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A Hybrid Dark Pool and Private DeFi Gateway on RISEChain (1)

RFP (RISEChain Foundation Proposal) - 00X

  • Darkpool Gateway Root privacy layer provider for any kind of defi with Adaptor based architecture.
    • Hence these Gateway actions indeed need high Frequency tx execution which can be leveraged from Rise Chain’s throughput

Abstract​

RISE-Xythum Darkpool is a novel decentralized application for the RISEChain ecosystem that combines a high-performance, privacy-preserving dark pool with a gateway for confidential DeFi protocol interactions. The platform integrates zkps and smpc dark pool technology with a DeFi interaction model to provide users with strong privacy protection, minimal MEV exposure, and seamless access to RISEChain's DeFi ecosystem all while maintaining confidentiality. By leveraging RISEChain's high throughput (100k TPS), the system enables efficient ZKP verification, MPC coordination, and responsive operations, positioning RISEChain as a leading platform for private financial transactions.

Motivation​

Current DeFi ecosystems, while innovative, suffer from several critical drawbacks:

  • Transparency & MEV: Publicly visible order books and transaction mempools lead to front-running, sandwich attacks, and other forms of MEV, eroding trader profits.
  • Pre-Trade & Post-Trade Privacy: Lack of privacy reveals trading strategies, positions, and balances, deterring institutional adoption and sophisticated traders.
  • Address Discrimination: Pseudonymous but traceable addresses allow for targeted strategies against known entities.
  • Fragmented Privacy Solutions: Existing privacy tools often act as mixers or isolated applications, lacking deep integration with the broader DeFi ecosystem for ongoing private interactions.

RISE-Xythum addresses these issues by:

  • Providing a True Dark Pool: Offering an encrypted, off-chain (or state-minimized on-chain) order book with matching via MPC and settlement via ZKPs, thus hiding orders and trade details.
  • Enabling Private DeFi Interactions: Extending the privacy umbrella beyond simple swaps. Users can interact with other RISEChain DeFi protocols (lending, yield farming, staking) from their shielded RISE-Xythum balance, obscuring their direct wallet address.
  • Leveraging RISEChain's Performance: RISEChain's 100k TPS capability is crucial for handling the computational load of ZKP verification and potentially MPC elements at scale, making a sophisticated privacy solution like this practical and user-friendly.
  • Fostering Institutional Adoption: The combination of privacy, compliance-readiness (via optional modules), and efficient execution is attractive to institutions and large-volume traders.
  • Enhancing the RISEChain Ecosystem: Providing a foundational privacy layer will attract liquidity, users, and further development to RISEChain.

Use Cases

  1. Confidential Large Block Trades: Institutions and high-net-worth individuals can execute substantial orders within the Xythum dark pool without alerting the market, preventing price slippage and front-running.
  2. Shielded Yield Aggregation: Users can deposit stablecoins into Xythum, privately swap portions for various LP tokens via the external DeFi gateway, stake these LPs in different yield farms on RISEChain, and periodically claim rewards back into their shielded Xythum balance, all without revealing their comprehensive yield strategy tied to their public RISEChain address.
  3. Private Token Vesting and Payroll Solutions: Organizations can distribute vested tokens or conduct payroll operations by sending private Xythum notes to employees or contributors, ensuring confidentiality for both the organization and the recipients.
  4. Universal MEV Mitigation: All Xythum users, regardless of trade size, benefit from significant MEV reduction due to the inherent privacy of orders and shielded interactions.
  5. Undisclosed Portfolio Rebalancing: Traders can adjust their asset allocations across various RISEChain DeFi protocols using Xythum as a private hub, without telegraphing their strategic shifts to the public.
  6. Stealth Inter-Protocol Arbitrage: Arbitrageurs can identify and act upon price discrepancies between Xythum's dark pool, other Xythum-accessible DeFi protocols, and public exchanges on RISEChain, while keeping their arbitrage algorithms and execution paths confidential.
  7. Private DAO Treasury Management: DAOs can manage and deploy their treasury funds using Xythum, making strategic investments or funding grants without premature public disclosure that could be exploited.

Specification​

  • RISE-Xythum will be a multi-component system built upon zero-knowledge cryptography (e.g., UltraPLONK with Noir circuits, or similar efficient ZKP systems optimized for RISEChain) and secure multi-party computation.

