How DeFi Works on Aztec

Transcript

[Music] there's kind of the the simple answer which is actually not DeFi on Aztec. It's kind of bringing Aztec to the rest of DeFi. If you look at kind of the Ethereum ecosystem and the layer 2 ecosystem, there's a lot of DeFi already. It's just public. And so, you know, people use it to speculate, but they don't really use it for real world assets. And so, what Aztec can do is let you access that DeFi privately. And so, that's kind of existing DeFi that we kind of saw in DeFi summer. It's still like a great like product that you're

bringing privacy to like the whole of the Ethereum ecosystem. That's not really DeFi on Aztec. It's more like bringing Aztec to DeFi. The more exciting thing is like longer term like imagining what DeFi you would build if you had privacy as a core primitive. And so there you can build things like dark pools or trade different types of assets that don't exist on on other chains. Yeah, I guess two two ways of doing it. Aztec is able to increase compliance in in DeFi or any transaction because you can have sensitive data inside that transaction. So you can have something like your passport or uh national ID or kind of bank information can accompany any transaction and you can prove facts about that. If you compare that to like

a public um blockchain like Ethereum, you're not going to want to broadcast that information for the whole world to see. And so the pattern we're seeing developers use on Aztec is they take their ID, they prove it's valid, and then they can prove they're um compliant as as a result. That's kind of the the most commonly used way. We also have tools like viewing keys, encryption for third parties where you can share kind of like that data with another party accountant or or tax person to kind of make sure that they can see what's happening but it's still not public for the rest of the world. We had a product two three years ago called Aztec connect which is kind of a proof of concept of a lot of the technology we we now have on on Aztec and what it did was enable you

to bring privacy to existing DeFi. That DeFi was on layer 1 cuz lay 2 didn't really exist at this time. Uh and so you could have funds on Aztec and you could bridge them privately to unis swap or arve on layer 1 and people really liked it. Um we had kind of 200,000 users via zk money and we started thinking as we were redesigning Aztec how could we do that across the entire Ethereum ecosystem. Now there's layer 2. One of the main issues with kind of the Azda connect product is you had to wait for lots of users to want to do the same transaction because we batch transactions together to reduce costs.

Now we have layer twos um you can do the same flow but you can do it as an individual. So I can take funds on Aztec, bridge them to arbitrum as an example and put them into Ave, but I don't have to wait for anyone else because it's a layer 2. So the transaction is really cheap and as a result I get a form of privacy on arbitum. Um you can't see that it's me doing this and so I can kind of hide my portfolio. I can hide who I am. Um but still get to access public defy on all these L2s. We think this is a good strategy because there's 50 million uh sorry $50 billion dollars of kind of assets across the whole like Ethereum ecosystem in DeFi and we can just give privacy to it which should help uh grow

adoption. Shared private state will massively change the landscape of what's possible with DeFi on Aztec. Uh if you look at kind of public blockchains, a lot of DeFi runs on um shared public state. So unis swap is the best example. you have kind of the ratio of two public pools and that's used to compute a price. If you have kind of shared private state, you can now take whole DeFi protocols and make them completely private. The kind of best you can do uh without shared private state is take parts of them and make them private. You can't make the whole protocol uh completely private. And so there's lots of teams in the ecosystem trying to solve the same problem. You can do this with trusted execution environments. So you can do it with some form of like MPC

and you can do it with uh co-arks as well. And so there's a few different teams in the ecosystem all trying to do this in different ways. Um I think some of them are at proof of concept stage but we're not quite there yet. Uh I think over the next 6 to 12 months we'll be there and the design space should explode.