Venice Finance
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Venice Finance

INTRODUCING Venice Finance: Front-running resistance, privacy-preservation, and cross-chain liquidity aggregation

Venice Finance is a next-generation decentralized exchange (DEX) that uses zero-knowledge proofs to keep your transactions secret and maximize your trading profits. By giving you control of your data and protecting your privacy, Venice prevents miners from arbitrarily changing your transactions inside a block to benefit themselves.

Venice Finance has launched on the Findora blockchain and plans to add a “programmable privacy” function early in 2022. This will allow users to hide certain transaction data, like the type of asset and amounts being swapped, so they aren’t visible on the blockchain but still available to auditors if the regulations of a certain country require it. This will give users from more countries access to a crypto DEX while preventing attacks from front-runners and market manipulators.

Venice uses advanced cryptography algorithms (like Bulletproofs and Turbo-PLONKS) to protect users from malicious exploits like miner extractable value attacks. Miner extractable value (or MEV) is a massive problem for public blockchains. It has cost users on Ethereum alone over $761 million in two years, but by breaking the link between sender and receiver, Venice goes a long way toward solving that problem.

Venice also provides lightning-fast trades, minimal slippage, and maximum liquidity efficiency. Uniswap’s market-making algorithm is implemented in V0 with future upgrades planned.

Venice is committed to the ideals of permissionless access, privacy protection, and auditable transparency, all indispensable components for a future where anyone in the world can access financial services without fear of identity breach or dishonest blockchain manipulation.

ETHEREUM is a dark forest

Because of MEV, Ethereum has become such an adversarial environment that it has been compared to a “dark forest,” a place beset with dangers for any liquidity venturing through. Hackers and miners use complicated algorithms to steal liquidity before it is finalized, and government regulations are tightening, chasing users from DEXes to CEXes with KYC processes. Here are a few challenges that Ethereum currently faces:

  • Since January 2020, cumulative miner extractable value has reached a total of $761 Million on Ethereum alone. MEV is a measure of the profit that miners can make through their ability to arbitrarily include, exclude, and re-order transactions within the blocks they produce, and usually takes the form of front-running attacks on decentralized exchanges. MEV is becoming a billion-dollar problem, and also costs millions in lost gas fees.
  • The U.S. Infrastructure Bill’s crypto provision implies expanding the tax code’s definition of “broker” to capture non-custodial actors, including the $53 Billion DEX markets, forcing them all to KYC users.
  • Sophisticated tools to track wallet movements in a more granular and organized fashion, such as Nansen, are emerging, which diminishes a trader’s profitability and efficiency by having their trading strategies exposed.

Above are only some examples of the challenges DEXes face when they deprioritize privacy while using a public blockchain. Venice is able to protect its users from such malicious exploits (including front-running attacks/GPA-style MEV) by veiling transaction linkability, identity traceability, and so on.

PRIVACY AT THE CORE & UNDER THE HOOD

Onion Transfer

Venice protects transaction data by allowing users to conduct transactions inside of its private walls before being reflected on the blockchain. Here are the basic steps:

  1. Users decontaminate assets of traceable data when they transfer those assets to Venice
  2. With a new, secret identity inside of Venice, users can conduct the swaps and trades they want
  3. Once finished, users transfer their new assets to the desired wallet.

How does Venice do this?

Venice’s beta implementation supports Onion Transfer, utilizing cryptography algorithms like atomic swap and anonymous transfer, to create a zero-knowledge version of any asset supported in the Venice ecosystem. This removes account traceability and introduces fundamental privacy protection.

Onion Transfer enables a “decontamination” process that helps users establish privacy-preserving on-chain identities by breaking the on-chain link between sources and destination addresses. It automates the transfer of user assets from a traceable account, linked to an identity KYC’ed on CEX, to an untraceable address inside of Venice.

Diagram of the decontamination process

Diagram of the decontamination process

Users can migrate their assets from “contaminated” accounts on the many supported public ecosystems — like Ethereum and Binance Smart Chain — to privately trade them inside Venice.

Front-running Resistance

Version 2 will give users protections against front-running, a practice in which a miner or hacker can identify a trade before it is finalized and input their own data or wallet address. This essentially allows them to jump ahead of the originator of the trade and take the price the trader wanted.

V2 will leverage advanced forms of zero-knowledge proofs, like Bulletproofs, to mask transaction data. It will also be EVM compatible so that, by using pre-compiled smart contracts, the asset type and asset amounts of a transaction can be hidden even while the transaction itself remains public and verifiable.

