What is the application future for the anonymous protocol Onion Mixer?
Privacy needs in DeFi
DeFi means decentralized finance, which is also known as open finance. Besides free access, its decentralization is also reflected in the openness and transparency of the blockchain. For example, whenever you transfer ERC20 tokens or any other digital assets, you will leave traces on the blockchain. With the help of blockchain browser tools like Etherscan, anyone can check the history of all your activities on the chain.
For example, via blockchain browsers we can see how Vitalik Buterin, the founder of Ethereum, withdrew SHIBs from Uniswap step by step, then donated 10% of them to charities in India, and burned the remaining 90%. Obviously, Vitalik intends to draw a clear line with projects that issue junk tokens. However, for most users, they don’t need to attract people’s attention to their daily transactions. In some sensitive scenarios, such as lending, investment, voting and so on, users don’t want people to know their transactions, and even hope to “hide” their tracks.
Users are like in a transparent glass room. Whatever they do on the chain is subject to public scrutiny all the time. They are in urgent need to protect their privacy.
The truth is, people have never stopped their pursuit of privacy protection since the birth of blockchain. Coin mixing, ring signature, zero-knowledge proof, and anonymous transaction protocol are all evidence showing the progress and development of privacy related technologies. Among them, anonymous transaction protocol can support smart contract and is of strong flexibility and adaptability. Anonymous transactions aiming to protect user privacy would be a long-term rigid demand in the blockchain.
How to meet users’ need for privacy?
There are already some anonymous transaction protocols in the market, such as Wasabi Wallet and Tonado, which allows anonymous transactions based on coin mixing or zero-knowledge proof. However, they can only support tokens like BTC and ETH, which can’t meet users’ diversified coin mixing needs. Besides, Wasabi Wallet also has the risk caused by centralization. That is, it keeps users’ transaction data during the mixing process, and once the data is leaked out, anonymity will only be a wishful goal.
With the development of DeFi, blockchain transactions are no longer limited to assets on one or two public chains. Besides security guaranteed, a qualified protocol should also be able to achieve anonymous transactions in a decentralized way and support multiple tokens, which enables cross-chain transaction on one protocol.
The right tokenomics can always inspire users’ enthusiasm and attract them to conduct anonymous transactions through the protocol. The key factor of a protocol’s anonymity is the depth of its mixer. Therefore, the more users participate in it, the better anonymity effect it will achieve.
Onion Mixer is a decentralized protocol for cross-chain private transactions, which can support DeFi transactions on multiple heterogeneous chains. It follows CoinJoin’s “coin mixing” idea but also incorporates the zkSNARK zero-knowledge proof technology, which can break the connection between the user’s deposit address and withdrawal address, so as to realize the private transaction for all DeFi components.
Onion Mixer is a smart contract mixer. When a user with the need for coin mixing sends an encrypted asset to the smart contract, a string of zero-knowledge proof codes will be generated. The proof then functions as a transaction credential but contains no valid information of the user. When withdrawing assets from the smart contract, the user only needs to provide the corresponding zero-knowledge proof code and a new address. The smart contract will automatically transfer the asset to the new address. Since there is no connection between the two addresses, attackers cannot find any clues which ensures absolute transaction privacy.
In the design of the tokenomics, Onion Mixer introduces transaction mining, liquidity mining and holding mining, which guarantees the interests of all parties in its ecosystem. The liquidity provider, OMT holder, or regular users can continuously obtain income, a mechanism that can encourage more people to participate and achieve a win-win cooperation for everyone.
Prospects for Onion Mixer
Speaking of private transactions, most people would think of negative scenarios such as money laundering, drug dealing and deep web. However, this is somewhat prejudicial. Yes, there are people using anonymous transaction protocol for gray transactions, but it is only a small fraction. According to an analysis from Chainalysis, only 8.1% of BTCs are related to theft, and another 2.7% of BTCs are used for deep web, that is, in every 11 BTC, less than 1 BTC is used for illegal purposes in the coin mixing transactions.
We can see from the pie chart that, in addition to the gray scenarios mentioned above, most mixers receive funds from exchanges, mining pools and ordinary end-to-end transactions. In other words, the vast majority of mixer users are for privacy protection, instead of illegal activities.
In the future, when digital currency or DiFi is integrated into people’s daily life, privacy protection will become more indispensable. For example, in the field of medical health, hospitals, insurance companies and pharmaceutical companies need to strictly protect patients’ medical records of treatment data; online games need to build a token system that is easy to circulate, trade and settle, and most importantly, can protect players’ transaction data. Onion Mixer will be used as the infrastructure of the DeFi private transaction to provide complete privacy protection for these scenarios.
Gambling industry is also an important application scenario of Onion Mixer. As it involves economic returns and competition, it needs to protect the privacy of players’ strategies and information to ensure the fairness and security of the whole process. Besides that, it also involves large cash flow, so smart contracts are needed to provide payment and settlement functions. Onion Mixer can meet all those requirements.
Onion Mixer can also be applied in industries involving sensitive data of digital assets, such as insurance industry, futures trading, credit industry, etc., which need to build a decentralized trading system to protect privacy.
Onion Mixer can also be integrated into a variety of DeFi scenarios to provide anonymous transaction services. When combined with Uniswap or Sushiswap, they can provide private transactions; when combined with Compound, they can provide private lending. According to Coinmarketcap, the average daily transaction volume of the global encryption market is about USDT 256.8 billion, of which DeFi accounts for about USDT 21.4 billion. As the infrastructure of the DeFi ecosystem, Onion Mixer is presented with a potential market of over USDT 10 billion.
Although anonymous transactions can be used to cover traces for some gray assets, the technology itself is neutral. The key lies in how we use it. Nowadays, as privacy is highly valued, anonymous transaction has proved its unique value. With the rapid development of big data, cloud computing, artificial intelligence and other technologies, users’ data is getting more and more transparent. Therefore, anonymous transaction protocol with powerful privacy protection function is particularly important.
Despite the development of private transaction, it also faces regulatory uncertainties. However, people’s pursuit of privacy protection behind private transactions is inevitable in the future of blockchain, which will also pave the way for the growth of anonymous transaction protocols such as Onion Mixer.