Private Cross-chain Swaps for ZEC

[incognick]

Hey forum,

This is Nick from Incognito.

A few weeks ago I posted the very first iteration of the design for Anonymous swaps we were building for ZEC. Since posting that we’ve received valuable users’ feedback from you that helped us identify room for improvements. We’ve been working hard to bring the best for the Zcash community and today I’d like to share with you the fixes we’ve made on our solution.

The MVP we present to you.

The MVP is an Inter-blockchain Bridge connected to Zcash blockchain. The Bridge enables access to Private Cross-chain swaps for ZEC<>BTC, ZEC<>ETH, ZEC<>BNB, and other coins. All the swaps are maintained on the Incognito pDEX (Private Decentralized Exchange)using AMM algorithms.

What’s the tech behind the Private Cross-chian swaps?

To store, send, receive, and trade assets privately we use Ring Signature, Confidential Transactions, Stealth addresses.

What’s been improved since the last appearance before you?

1. We enabled anonymous cross-chain swaps for ZEC;
2. Community added more than $50,000 worth of liquidity for the ZEC-PRV trading pair on the pDEX;
3. We fund newly created wallets with a minimum amount of fee for the initial trade;

Why do we care to post here?

1. We eager to collaborate with the privacy-oriented Zcash community;
2. We feel support and interest from the Zcash community to acomplish cross-chain swaps and trades anonymously (ZEC numbers are gradually rising on the pDEX);
3. We believe that there’s always room for improvements and we want to do our best to make your experience with Incognito smoother and better.

It’s your turn

Could you try our pDEX out and answer a couple of simple questions below, please:

1. How comfortable are you using our app for trading on the go?
2. Do you think the Anonymous Cross-chain Swaps solution by Incognito covers your demand for private trades and exchange of ZEC? If not, what do you think should be implemented more?

Notice
As at today Anonymous Cross-chain Swaps are available on the Incognito app. Try it out for iOS and Android. Web versions of the wallet and pDEX are coming this quarter.

[tokidoki]

Great to see some improvement being made. However, a few notes:

• This is definitely a different expectation that I had when you say Cross-chain Swap. Effectively, I still need to deposit some tokens → trade → withdraw. I would prefer an immediate swap option available where I don’t have to download an app, create a wallet, deposit tokens, trade it and then withdraw. I think sideshift would be the better example for a similar product. Hopefully your web app will have that option.
• The deposit → trade → withdraw option is fine for those who wants to do limit trade. I don’t think you provide that option at the moment. 0xMesh project could be an example to follow here. They also integrate it into their matcha.xyz dex.
• I just check the rate to swap ETH to ZEC and there is unfortunately more than 10% spread. I would get 5% less of ZEC when I trade on pDEX compared to similar solutions. Maybe just a market discovery problem but this certainly doesn’t help the adoption.

Good luck with the project.

Cheers.

[incognick]

Hey @tokidoki, I’m glad you’re keeping an eye on us, your detailed, full of examples inputs are the part of my presence here

• This is definitely a different expectation that I had when you say Cross-chain Swap. Effectively, I still need to deposit some tokens → trade → withdraw. I would prefer an immediate swap option available where I don’t have to download an app, create a wallet, deposit tokens, trade it and then withdraw. I think sideshift would be the better example for a similar product. Hopefully your web app will have that option.

So, probably I was not clear when I was saying Private Cross-chain swaps in the name of the topic. Then, I emphasise on the word ‘Private’ now. This is how we’re different from any service providing a swap function. Using Incognito, as you mentioned the way: deposit some tokens → trade→ withdraw, you get access to the private cross-chain exchange and both of assets are private (not traceable, not visible to public, hidden). So, there’s our core competitive advantage before the sideshift.ai and similarities - we give privacy during swaps that others can’t guarantee as the public chains operators.

Also, the ideal way if you don’t want to withdraw (exit Incognito mode for ZEC) and stay private forever. This is what we’re building as a tech and mindset.

