Private Deals

Problem Statement

(incomplete) In this project, we explored a way to create an 1inch Aqua-compatible privacy pool with institutional liquidity providers' needs in mind.The key aspect of institutional liquidity providers' problem is the particular attention the movement of their funds garners, and the disruption to the markets that their participation or withdrawal from markets can cause.

Solution

We attempted to build a Ethereum L1-based privacy pool controlled by a set of Aztec private accounts.What worked:1inch SwapVM to create privacy pool-compatible strategies; particularly exploring theextructionopcode, but ultimately settling on using maker-defined callbacks to attribute balance changes to specific members of the pool.1inch Aqua to enable the pool to open channels to SwapVM strategies.Aztec Private Execution Environment (PXE) to privately store balances of the members of the pool, as well as to issue produce private intents to modify strategy choices by the members of the pool.Aztec L1↔L2 messaging, which enabled communication between the L1-based pool and the L2 private state.What didn't work:We were ultimately unable to find a solution to the problem of over-spending by a malicious member of the pool. That is, the pool needs to (1) allow a single member to provide more total liquidity across multiple strategies than on their balance, (2) prevent any single member's strategy choices from adversely affecting other members of the pool. We explored limiting total allocations by each member of the pool to their own balance; however, we decided that it went against one of the core propositions of 1inch Aqua — to enable one account to provide liquidity across multiple strategies using the same underlying tokens.