DEV Community

Cover image for Noah's Ark for Algorithmic Trading: Why VCP v1.1 Requires a Three-Layer Architecture
VeritasChain Standards Organization (VSO)
VeritasChain Standards Organization (VSO)

Posted on

Noah's Ark for Algorithmic Trading: Why VCP v1.1 Requires a Three-Layer Architecture

#ai #vcp #veritaschain #protocol

The Flood

Between February 2024 and late 2025, the proprietary trading industry experienced its own biblical deluge. 80 to 100 prop firms ceased operations—approximately 13-14% of all firms globally.

The catalyst? MetaQuotes revoked MT4/MT5 licenses from prop firms serving US clients. Within weeks:

  • True Forex Funds shut down May 13, 2024 — 300 traders, $1.2M frozen
  • SurgeTrader collapsed May 24, 2024
  • The Funded Trader admitted to $2M+ in denied payouts

But MetaQuotes didn't cause the flood. It merely exposed that the industry was built on sand.

The real problem? Every single one of these firms operated on "Trust Me" architecture.

// The old world
function verifyTrade(brokerStatement) {
  return "just trust us"; // 🙃
}
Enter fullscreen mode Exit fullscreen mode

When traders asked for proof of fair execution, firms could only offer... promises. When regulators investigated, there was no immutable record. When disputes arose, it was trader's word against platform's word.

The era of "Trust Me" is over. The era of "Verify Me" has begun.

Building the Ark: VCP v1.1 Three-Layer Architecture

The VeritasChain Protocol (VCP) v1.1 introduces a three-layer architecture designed to survive any future flood. Think of it as Noah's Ark for trading data:

┌─────────────────────────────────────────────────────────────┐
│  Layer 3: EXTERNAL VERIFIABILITY                            │  ← Roof
│  "Anyone can verify without trusting the builder"           │
│  • Digital Signatures (Ed25519)                             │
│  • Timestamps (RFC 3339)                                    │
│  • External Anchoring (Blockchain/TSA) — NOW REQUIRED       │
├─────────────────────────────────────────────────────────────┤
│  Layer 2: LOCAL INTEGRITY                                   │  ← Hull
│  "Detect any tampering within the dataset"                  │
│  • Merkle Trees (RFC 6962)                                  │
│  • Hash Chains (optional, complementary)                    │
├─────────────────────────────────────────────────────────────┤
│  Layer 1: EVENT GENERATION                                  │  ← Cargo Hold
│  "Capture everything that matters"                          │
│  • UUID v7 (temporal ordering)                              │
│  • Canonical JSON (RFC 8785)                                │
│  • Full trade lifecycle events                              │
└─────────────────────────────────────────────────────────────┘
Enter fullscreen mode Exit fullscreen mode

Let's dive into each layer.

Layer 1: The Cargo Hold (Event Generation)

Noah didn't just throw animals into the ark randomly. He catalogued every species, two by two.

VCP Layer 1 captures every event type in the trading lifecycle:

Trading Events:     INIT → SIG → ORD → ACK → EXE → CLS
                              ↘ REJ
                         ORD → ACK → PRT → EXE
                                   ↘ CXL

Governance Events:  ALG_UPDATE | RISK_CHANGE | AUDIT_REQ
System Events:      HEARTBEAT | ERROR | RECOVERY | CLOCK_SYNC
Enter fullscreen mode Exit fullscreen mode

The UUID v7 Requirement

Every event gets a UUID v7—not v4. Why? Temporal ordering baked into the identifier.

import uuid
from datetime import datetime

def generate_vcp_event_id():
    """
    UUID v7: First 48 bits = Unix timestamp (ms)
    Enables chronological sorting by ID alone
    """
    return uuid.uuid7()

# Events are naturally sortable
event_ids = [generate_vcp_event_id() for _ in range(3)]
assert event_ids == sorted(event_ids)  # Always true
Enter fullscreen mode Exit fullscreen mode

Canonical JSON: The IEEE 754 Problem

Here's a fun bug that has caused countless audit failures:

// JavaScript
const price = 0.1 + 0.2;
console.log(price); // 0.30000000000000004 🤯
Enter fullscreen mode Exit fullscreen mode

Different systems serialize 0.30000000000000004 differently. Your hash changes. Your audit trail breaks.

VCP solution: Numbers as strings.

{
  "event_id": "019400a1-b2c3-7def-8901-234567890abc",
  "event_type": "EXE",
  "payload": {
    "symbol": "EURUSD",
    "price": "1.08425",
    "quantity": "100000",
    "side": "BUY"
  },
  "timestamp": "2025-01-04T10:30:00.123Z"
}
Enter fullscreen mode Exit fullscreen mode

RFC 8785 (JSON Canonicalization Scheme) ensures identical serialization across all implementations.

