In the previous Crypto Series #1, we did discuss the emerging players in the DeFi ecosystem — CONTRIBUTE, DeFiat, and DEXG. If you didn’t see the first article in this series, I highly recommend giving it a read!
This is the second article in Crypto Series, where we will be discussing three players that are very distinct from each other but are making tides in DeFi and the overall crypto space. Those three players are:
- Zoracles — Brining Zero-Knowledge Proofs (ZKPs) to Open Oracle along with off-chain computing, ensuring better privacy and confidential data delivery.
- Uniswap — Decentralized Exchange, Liquidity Pool, and an Automated Market Maker (AMM), along with UNI token and liquidity mining.
- Vanilla Network — A staking pool with a deflationary ERC-20 token, along with a range of different dApps for betting and lottery.
Let's dive in!
You might already be familiar with the problems faced by the blockchain ecosystem, with the major ones being privacy and anonymity. However, an inherent problem is one of the biggest hurdles in the growth of the blockchain space and specifically the DeFi world, known as the Oracle Problem.
Before we explain what Zoracles is all about, we first need to understand the Oracle Problem. Oracles are services that feed external data into a smart contract to execute conditional logic based on that data. You can also think of oracles as traditional APIs used to pull data from a specific source and feed it into a system.
However, you might wonder why we need such oracles if we can directly use external APIs and the difference between them. The problem is that unlike traditional services that live on the internet, blockchains can’t see, and they don’t have access to information that is off the blockchain — that information can be anything on the internet or any real-world data.
Now that you understand what an Oracle is let’s dive a little deeper into the Zoracles project — the zero-knowledge oracles platform.
Zoracles has been primarily built on top of ‘Open Oracle’ developed by Compound Labs. The real strength of the Zoracles platform lies in the introduction of zero-knowledge proofs (ZKPs) on Open Oracle to transmit confidential data from data operators to smart contracts.
Zoracles is one of the very few projects working on combining ZKPs with Open Oracle, ensuring more privacy and widespread adoption in areas where private data cannot be revealed. ZKPs would ensure end-to-end privacy of smart contracts, especially for enterprises.
ZKPs often require a lot of computation. To make these computations easier, Zoracles has launched an off-chain processing model based on non-interactive ZKPs, and a set of software tools called ZoKrates to support this off-chain processing model.
The off-chain processing model introduces delegated computation, where a delegate node (a prover) performs off-chain computations by employing a verifiable computation (VC) scheme. This model helps reduce the cost and increase performance because all the expensive computation happens off-chain, and only the result of the computation is written on the blockchain.
Traditionally on a blockchain network, all the participating nodes perform a certain computation and store results. However, with the off-chain processing model, this computation is done off-chain. Instead of every node doing the computation repeatedly, they only verify the ‘correctness’ of the result with zero-knowledge proofs (ZKPs).
To ease this entire process of ZKPs and verifiable computation scheme in Open Oracle, Zoracles has built ZoKrates, which is a toolbox for deploying contracts for off-chain computations.
Ethereum blockchain is Turing complete, but it’s inefficient for running complex computations, mainly because of the higher gas fees involved. With ZoKrates, developers would be able to construct zk-SNARKS based proofs that can be computed off-chain but only need to be verified only once on-chain.
As of now, ZoKrates is only limited to Ethereum blockchain, but in the future, it will be platform-agnostic, supporting all the major blockchain platforms to construct zk-SNARKS with a verifiable computation scheme. With ZoKrates, developers can focus on bringing their ideas to life without worrying about the expensive on-chain computations.
Another good news for the developers is that ZoKrates also comes with a domain-specific language (DSL) that provides a higher level of abstraction, so you could easily specify off-chain computations. The DSL program is translated into R1CS through a compiler, making it compatible with zkSNARK proof systems.
Zoracles doesn’t come with a utility token. Instead, it has a governance token called ZORA. A total of 100 ZORA tokens have been created, and each token represents a vote. More voting power can be acquired by having more ZORA tokens.
With the launch of Zora 2.0, the community has decided to upgrade the original Zora tokenomics to include more features and privileges like on-chain governance, time-locks, and an increased supply of tokens to ensure more inclusivity.
Overall, Zoracles seems like a great Oracle project, bringing privacy with ZKPs on Open Oracle, ZoKrates, and off-chain computations. It can surely compete with Chainlink's likes because of its focus on bringing anonymity to oracle data and confidential data delivery, which is much needed for today’s world's privacy-focused enterprises.
Uniswap is perhaps one of the most important players in the Defi space today and has gained an enormous amount of traction from the community since its launch back in November 2018.
