Incognito brings anonymous DAI transactions with close to zero fee (Intro)

Hey guys :wave:
It’s Andrey from Incognito. Previously I showed up with the ambition of Making DAI a default stable coin on Incognito pDEX. This time I would like to show you how we anonymized $3.5M DAI.

There are a lot of discussions is going on around privacy and gas fee topics. I would like to share how we solved those two problems.

Let me pitch to you the wallet itself

Incognito wallet allows you to store, transfer, trade, and invest DAI anonymously. By anonymously I mean:

  • Your wallet balance is encrypted (hidden)
  • Your transaction history is encrypted (hidden)
  • Sender & Receiver addresses are unlinked
  • Your trading data is dissociated with your wallet address
  • Your Liquidity Providing data is encrypted (hidden)
    *Network fee for a transaction ≈ $0.00001 (possible to pay in DAI or PRV)

Here is how the wallet looks like:

And bring more light on technology stack behind

Behind the application level, we developed Incognito protocol - layer2 privacy solution, with $2M DAI and $4.5M in ETH locked in the network.

To achieve our goal of delivering cheap privacy we work towards 3 main directions:

  1. Privacy: Ring Signature, Confidential Transactions, Stealth addresses —>
  2. Scalability: POS, Sharding —>
  3. Interoperability: Non-custodial bridging—>

Why do I make this post

  1. Firstly, we :black_heart: DAI
  2. Incognito community decided that we should bring more usage of DAI into Incognito ecosystem and make it a major stable coin of the network
  3. Currently on the Incognito network used only 2M DAI and we aim to scale this usage up to 10% of DAI supply. (Ambitious, right? We believe if crypto wins - privacy wins)

Your turn

Could you please give us your opinion on several questions:

  1. What do you think about the demand for privacy from DAI holders?
  2. Could Incognito be a solution that helps bring DAI into developing countries and/or remittance market (with close to zero TXs fee and full anonymity of transactions) ?
  3. Which project/ppl in the Maker ecosystem should we talk about our ideas?
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I’m in favor, but as an American citizen, I’m terrified to personally participate because of our aggressive regulators and law enforcement.

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I double this sentiment. I want privacy–but as a Yankee, too much regulatory risk. Once we get clarity–I’m all in. I hope that privacy takes off in 2021–it is needed.

TY @Andrey_Incognito --wish you and your Team a lot of success!

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  1. Tornado Cash is doing something similar and they complained quite a bit about low interest. But I do think this was before the growth of defi. There is definitely demand.
  2. Maybe. But I would not expect it to moon.
  3. Hmmm. Maybe @Davidutro is in a better position to answer this. Possibly this is better left to others to develop.
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This looks great, very cool. Thanks for the overview.

  1. Privacy demand seems high in theory, low in practice. This is likely due to the regulatory uncertainty behind private crypto wallets and tools. Until there is more clarity there, I believe the usage will be substantially muted.

  2. Sure, it can. In fact the biggest problem for smaller Dai users around the world today is inflated gas costs. L2s are crucial, and I think the next year or two will be all about finding the best L2 to achieve some form of retail tx volume scalability.

  3. Best people to talk to:

  • Developers who understand your L2 well enough to make an assessment whether it will win-out in the long run or be replaced by a better L2 solution.
  • Dai users. There are probably a good many of them here in this community. I suspect their questions will probably be around risk both with the wallet app itself and with the L2.
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I could see that privacy becomes a unique selling point to a Dai transfer solution that already has product-market fit. Like Whatsapp has a great messaging experience, and the privacy is an additional benefit to it.

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Thank you everyone for the inputs:

@Joshua_Pritikin @ElProgreso

As I know right now there are not regulations that do not allow you to use Incognito for personal privacy. For example, things like travel rule is compliant with Incognito’s privacy solution. With READONLY keys you are able to verify your DAI balance.