As we’re a L2 solution, there’s no other way to go private with Incognito, if not to use our apps or web extensions (coming this quarter). Actually, the same situation for the ETH based DeFi projects. When it comes to non-ETH assets they issue wrapped (mapped) value on ERC-20 chain and connects to those service through Metamask (as an example).

• The deposit → trade → withdraw option is fine for those who wants to do limit trade. I don’t think you provide that option at the moment. 0xMesh project could be an example to follow here. They also integrate it into their matcha.xyz dex.

Can’t add anything than Incognito has it’s own autonomous, Automated Market Making Private DEX (AMM pDEX). This DEX is not affiliated to ETH DeFi infrastructure that 0x.org represents as one of the players. Our pDEX is beyond ETH. It’s privacy oriented as the whole Incognito. We build Private DeFi solutions for assets as ZEC, which are suffering by ETH based assets limitations.

To attract liquidity more we designed Provide - a 1-sided liquidity provision option that enables yield farming. The solution gives very first and I’d say cut understanding on how Liquidity pools work for a brand new user to DeFi. As at today our stats for ZEC looks next: ZEC pool total current balance is 281.0631 pZEC. Thanks for the Zcash community who has already helped us build trust and legitimacy for pDEX and Provide.

[tokidoki]

Thanks for your thoughtful response @incognick

The dynamic you mention is really interesting considering you want users to store their crypto on your chain. So, you have incentives as a network for users to not actually swap their crypto (going from on L1 to another L1). This is also interesting considering that at some level the deposited crypto are in the custody of the dev team (from the latest info that I have regarding this). The custody risk is greatly reduced when users actually go from one L1 to another L1.

If the assumption of users going from one L1 to another L1 then no matter what scheme you have during trade, the linkability will always be present. Not considering that any decoy-based privacy measure will not stand the test of time.

@incognick

you don’t want to withdraw (exit Incognito mode for ZEC) and stay private forever

This is also categorically false. The most private (and secure) place to store your crypto is in Zcash shielded pool (which currently only supports ZEC).

Cheers.

[incognick]

Our convo becomes a friends talk sharing experience and points of view

Back to the statements. I’m not sure how did you get to the migration from one L1 to another. This is a mislead at that point. The incentives I meant as a part of liquidity provision (the Provide option) is also designed for the wrapped assets (assets issued on Incognito while the lock for native coins).

The custody of native assets provided by the team is a temporary solution while we build the Portal - trustless bridges.

I won’t even say a word or argue against ZEC Shielding Pool, because I totally agree w/ you on that. But my 2 cents again swaps - we allow swap ZEC to BTC privately. Both wrapped coins are untraceable and that’s why even if you go public after the swap there won’t be no evidence to link a personality and assets together.

[tokidoki]

@incognick

the migration from one L1 to another

This is the expectation that I have when you use the word “swap”. I think what you mean by swap is exchanging wrapped assets on pDex.

@incognick

if you go public after the swap there won’t be no evidence to link a personality and assets together

I think this statement will need evidence to back it up. Assuming we transact from BTC to ETH on pDex which is available on your chain. There will be a way to trace your (pDex) deposit account on BTC chain and your (pDex) withdrawal account on ETH (maybe not immediately but definitely traceable). This is what I mean when I say

@tokidoki

the linkability will always be present.

Of course the dynamic above will be different when users just store their crypto on your chain or if we include shielded Zcash deposit or withdrawal from pDex. There will be no way to trace deposit or withdrawal z-address on Zcash chain.

[incognick]

I can’t disagree

@tokidoki

Of course the dynamic above will be different when users just store their crypto on your chain or if we include shielded Zcash deposit or withdrawal from pDex. There will be no way to trace deposit or withdrawal z-address on Zcash chain.

My guess, you’ve described the perfect combination of privacy provided by L1 and L2.