When it comes to sending and receiving value in an autonomous, permissionless fashion, one of the few catches with DeFi today is that all of it is broadcasted to a public network like Ethereum – meaning transactions are viewable by anyone who wishes to see.
In most instances, traders wishing to leverage privacy are not interested in converting assets to a new protocol like ZCash for zero knowledge (zK) transactions.
Thankfully, a new protocol called Aztec is now live on mainnet with privacy wrapping capabilities.
Aztec protocol leverages zkTokens – native tokens with a privacy zkSnarks wrapper – to allow Ethereum-based assets to be quickly converted into autonomous coins.
Following the launch, Aztec seeded the zkToken pool by depositing 10,000 DAI which was converted to 10,000 zkDai – allow in an anonymous fashion.
After our network launch last Friday, today we put $10k of zkDAI into the Aztec network: https://t.co/YmdoIIdiTr
— Aztec (@aztecprotocol) February 5, 2020
So, what makes Aztec unique from other privacy tools like Tornado Cash?
Why Aztec?
Aztec utilizes two main components:
- Aztec Crypto Engine (ACE) — a smart contract validator on Ethereum mainnet, checking the correctness of every private transaction
- Privacy SDK — a user-friendly tool to abstract complexity for easy dapp integration
Building off the privacy SDK, it’s refreshing to see a team provide tooling for other developers to easily integrate Aztec zK wrapper directly into their front end.
We’ve seen similar use-cases with DEXs like Uniswap, in which projects will bake a Uniswap front-end directly into a product to reduce friction for the end-user.
Now that we have tooling for easy privacy wrappers, it’s entirely possible for someone to swap between any two assets and send those assets to any address in an entirely anonymous fashion – all without having to leave the web3 site.
Why Should I Care?
Seeing as we’re in a relatively nascent industry, DeFi has been largely able to thrive without any government intervention or malicious observers. We’ve yet to see any major blockers that prevent the vast majority of users from using DeFi in a relatively seamless fashion.
However, as the sector continues to grow, there will inevitably be limitations on certain protocol interactions to and from users in restricted territories. Without diving too deep into why privacy is so important, it’s worth noting that there will come a time when third parties will be eager to leverage Ethereum transaction data to their advantage. As Aztec states in their original post:
“Our privacy network acts as a shield between you and the rest of the world — dapps, counterparties, and all other network observers”
This means that as the industry evolves, it’s likely that new standards may come into place to give consumers slightly more peace of mind that their entire portfolio is not public to anyone who wishes to see it.
In the meantime, tools like Aztec play a vital role in further expanding on Ethereum’s potential as a leading smart contracting protocol.
Keep up with them via their official Twitter for more news on all things privacy!
Cooper is focused on building compelling blockchain products. He currently works as the managing director at Fitzner Blockchain Consulting and is a contributor to DAOs like MetaCartel and Moloch. He is an active member of the Ethereum community and has a strong interest in for-profit businesses such as The Block Crypto and Messari.
