Xyxyx Litepaper
Author: Pinedale Research

Abstract. In this paper, we propose a decentralized inscription protocol on Ethereum that runs fully on-chain. The protocol introduces an entirely blockchain-based iteration of the ERC-404 by employing encoded Base64 strings as tokenURI, having zero external, off-chain dependency to its fulfillment. In addition, we introduce a native tokenId-based hash function that enables uniqueness for each NFT generated by the smart contract.

1. Introduction
Data stored on the Ethereum blockchain is permanent and immutable. While this is a fact for actual blockchain data, this does not apply to NFTs in full: ERC-721 tokens are stored permanently on the blockchain, however, their linked digital assets like JPEGs, GIFs, and PNGs predominantly reside on off-chain platforms such as IPFS.

1.1. Off-chain NFTs
For off-chain NFTs, tokens contain URLs that point to external resources to display the full NFT data. If those URLs become unavailable, the visual representation of the NFT will no longer be accessible, despite the NFT's hash continuing to exist on the blockchain.

1.2. On-chain NFTs
On-chain NFTs store data directly on the blockchain using data URLs instead of pointing to off-chain resources. As long as the blockchain remains operational, this ensures the NFT's content remains accessible.

2. XYXYX
Xyxyx (XYXYX) are 128 ERC-404-powered tokens fully generated, rendered, and stored on-chain.
Each XYXYX is encoded in a Base64 string, which generates an SVG file as human-readable data; instead of storing it in an external source that is located off-chain. As a result, this empowers XYXYX to not rely on any third-party off-chain hosting to exist, making it a purely blockchain-based iteration of the ERC-404 -- leveraging the Ethereum blockchain itself as the data store.

2.1. Base64 Inscription
In off-chain NFTs, the [tokenURI] points to an external URL, which can be modified by the smart contract owner at any time. In its turn, each XYXYX [tokenURI] points to an immutable Base64 string inscribed directly on the Ethereum blockchain.

3. XYHASH
XYXYX introduces a built-in hash function called XYHASH, which provides uniqueness for each NFT. XYHASH, instead of using numbers and characters to create an encoded hash, employs Hex colors as hashed output. Simple and robust, the input that generates each XYHASH is the [tokenId] of each XYXYX. For each combination of numbers that represents a [tokenId], a distinct combination of two Hex colors is generated by the smart contract.

3.2. Uniqueness
Outputs generated by XYHASH are always unique for each XYXYX. This means that no two NFTs minted by the smart contract will be ever the same.
XYHASH leverages the ERC-404's non-rollup of token IDs feature by employing each [tokenId] as input to generate a one-off hashed output.

4. Tokenomics
Xyxyx has a total supply of 128, of which 90% is pooled via an Uniswap V3 LP. 

4.1. IDO
The XYXYX tokenomics provides equal opportunity for everyone to participate in the IDO, empowering decentralization since the protocol's inception.

4.2. Liquidity
Built to last, 100% of XYXYX's LP liquidity is locked until 2224 (200 years).

4.3. Allocation
- 90% to LP [115 units]
- 5.5% to Team [7 units]
- 4.5% to Treasury [6 units]

5. Conclusion 
We have proposed a decentralized inscription protocol on Ethereum that runs fully on-chain. As a result, we introduce a proof of concept of a fully blockchain-based iteration of the ERC-404. We explore, on one hand, supply scarcity, fractionalization, and decimals as core fundamentals and, on the other hand, the principles of on-chain NFTs: long-standing and zero dependencies of off-chain resources.