Because the asset type and amount are masked, hackers and miners won’t have access to the data necessary to jump ahead of a user before their transaction is complete. This creates an elegant mechanism to prevent front-running while maintaining a completely decentralized system and open ledger.

Using Bulletproofs to prevent front-running

Using Bulletproofs to prevent front-running

Full-Anonymity Privacy

Onion Transfers and front-running resistance will provide a full set of privacy solutions for transaction data, but version 3 will aim to also protect personal identity and geographical data, thus providing “triple masking.”

The goal of triple masking is to bring about a Privacy Finance, or “PriFi” revolution to DeFi. By creating frictionless user interfaces and EVM-compatible smart contracts, Venice hopes to encourage mass adoption of PriFi, protecting all user data and finally giving crypto users true ownership and control of their identity.

More about triple-masking:

  • Triple masking is achieved by an efficient implementation of Turbo-PLONKs and Bulletproofs, to be deployed on the UTXO ledger first and then exported to the EVM ledger through pre-compiled contracts.
  • This feature enables the sender to provide zero-knowledge proofs of a transaction’s input, which is verifiable by the ledger without revealing details of the transaction.
  • The network in this case would be secured through a multi-party computation (MPC).
Cryptographic Methods in Triple Masking

Cryptographic Methods in Triple Masking

MultiChain Vision

Venice allows users to frictionlessly and trustlessly move assets between different blockchains without revealing user data, offering programmable privacy for liquidity transfers across all blockchains.

Beginning with Binance Smart Chain and Ethereum, Venice seeks to eventually integrate all major blockchain ecosystems, enabling users to transfer funds from any chain to Venice so they can privately conduct their transactions, whether to earn higher yields or trade. In Venice, users will enjoy transaction speeds that are an order of magnitude faster than Ethereum at a fraction of the gas fees.

Venice aims to be a chain-agnostic “Privacy-centric Liquidity Hub,” a settlement layer introducing privacy to assets within any ecosystem, as the foundation of a future of decentralized, private finance.

This means Venice will provide a place that enhances the functionality of current tokens and chains. For example:

  • Although Zcash and Monero are private, their anonymous natures prevent yield farming. However, once transferred to Venice, those tokens would have access to Venice’s programmable privacy which is more flexible and smart-contract compatible. This means that, in Venice, Monero and Zcash could be used for yield farming, helping to unlock more liquidity.
  • Any liquidity on EVM compatible protocols, like Polygon, would have access to cheap transactions, fast finality, and privacy protections.
  • Blockchains compatible with Venice would have access to privacy-preserving cross-chain swaps e.g. Cosmos <> XRP.

COMING NEXT: VENICE PRODUCT ROADMAP

Built on the principles of usability and privacy, Venice provides a foundation for the open and accessible financial system of the future.

V0 2022 Q1

  • Minimum viable product launch on testnet with Onion Transfer utilizing zero-knowledge synthetic assets supported by atomic swaps and confidential transfers
  • Bridge Integration to Ethereum and Binance Smart Chain

V2

  • V1 Mainnet launch
  • Bridge integration to Bitcoin and Arbitrum, deployment on Ethereum and BSC
  • Governance & VENI community DAO w/ $10 million initial liquidity support

V3

  • V2 launch with front-running resistance utilizing Bulletproofs
  • Bridge integration to Polygon, Terra, and Avalanche, deployment on Avalanche, Polygon, and Arbitrum
  • Introduce limit order functionality to support customizable liquidity positions

V4

  • V3 launch with full anonymity utilizing Turbo-PLONK and Multi-Party Computation
  • Oracle integration
  • Improved market-making algorithm to support single-sided liquidity provision, staking rewards auto compounding, and stablecoin swap support

V5

  • V4 launch with customized private money market supporting leveraged lending and NFT collateralization
  • Introduce launchpad for new project incubation

*As a decentralized ecosystem, any further roadmap will be determined by Venice’s community. Venice welcomes other teams to innovate on top of the existing product, creating a thriving ecosystem and network effect. Grants and bounties will be given to contributors who create new successful features.

About Venice Finance

Venice is building the First Front-running Resistant, Privacy-preserving AMM DEX in the World. Venice is a next-generation, Zero-Knowledge powered decentralized exchange, primarily focused on privacy preservation, front-running resistance, and cross-chain liquidity aggregation.

Read more about Venice Finance here:

Website | Twitter | Telegram Chat | Telegram Announcements | Discord | GitHub | Medium

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