Layer 2: The Hull (Local Integrity)

The ark's hull prevents water from getting in. VCP Layer 2 prevents tampering from going undetected.

Merkle Trees: The Core Integrity Mechanism 

import hashlib
from typing import List

def build_merkle_tree(events: List[dict]) -> str:
    """
    RFC 6962 compliant Merkle Tree
    Returns the root hash
    """
    # Leaf nodes: hash of each event
    leaves = [
        hashlib.sha256(
            canonicalize(event).encode()
        ).hexdigest()
        for event in events
    ]

    # Build tree bottom-up
    while len(leaves) > 1:
        if len(leaves) % 2 == 1:
            leaves.append(leaves[-1])  # Duplicate last if odd

        leaves = [
            hashlib.sha256(
                (leaves[i] + leaves[i+1]).encode()
            ).hexdigest()
            for i in range(0, len(leaves), 2)
        ]

    return leaves[0]  # Merkle Root
Enter fullscreen mode Exit fullscreen mode

Why Merkle Trees matter:

  1. O(log n) proof size: Prove inclusion of 1 event among 1 million with only ~20 hashes
  2. Tamper evidence: Change 1 bit → completely different root
  3. Partial disclosure: Prove specific events without revealing others

Hash Chains: Now Optional

Here's a controversial change in v1.1: prev_hash is now OPTIONAL.

// v1.0: prev_hash was REQUIRED
{
  "event_id": "...",
  "prev_hash": "a1b2c3d4...",  // Links to previous event
  "hash": "e5f6g7h8..."
}

// v1.1: prev_hash is OPTIONAL
{
  "event_id": "...",
  "hash": "e5f6g7h8..."
  // prev_hash can be omitted
}
Enter fullscreen mode Exit fullscreen mode

Why the change?

Hash chains provide local ordering guarantees, but they don't prevent a malicious actor from regenerating the entire chain. The real integrity guarantee comes from Layer 3—external anchoring.

Think of it this way: a chain connecting boxes inside the ark is useful, but what really matters is that the ark itself is anchored to a mountain.

Layer 3: The Roof (External Verifiability)

This is where v1.1 makes its most significant change.

In v1.0: External anchoring was optional for Silver tier.

In v1.1: External anchoring is REQUIRED for all tiers.

┌─────────────────────────────────────────────────────────┐
│                    External Anchor                       │
│  "Proof that this Merkle Root existed at this time"     │
├─────────────────────────────────────────────────────────┤
│  Silver Tier:   Daily anchor (24h)                      │
│  Gold Tier:     Hourly anchor (1h)                      │
│  Platinum Tier: Near real-time (5min)                   │
└─────────────────────────────────────────────────────────┘
Enter fullscreen mode Exit fullscreen mode

Why This Matters

Without external anchoring, a log producer could:

  1. Generate events
  2. Build Merkle tree
  3. Modify events retroactively
  4. Rebuild Merkle tree
  5. Anchor the falsified root

External anchoring timestamps the Merkle Root to an independent third party. Once anchored, retroactive modification becomes cryptographically impossible.

Anchoring Options 

from enum import Enum

class AnchorType(Enum):
    # Public blockchains
    BITCOIN_OP_RETURN = "bitcoin"      # ~$0.50/anchor, ~10min finality
    ETHEREUM_CALLDATA = "ethereum"     # ~$2-20/anchor, ~15sec finality

    # Timestamping services
    ORIGINSTAMP = "originstamp"        # Free tier available
    RFC3161_TSA = "rfc3161"            # Traditional PKI

    # Transparency logs
    CERTIFICATE_TRANSPARENCY = "ct"    # Google's CT logs

def anchor_merkle_root(root: str, anchor_type: AnchorType) -> dict:
    """
    Anchor a Merkle root to external verifiable source
    Returns receipt with proof of existence
    """
    if anchor_type == AnchorType.BITCOIN_OP_RETURN:
        return bitcoin_anchor(root)
    elif anchor_type == AnchorType.ORIGINSTAMP:
        return originstamp_anchor(root)
    # ... other implementations
Enter fullscreen mode Exit fullscreen mode

The Verification Flow 

def verify_event(event: dict, merkle_proof: dict, anchor_receipt: dict) -> bool:
    """
    Full VCP v1.1 verification
    Returns True only if ALL checks pass
    """
    # Layer 1: Event integrity
    computed_hash = sha256(canonicalize(event))
    if computed_hash != event['hash']:
        return False