DAI on Incognito is like cash in your pocket. You can simply report it for tax purpose, but ppl can see it only if you allow.

I think we are on the same understanding here. At Incognito we try to solve it as well. On this moment

  • Incognito has 8 shards and able to proceed 100 TPS, but the current demand ≈ 5k daily TXs
  • Average TX fee in the protocol is around $0.000001

@Davidutro would you recommend any particular niche we should focus on or just. test the ground around?

Yeah, hopefully, to get more feedback from users, to understand what should we improve in the application or protocol layer.

Salty feedbacks are the most useful :wink:

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Yeah, we believe if we find the right niche where ppl wants to keep their funds private, and DAI will be a major stable coin on the Incognito layer it will be mutually beneficial for Maker & Incognito.


A quick example of how our life became simpler with privacy

We have 43 members in the core team and before we implemented privacy payroll was a headache for our accountant. She used mixers, she used binance, she made transfers from different wallets.

no need to explain to anyone if you do payroll from one account all salaries are linkable, wallet balances and expenses are traceable to everyone in the team and outside.

With Incognito, she doesn’t need to dance with a tambourine anymore. She executes the whole payroll from one address and does not worry about privacy. While all team members remain compliant in their jurisdictions.

I get the sense that some L2 will win out and get other protocols to create activity there. The L2 that has the most activity has a very good advantage. Your wallet will only be as popular as the L2 you use.

Are there any future plans to integrate migrations to other L2s or back to the main chain using this wallet?

I think keep testing the ground. Privacy is a great niche in theory imo.

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Have you tried:

  • restoring backed up messages?
  • Changing numbers?
  • Changing phones?
  • Managing large groups?
  • Managing permissions?

:smiley:
(Sorry for the offtopic).

I think it was before. The last data i saw was more about a very big interest and use

I tried Incognito a few months ago, fut I quickly stopped because I didn’t really understand how the app works.

And I also have a more general question. I really like all those private solutions. But at the end what is the real point of doing that ? Avoid taxes ?

I am sure some people would like to avoid taxes. Avoid taxes, the wife, the ex-wife, the list is long.
It is for the same reason that private bank accounts are private.
Keeping criminals off your back is also important. If you are a crypto investor from Venezuela, Russia or Nigeria you do definitely not want your local gangster to back trace your wealth.
Just going on vacation to certain countries could be impossible if people knew about your stack.

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This is totally true, i’m from Vzla in just gave a look to this wallet and might works pretty awesome over here, for example, you can’t even do a bank transfer with the subject: Crypto, because even the banks will freeze your account and you can have problems with the government. I’ll be testing it to see how we can address some problems over here, thanks @Andrey_Incognito !

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Hey @Lozadaluis12 thanks for the feedback! Any thoughts on how to bring Incognito + DAI couple into your local crypto community ?

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Hi Andrey, well the first thing is that the wallet is on English, so that’s a first barrier, also having like 3 keys (that’s from what i saw when installed the wallet) can be like confusing for regular people, but the rest seems pretty cool, like the sending at a low cost (i asume you guys use batches) and give an anon address is also an amazing feature for receive and make payments over here.

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Oh yeah, thank you for the feedback language is a barrier for majority of users. Two quick solutions that might hell

  • We kickstarted Spanish speaking thread to work out on translating tutorials and explanations.
  • Also within next 2 weeks we plan to release a web extension, that might make privacy accessible without download mobile app. Also web extension would be easier to translate in different languages

Anything else should we change/improve to make it easier to use ?

Awesome thanks for this info, still ppl here like to see apps in spanish.

And yes, this sounds nice as well, like having a Metamask with Incognito, maybe the keymaster thing and having three keys seems (to me) little bit confusing and make the onboard little bit hard for non-crypto (and even less experienced) users. Maybe just giving an initial ERC20 address (the anon one) and focusing on explaining the shield part would be better. I’m still seeing how it works so will let you know anything that comes up !

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