenarios where, a consortium of financial

institutions jointly contribute to a Byzantine agreement protocol to allow fast and robust

exchange and settlement of transactions.

The system model assumes the following CAP theorem constraints:

Consistency:

• If any correct node outputs a transaction Tx, then every correct node outputs Tx.

• If one correct node has an output transaction sequence s1 and another correct node has an

output transaction sequence s2 then s1 is a prefix of s2 or vice-versa.

• If a transaction Tx is input to N-f correct nodes, then it is eventually output by every

correct node (Censorship resilience).

Availability:

• Response time and contention are not the critical factors for many financial applications

(e.g. some classes of payment and settlement networks). What these applications often do

need though is throughput in order to be able to sustain high volumes of requests.

• Each pair of nodes is connected by a reliable authenticated point-to-point channel (which

can be built on top of unreliable foundations of course). “The delivery schedule is entirely

determined by the adversary, but every message sent between correct nodes must

eventually be delivered”

Partition Tolerance:

• The adversary can control up to f faulty nodes, giving correct operation so long as there

are N ≥ 3f +1 nodes.

Page | 18

1 James, J. (2014). “Patterns of Mobile Phone Use in Developing Countries: Evidence from Africa”. Social Indicators

Research, 119(2), 687–704. https://doi.org/10.1007/s11205-013-0510-9

2SWIFT. (2018). “Africa Payments: Insights into African transaction flows”.

3Susan Wyche, Nightingale Simiyu, and Martha Othieno (May 2016). "Mobile Phones as Amplifiers of Social Inequality

Among Rural Kenyan Woman". ACM Transactions on Computer-Human Interaction. 23 (3): 14. doi:10.1145/29111982

4Milford Bateman, Maren Duvendack & Nicholas Loubere: "Is fin-tech the new panacea for poverty alleviation and local

development? Contesting Suri and Jack’s M-Pesa findings published in Science." Review of African Political Economy. June

2019. A freely accessible short Version is: Bateman, Duvendack, Loubere: "Another False Messiah: The Rise and Rise of

Fin-tech in Africa." Review of African Political Economy Blog.

i (see Claude Levi-Strauss, 1969; Bronislaw Malinowski, 1961; Marcel Mauss, 1967; Marshall Sahlins, 1972).

ii For the garment industry in New York, see Sally Falk Moore (1973. 1978). For Chinese entreDreneurs in

Singapore, see Yao Souchou (1987). For shantytowns in Mexico City, see Larissa Adler Lomnitz (1977) and in

Lima, see Susan Lobo (1982).