    # Layer 2: Merkle inclusion
    if not verify_merkle_inclusion(event['hash'], merkle_proof):
        return False

    # Layer 3: External anchor (NEW in v1.1 - REQUIRED)
    if not verify_external_anchor(merkle_proof['root'], anchor_receipt):
        return False

    return True  # Cryptographically verified ✓
Enter fullscreen mode Exit fullscreen mode

v1.0 → v1.1: What Changed and Why

Change v1.0 v1.1 Rationale
External Anchor Optional (Silver) REQUIRED (All) "Verify, Don't Trust" requires external proof
prev_hash REQUIRED OPTIONAL Local chains don't prevent regeneration attacks
Policy ID Not specified REQUIRED Immutable reference to operating rules
Completeness Implicit Explicit guarantees Gap detection mechanisms

Migration Timeline 

┌────────────────────────────────────────────────────────────┐
│  VCP v1.1 Migration Timeline                               │
├────────────────────────────────────────────────────────────┤
│  2025-12-25  │  v1.1 Specification Released                │
│  2026-03-25  │  Policy Identification REQUIRED             │
│  2026-06-25  │  External Anchor REQUIRED (Silver)          │
│              │                                              │
│  After 2026-06-25: v1.0-only = No VC-Certified status      │
└────────────────────────────────────────────────────────────┘
Enter fullscreen mode Exit fullscreen mode

Real-World Implementation: MQL5 Sidecar

For those running algos on MetaTrader, here's how VCP integrates as a sidecar:

// vcp_bridge.mqh - Zero impact on trading logic

#include <JAson.mqh>

class VCPBridge {
private:
    string m_api_endpoint;
    string m_api_key;

public:
    void EmitOrderEvent(ulong ticket, string symbol, 
                        ENUM_ORDER_TYPE type, double price, 
                        double volume) {
        CJAVal event;

        // Layer 1: Event generation
        event["event_id"] = GenerateUUIDv7();
        event["event_type"] = "ORD";
        event["timestamp"] = TimeToString(TimeCurrent(), TIME_DATE|TIME_SECONDS);

        // Payload with string-encoded numbers (IEEE 754 safe)
        event["payload"]["ticket"] = IntegerToString(ticket);
        event["payload"]["symbol"] = symbol;
        event["payload"]["price"] = DoubleToString(price, 5);
        event["payload"]["volume"] = DoubleToString(volume, 2);

        // Async emit - non-blocking
        AsyncPost(m_api_endpoint, event.Serialize());
    }

    void EmitExecutionEvent(ulong ticket, double fill_price, 
                            double slippage) {
        CJAVal event;
        event["event_id"] = GenerateUUIDv7();
        event["event_type"] = "EXE";
        event["payload"]["ticket"] = IntegerToString(ticket);
        event["payload"]["fill_price"] = DoubleToString(fill_price, 5);
        event["payload"]["slippage"] = DoubleToString(slippage, 5);

        AsyncPost(m_api_endpoint, event.Serialize());
    }
};
Enter fullscreen mode Exit fullscreen mode

Key principle: The sidecar runs alongside your trading logic, capturing events asynchronously. Zero latency impact on order execution.

The Covenant: Policy Identification

Noah received specific instructions. VCP v1.1 requires every implementation to declare its Policy ID:

{
  "policy_id": "vso:vcp:silver:2025-12",
  "policy_hash": "sha256:a1b2c3d4e5f6...",
  "policy_url": "https://veritaschain.org/policies/silver-2025-12.json"
}
Enter fullscreen mode Exit fullscreen mode

This creates an immutable reference to the rules under which trading occurred. No more "we updated our terms of service retroactively."

Who Boards the Ark?

The flood is coming. EU AI Act Article 12 mandates automatic logging for high-risk AI systems by August 2026. MiFID III requires microsecond-precise audit trails.

Those who board:

  • Firms implementing cryptographic audit trails now
  • Platforms that can prove "best execution" mathematically
  • Traders who demand verifiable performance records

Those who don't:

  • The next 80 firms that will collapse when regulators or traders demand proof they cannot provide

Getting Started 

# Clone the specification
git clone https://github.com/veritaschain/vcp-spec

# Read the v1.1 spec
cat VCP-Specification-v1_1.md

# Check out reference implementations
ls sdk/
# → python/ typescript/ mql5/
Enter fullscreen mode Exit fullscreen mode

Resources:

TL;DR

Old World New World (VCP v1.1)
"Trust our logs" Merkle proofs + external anchors
Retroactive rule changes Immutable Policy ID
80 firms collapsed Survivors can cryptographically prove integrity
"We investigated ourselves" Anyone can verify independently

The flood already happened. The question is: are you building an ark?

If you're working on trading systems and thinking about audit trails, I'd love to hear your challenges. Drop a comment below or reach out at technical@veritaschain.org.

Tags: #fintech #blockchain #opensource #security #trading
Enter fullscreen mode Exit fullscreen mode

Top comments (0)