Yellow Network & Nitrolite Best Practices

Guidelines for building high-performance decentralized applications using Yellow Network's state channel infrastructure and the Nitrolite SDK (ERC-7824).

Quick Start

npm install @erc7824/nitrolite

ClearNode WebSocket URL: wss://clearnet.yellow.com/ws

Core Concepts

What is Yellow Network?

Yellow Network is a decentralized clearing and settlement network that connects brokers, exchanges, and applications across multiple blockchains using state channels. Key features:

• Chain Abstraction: Unified balance across multiple chains
• Off-chain Processing: Up to 100,000 transactions per second
• Non-custodial: User funds are governed by smart contracts
• ERC-7824 Protocol: Challenge-dispute mechanism for fund recovery

Architecture

┌─────────────────┐     ┌─────────────────┐
│   Your App      │────▶│   ClearNode     │
│  (Nitrolite SDK)│◀────│   (Broker)      │
└─────────────────┘     └─────────────────┘
        │                       │
        └───────────┬───────────┘
                    ▼
            ┌───────────────┐
            │  Blockchain   │
            │  (Settlement) │
            └───────────────┘

Rules by Category

For detailed rules, see the rules/ directory:

• 01-connection.md - ClearNode connection patterns (Critical)
• 02-authentication.md - Authentication flow (Critical)
• 03-app-sessions.md - Application session management (High)
• 04-state-management.md - State and balance management (High)
• 05-security.md - Security best practices (Critical)
• 06-error-handling.md - Error handling patterns (Medium)

Essential Patterns

1. ClearNode Connection

Always implement reconnection logic with exponential backoff:

class ClearNodeConnection {
  constructor(url) {
    this.url = url;
    this.reconnectAttempts = 0;
    this.maxReconnectAttempts = 5;
    this.reconnectInterval = 3000;
  }

  connect() {
    this.ws = new WebSocket(this.url);
    this.ws.onopen = () => {
      this.reconnectAttempts = 0;
      // Proceed with authentication
    };
    this.ws.onclose = () => this.attemptReconnect();
  }

  attemptReconnect() {
    if (this.reconnectAttempts >= this.maxReconnectAttempts) return;
    this.reconnectAttempts++;
    const delay = this.reconnectInterval * Math.pow(2, this.reconnectAttempts - 1);
    setTimeout(() => this.connect(), delay);
  }
}

2. Authentication Flow

Use EIP-712 structured data signatures:

import {
  createAuthRequestMessage,
  createAuthVerifyMessage,
  createEIP712AuthMessageSigner,
  parseRPCResponse,
  RPCMethod,
} from '@erc7824/nitrolite';

// 1. Send auth_request
const authRequest = await createAuthRequestMessage({
  address: walletAddress,
  session_key: signerAddress,
  application: 'YourAppDomain',
  expires_at: (Math.floor(Date.now() / 1000) + 3600).toString(),
  scope: 'console',
  allowances: [],
});

// 2. Handle auth_challenge and send auth_verify
// 3. Store JWT token for reconnection

3. Message Signing

Sign plain JSON payloads (NOT EIP-191):

const messageSigner = async (payload) => {
  const wallet = new ethers.Wallet(privateKey);
  const messageBytes = ethers.utils.arrayify(
    ethers.utils.id(JSON.stringify(payload))
  );
  const flatSignature = await wallet._signingKey().signDigest(messageBytes);
  return ethers.utils.joinSignature(flatSignature);
};

4. Application Sessions

import { createAppSessionMessage } from '@erc7824/nitrolite';

const appDefinition = {
  protocol: 'nitroliterpc',
  participants: [participantA, participantB],
  weights: [100, 0],
  quorum: 100,
  challenge: 0,
  nonce: Date.now(),
};

const allocations = [
  { participant: participantA, asset: 'usdc', amount: '1000000' },
  { participant: participantB, asset: 'usdc', amount: '0' },
];

const message = await createAppSessionMessage(signer, [{
  definition: appDefinition,
  allocations,
}]);

Critical Rules

DO

1. Always use wss:// - Never use unencrypted WebSocket connections
2. Implement timeouts - Add timeouts to all async operations (10-30 seconds)
3. Store JWT tokens - Reuse tokens for reconnection instead of re-authenticating
4. Clean up listeners - Remove message event listeners to prevent memory leaks
5. Verify signatures - Always verify received message signatures
6. Use session keys - Generate temporary keys for signing, not main wallet keys

DON'T

1. Don't expose private keys - Never hardcode or log private keys
2. Don't skip error handling - Always handle WebSocket errors and auth failures
3. Don't ignore timeouts - Implement proper timeout handling for all operations
4. Don't use EIP-191 prefix - Sign plain JSON, not prefixed messages
5. Don't forget to close sessions - Always properly close app sessions when done

SDK Components

Component	Purpose
NitroliteRPC	Message construction and signing
NitroliteClient	High-level channel management
createAuthRequestMessage	Auth request creation
createAuthVerifyMessage	Challenge response
createAppSessionMessage	App session creation
createCloseAppSessionMessage	Session closure
createGetLedgerBalancesMessage	Balance queries
parseRPCResponse	Response parsing

Additional Resources

• Full LLM Documentation
• Yellow Network Docs
• ERC-7824 Quick Start
• Nitrolite GitHub