Simple Summary:
- Hashflow Foundation’s R&D department continues to invest resources to find ways to better architect the next generation of exchanges and we would like to present our most recent findings. A key finding from this research is that the best trade-off between performance and safety is leveraging zero-knowledge (ZK) technology to build application roll-ups (exchanges).
- Currently, the exchange landscape offers products that are either:
- Scalable and performant, but not transparent
- Transparent, but not scalable and performant
- This proposal suggests an addition to Hashflow’s suite of products to include a ZK Settlement layer to eliminate the need for exchanges to choose between performance and security:
- This ZK Settlement layer will allow any exchange (new or existing) to seamlessly integrate ZK verification while leveraging a public data availability (DA) layer.
- This feature can be added by any exchange application without altering their existing infrastructure, ensuring that performance and user experience remain uncompromised.
- By utilizing Hashflow, exchanges can enhance their security and privacy features with minimal disruption, providing their users with a robust and efficient trading environment.
- The ZK layer will be a product addition and is not intended to replace any existing Hashflow products or services.
Abstract:
- Hashflow should strive to create products and features to support its users and the market at large. Since its inception in 2021, Hashflow has processed over $20B in total volume. Hashflow has also demonstrated its technical prowess by being one of the first RFQ DEXs, offering the first bridgeless cross-chain swaps in DeFi, as well as the first native swap integration between EVM chains and Solana.
- While pioneering the RFQ exchange model, Hashflow’s ethos has always been to protect user funds (it is one of the first MEV-resistant protocols). However, the current DeFi stack has been forced to make abrupt trade-offs between security and performance.
- For background, recent statistics indicate that the vast majority of trading volume on Hashflow is non-native (i.e. does not originate from users trading directly on Hashflow’s UI). Over the past year, non-native volume comprised nearly 94% of Hashflow’s total volume. This reflects the team’s focus on a highly competitive B2B product to drive volume, revenue, and growth.
- In line with this B2B strategy, the ZK settlement layer represents another strong opportunity to generate value for Hashflow token holders and exchange users more broadly.
- Exchanges currently in the market are either low throughput or do not offer solvency guarantees.
- Hashflow should ensure that users need not be subjected to this trade-off between security and performance.
- Hashflow’s ZK settlement layer would eliminate the need for this compromise, allowing DeFi users to onboard both safely and efficiently.
- Additionally, this can create additional token utilities for HFT, including (but not limited to):
- Hashflow could receive fees from ZK layer users that can be:
- Used for HFT buybacks/burn
- Distributed to HFT stakers
- HFT could be staked by ZK layer users to:
- Reduce proof verification costs
- Reduce rev share %
- Hashflow could receive fees from ZK layer users that can be:
Proposal:
- If approved, Hashflow will move forward with the development of the ZK layer, and will signal this publicly.
- If approved, Hashflow will spend requisite internal resources to promote and market the product, although not to the exclusion of existing products. Marketing efforts, however, may focus more squarely on the ZK layer as opposed to retail marketing for DEX/Aggregator products (as the overwhelming majority of volume and fees are derived from non-native sources).
Benefits (Pros):
- Offer a new vertical to expand Hashflow’s footprint as a premier B2B product suite
- Generate more revenue, add more token utility for HFT, and strengthen the HFT ecosystem
Downside (Cons):
- Implementation and marketing costs incurred by Hashflow Foundation
Voting:
- Yes to support the launch of Hashflow’s ZK layer
- No to continue only with Hashflow’s existing products