On a higher level, Uniswap is an Automated Market Maker (AMM), which is a class of decentralized exchanges that doesn’t rely on the traditional ‘order book’ approach for buy and sell orders, but rather rely on liquidity pools and mathematical formulas instead.
Most decentralized exchanges are built on the Ethereum platform. They suffer from liquidity issues because of their inherent ‘order book’ approach, as placing each order requires spending gas and waiting for block confirmation times. Even worse, the low transaction throughput of Ethereum means that the final trade settlement can take a long time.
Uniswap solved this problem by bringing together the concept of liquidity pools and automated market makers (AMM). The concept is similar to Changelly and ShapeShift, with the main difference that the ‘reserves’ are replaced by ‘liquidity pools.’
The liquidity pool contains two assets together in a trading pair, and liquidity providers can provide these trading pairs equally.
You might wonder if there is no order book just like in the traditional exchanges, then who sets the price? The price is set by the automated market maker using a mathematical formula that considers the relative percentage of each token in the liquidity pool and determines the theoretical price. The formula is called ‘constant product formula,’ a simple x * y = k curve where ‘k’ is a constant for the math geeks out there.
Uniswap charges a small fee for the swap, distributed as a reward to all the liquidity providers. The only drawback in the constant product formula is that the price slippage is raised exponentially in large volume orders.
On September this year, Uniswap launched its own governance token called UNI with a total supply of 1 billion UNI tokens released in phases within the next 4 years due to the designated vesting period. All the UNI token holders will have ownership of the governance process, and the Uniswap team calls it a community-managed treasury.
With its UNI token, Uniswap now also supports ‘liquidity mining’ where the liquidity providers will earn UNI tokens based on their capital contribution. Initially, the liquidity mining program will target the USDT, USDC, DAI, and wBTC pools on the network and more than 5,000,000 UNI tokens will be allocated per pool to liquidity providers’ proportional to liquidity.
It should be mentioned that Uniswap’s constant product AMM is resistant to price manipulations, and analysts have seen much more stable prices on Uniswap compared to other exchanges where the speculators and manipulators hold a significant amount of pricing power.
Vanilla Network is quite different from the two platforms we discussed above.
Vanilla Network comes with a true deflationary ERC-20 token. It aims to build a suite of different staking and betting decentralized applications (DApps), catering to a wider audience of betting enthusiasts and those who are interested in staking to generate consistent long term rewards.
Traditionally, companies have been releasing tokens with a certain burn rate, creating a scarcity in the supply side, and calling it a ‘deflationary token.’ However, the mechanics of a deflationary token model go well beyond just the concept of ‘scarcity.’
There is one important element that many companies with a deflationary token miss out, and that is focusing on the demand side. If your deflationary token doesn’t have any significant demand, the supply side's scarcity won’t simply cut it. This is why Vanilla has a demand-focused approach. The project will launch a staking pool and betting DApps to increase adoption for their deflationary ERC-20 token.
The Vanilla token has a 5% fee (burn rate) whenever you make a transaction on an exchange or in one of their DApps. Half of this burn fee (2.5%) goes directly to the stakeholders in the vanilla staking option pool, creating rewards for the investors.
However, when the investors want to take out their rewards, this 5% burn fee will not be charged to incentivize stakeholders for staking in the pool. The Vanilla Network will also have a community fund known as the DAO (decentralized autonomous organization), that will be funded with the wins and losses accumulated through different betting and lottery DApps launched by the team.
To facilitate the investors, temporary high rewarding staking pools (Mint and Chocolate) will be launched so they could stake their funds for a pre-determined period of time to generate fixed returns. The Vanilla token will have a starting supply of 1 million tokens, and after the successful burn completion, the supply will be locked at 100,000 Vanilla tokens, where no more burn fee rate of 5% will be applied.
In the diagram below, you can see the token distribution for the vanilla token:
The presale ICO is happening on their website. After the pre-sale ends, they will launch their token through Uniswap by providing huge liquidity of 20% to increase investors’ confidence.
Analysts believe that games will be one of the major factors for widespread crypto adoption. Vanilla Network not only aims to build betting and lottery DApps, but it also comes with its own deflationary token and a staking pool for rewarding investors, hence the tagline ‘Invest, Stake and Play.’
This article has reviewed those projects that are making tides in the Defi space, from zero-knowledge proof oracles, automated market making, and betting and lottery DApps along with a deflationary token, and a staking pool. DeFi movement is certainly going to be the future, and projects like these will act as a building block towards widespread crypto adoption.