Core Concepts

Xythum employs a UTXO-like (Unspent Transaction Output) model for managing users' private balances, referred to as "notes." Each note represents a specific quantity of a particular asset owned by a user within the Xythum system.

Private Interactions with External DeFi Protocols​

Xythum allows users to interact with other DeFi protocols on RISEChain using their shielded Xythum balances, with the Xythum smart contract acting as a proxy.

This detailed flow can be adapted for various DeFi interactions like lending (depositing into a lending pool), liquidity provision, or staking.

Deposits and Withdrawals​

Rationale

  • Holistic Privacy by Design: Xythum's architecture prioritizes privacy at every stage, from note creation to complex DeFi interactions, rather than treating privacy as an add-on.
  • Leveraging ZKPs for Verifiable Secrecy: ZKPs are the cornerstone, enabling users to prove the validity of their actions (fund ownership, correct computation, adherence to protocol rules) without revealing any underlying sensitive data.
  • MPC for Private Multi-Party Logic: For operations like order matching, where inputs from multiple users must be processed jointly without premature revelation, MPC provides the necessary cryptographic guarantees.
  • UTXO-like Notes for Composability and Efficiency: The note-based system simplifies ZKP circuit design, enhances parallelism (as notes can be processed independently), and aligns well with established privacy-preserving models.
  • Decentralized Relayer Network for Liveness and Censorship Resistance: Distributing off-chain responsibilities among a staked and incentivized Relayer network enhances the system's robustness and reduces reliance on any single entity.
  • RISEChain's Unique Advantages:
    • Extreme Throughput (100k+ TPS): This is paramount. Verifying ZK-SNARKs, even efficient ones, is computationally non-trivial. RISEChain's capacity ensures that a high volume of private Xythum transactions can be processed swiftly and economically, preventing bottlenecks and maintaining a good user experience.
    • Real-Time Finality: Quick confirmation of Xythum state changes on RISEChain is crucial for responsive trading and DeFi interactions.
    • Scalable Anonymity Sets: High throughput allows Xythum to support a large number of users and transactions, which is vital for a strong anonymity set. The more activity, the better the privacy.
    • Low Transaction Costs (Expected): Affordable gas fees on RISEChain make complex ZKP-based transactions accessible.
  • Hierarchical Keys for Security and Delegation: The key derivation scheme allows users to maintain ultimate control (sk_root) while safely delegating specific, less sensitive functions (like matching via sk_match) to off-chain components or even third parties.
  • Modularity for Future-Proofing: Designing ZKP verifiers and compliance modules as distinct, potentially upgradeable components allows Xythum to adapt to new cryptographic advancements, evolving DeFi landscapes, and changing regulatory requirements.

architecture​

PRIVACY FOCUSED DEFI GATEWAY FLOW

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PRIVACY FOCSED DEX FLOW

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Future Work / Potential Enhancements

  • Private Cross-RISEChain and Inter-Chain Interactions: Extending the Xythum DeFi gateway to facilitate private interactions with protocols on other compatible blockchains, leveraging RISEChain's bridging infrastructure.
  • Advanced Private Order Types: Implementing more sophisticated order functionalities within the dark pool, such as private Time-Weighted Average Price (TWAP) or Volume-Weighted Average Price (VWAP) orders, using advanced ZKP/MPC constructions.
  • Fully Decentralized Governance (XythumDAO): Establishing a Decentralized Autonomous Organization for governing protocol upgrades, parameter adjustments (e.g., fees, staking requirements), and treasury management.
  • Client-Side ZKP Proving Optimization: Researching and integrating support for WebAssembly (WASM) optimizations, multi-threading, and potential hardware acceleration (e.g., via FPGAs/ASICs if accessible to users) for client-side ZKP generation to improve user experience.
  • Enhanced MEV Resistance Strategies: Exploring and incorporating advanced MEV protection mechanisms such as threshold encryption for transaction batching or verifiable delay functions (VDFs) for fairer transaction ordering.
  • Private Non-Fungible Token (NFT) Operations: Extending Xythum's capabilities to support the private trading, fractionalization, and shielded management of NFTs.
  • Formalized Off-Chain Communication Protocols: Standardizing secure and efficient communication protocols between users, Relayers, and MPC participants.