Introduction
Aztec is dedicated to bringing programmable privacy to Web3. The team invented PLONK — the paradigm-defining universal zk-SNARK — which is now used by leading zero-knowledge scaling projects. Over 45,000 users have deposited 15,500+ ETH and $11M DAI through zk.money, a private transfer protocol built on Aztec, since launching in 2021.
The team is launching Aztec Connect, which will offer earning, lending, borrowing, and swapping with gas savings and privacy by default via Aztec’s zkrollup and bridge contracts. With Aztec Connect, users can deposit into and borrow from Compound with 95%+ gas savings compared to mainnet and benefit from privacy by default.
Proposal
Many users have been priced out of using Compound and are regularly asking for an L2 deployment. However, Compound is focused on building Gateway to offer cross-chain interest rates. Because Aztec interacts with existing L1 smart contracts, it can provide users with a scalability solution — without needing to redeploy any smart contracts or rebuild liquidity pools.
How it works: Users will deposit ERC20 into Aztec and initiate the Compound deposit or borrow request via zk.money. Aztec’s zkrollup will batch transactions across users and interact with Compound’s L1 contract via a bridge contract. Users will receive a cToken on Aztec - or whichever assets they borrowed, which can be used across other DeFi protocols on Aztec.
Aztec wants to make it seamless for users to deposit and borrow assets with Compound. Aztec is requesting a $100,000 grant to subsidize Compound deposits and loans. This subsidy will simulate the gas savings that will benefit users when the rollup is full and the gas cost associated with the rollup — kickstarting the network effects for this integration.
Aztec can drive substantial adoption and deliver an excellent ROI for Compound. With a $100,000 grant, there will be minimal transaction costs for up to 40,000 transactions on Aztec. The scenarios below show outcomes from 7-1000x ROI, depending on gas savings provided and user adoption. Importantly, the subsidy will only be spent as users adopt the network.
A successful outcome of this grant would be:
- Reducing transaction fees by 95%+ compared to mainnet
- Increasing Compound’s user base by 10% (30,000 users over the next 12 months)
- Growing to >100 transactions per day so subsidy can be phased out
- Enabling institutions to deposit/borrow from Compound privately
Timeline and milestones
In Q4 2021, Aztec collaborated with Adam Bavosa and Nick Martitsch on the spec for the Compound integration and launched its grants program to encourage community development of bridge contracts. Joe (co-founder) and Lisa (head of business development) presented on the Compound community call and met allthecolors, who built the Compound deposit bridge.
In Q1 2022, the bridge will be completed and Solidified will audit the bridge. Once the contract is audited, Aztec will integrate into zk.money on mainnet. The initial functionality will be depositing DAI.
In Q2, the borrowing contract will be completed, audited, and launched on zk.money. Aztec will also expand the scope of the grants program to encourage development of alternative interfaces with the Aztec SDK. In Q3, the team will focus on integrations with custodians and platforms focused on an institutional user base.
We propose earmarking a $100,000 budget with $50,000 distributed upfront and $50,000 released three months after launch. Aztec would like to collaborate to ensure the grant is optimally allocated across different assets and transaction types, promote the integration to users, and integrate Aztec into interfaces that provide significant volume to Compound.
Before the second tranche is released, Aztec will provide the Compound community with updates on user adoption, network performance, and subsidy spent. If the community is not satisfied with the metrics from the first three months after launch, there may be another governance vote deciding not to distribute the second tranche of funding.
Conclusion
Aztec aligns well with Compound’s current focus on strengthening its protocol on mainnet and building for new use cases, such as onboarding institutions to DeFi. Today, Compound users will benefit from the scalability benefits provided by Aztec’s rollup. Over time, we envision Aztec being a critical component of Compound’s institutional offering. This partnership will accelerate the user adoption and enable privacy as a new capability for the protocol.
We look forward to hearing your thoughts, feedback and suggestions in this forum.
Relevant Links
https://twitter.com/aztecnetwork
Team
Zac Williamson (cofounder, CEO) - https://www.linkedin.com/in/zachary-williamson-b02b0192/
Joe Andrews (cofounder, head of product) - https://www.linkedin.com/in/joe-andrews-2783918a/
Ariel Gabizon (chief scientist) - https://www.linkedin.com/in/ariel-gabizon-6b423a8/
Lisa Cuesta (head of BD) - https://www.linkedin.com/in/lisacuesta/
Jon Wu (head of growth) - https://www.linkedin.com/in/jonathanjwu/