Labyrinth’s journey to private and compliant DeFi: Milestones, integrations, and the road to mainnet

Hey everyone! We’ve been caught up in the whirlwind of Devcon 24, connecting with incredible builders, swapping stories, and sneaking in some late-night brainstorming sessions over (probably too much) coffee. The whole team has been energized, and even though this update took a little longer, we think you’ll agree—it was worth the wait!

Since Labyrinth’s beginning, our mission has been clear: to make privacy in DeFi accessible, decentralized, compliant, and user-controlled. We want every blockchain transaction to be as secure and private as it is decentralized. On August 27, we hit a major milestone with the launch of Labyrinth’s live private testnet. This accomplishment came from countless hours and contributions, from integrating top DeFi protocols to major performance enhancements and expanding our decentralized compliance network, Decom.

As we close Phase One, we’re eager to share our journey, the key milestones we’ve achieved, and the road ahead as we push closer to our vision.

Phase 1: Foundation-Building and Community Impact

Phase 1 has been nothing short of transformational. Beyond launching private P2P transfers for ERC-20 assets, we integrated with top DeFi protocols like Uniswap for swaps, Lido for staking, Aave for lending, Curve for liquidity provision, Beefy for yield farming, 1inch for swaps with best rates, and Ethena for earning stablecoin yields. Each integration was driven by our commitment to privacy and functionality, setting a new standard in private DeFi interactions.

Real-World Use Cases: Privacy for the Full DeFi Spectrum

Our integrations serve real-world use cases and solve critical problems in DeFi space, bringing privacy and security to every interaction across DeFi:

Take Swap, for example. With daily volumes exceeding $2.47 billion, Uniswap’s popularity as a DEX is undeniable. However, this transparency creates privacy concerns for high-capital users and traders, who face risks like front-running, where others exploit visible transactions. This privacy gap has often driven users toward centralized exchanges (CEXs) that, while more private, come at the cost of user control.

Labyrinth addresses this gap by integrating private swap features with Uniswap, allowing anonymous compliant trade without KYC with the Decom network. Using this integration users can keep their swap history anonymous and avoid the risk of front-running. This ensures a seamless, privacy-enhanced experience for high-net-worth traders, institutions, and privacy-conscious users. 

Above was the reasoning behind privacy for a swap, now let’s look at the staking use case. The adoption of decentralized staking platforms has seen significant growth. As of July 2024, over 33.8 million ETH were staked, marking a 34.9% increase from the previous year. However, this surge in participation has heightened privacy concerns among users as all user activity is public on-chain. Private staking on decentralized platforms is also crucial because it addresses the privacy risks and custodial issues associated with centralized staking. With Labyrinth, users can stake without exposing their activity details or strategies, protecting against front-running, regulatory scrutiny, and targeted attacks. 

By providing anonymity for staking and control over private keys, Labyrinth enables high-capital users and institutions to stake confidently, combining security, privacy, and compliance without sacrificing decentralization. 

Apart from this, we integrated other top DeFi protocols as well for core use cases, we will talk about the reasoning and need for privacy for those in a near future blog.

Major Improvements: Reducing Gas Fees and strong compliance guarantees

Throughout the above-discussed integrations, we've moved from closed devnet to private beta testnet, We have done demos with some of the best power users and did stress-testing of Labyrinth’s features in real-world environments. This phase allowed us to fine-tune the protocol with rigorous validation and optimization across the privacy-compliance spectrum. 

Along with the above integrations we made many improvements in the last two months after rigorous testing and feedback we got from defi power users, To make private transactions even more accessible, we achieved a 50-55% reduction in gas fees through the implementation of an upgraded zk-based queued Merkle tree—a priority as we scale. 

Balancing privacy and compliance has been challenging for privacy protocols, but Labyrinth’s compliance suite tackles it with a multi-faceted approach. Our decentralized compliance network, Decom, ensures “Compliance Without KYC” through Selective Disclosure (SeDe). Decom’s multi-party accountable system of Guardians and Revokers uses threshold decryption to address suspicious transactions without disrupting genuine users or freezing their assets, providing economic security through staking. Decom aspires to become the default compliance network for the entire on-chain financial system, extending its services to protocols beyond Labyrinth, such as Aztec, Railgun, Renegade, and Hinkal.

Along with Decom, Labyrinth’s compliance suite offers other two essential tools: voluntary compliance, and our 0xbow integration for added trust-proof capabilities. 

The 0xbow integration allows users to demonstrate non-association with any illicit activities. These tools help create a safe, compliant environment that is still deeply rooted in user privacy. Learn how we enable blockchain privacy without illicit activities here.

With the above advancements, Labyrinth SDK continues to abstract the complexities of zero-knowledge proofs, cryptography, and compliance, allowing developers to build private, compliant dApps without compromising the user experience or requiring new wallets.

You can check detailed updates of the last two months in the August and September update blogs.

Expanding Horizons: Beyond the Protocol through community and knowledge-sharing Initiatives

Meanwhile, our co-founder Amit Chaudhary represented Labyrinth on the global stage, presenting at conferences like CIFRIS24 and the Warwick Business School conference at The Shard in London. These appearances highlighted our commitment to advancing privacy-first, compliant DeFi while gathering critical insights from the industry's best minds to refine our protocol.

We hosted our first-ever live AMA with our Founder Amit Chaudhary & Peymann, Founder of Fairblock, who provided community members with real insights into compliant privacy. They also submitted a collaborative research article on ETH research adding to Labyrinth’s thought leadership in privacy and decentralized compliance.

Recently, Amit also presented Labyrinth at the CBER CtCe conference organized by Uniswap and Avalanche, where he presented the Labyrinth protocol, advocating for privacy without liquidity fragmentation while maintaining regulatory compliance. I introduced the concept of Decom (Decentralized Compliance), which allows for selective disclosure of secrets at the user's discretion.

Devcon Highlights

Our founder, Amit Chaudhary, had a fantastic panel discussion with Peymann, founder of Fairblock at “Ethereum Cypherpunk Congress” by Web3PrivacyNow. Together, they shared insights in a fireside chat moderated by Christopher Goes, where they explored the latest in privacy and compliance.

A standout moment came from Paul Brody of EY, who presented on privacy needs in business, emphasizing two core requirements: one for asset transfers and payments, and another for the terms of agreements within smart contracts. Brody pointed out the long-term traceability challenges with pseudo-privacy and mixers, as non-fungibility can expose identities. He advocated for ZK-proof technology as the solution, aligning with Labyrinth’s focus on sustainable, private DeFi solutions.

And here’s a highlight that made our day: Ameen Soleimani from 0xBow described Labyrinth as a "great solution for privacy," and we couldn’t be happier to get his support.

A Hot Take: No more research papers that might not see real-world applications for another 5+ years. We’re all building here and now.

A glimpse of the future: Incentives, new features, and the roadmap ahead

In this next phase, we are refining the foundational components that make Labyrinth unique. Integrations with protocols like Cowswap—known for its high-volume trades and adoption by influential users—Rocket Pool, and Pendle, Labyrinth continues to strengthen its privacy toolkit with a full DeFi suite. These protocols collectively manage billions in total value, and their integration with Labyrinth ensures that user privacy is preserved in every interaction.

We are also preparing to roll out support for batch transactions and multi-signature capabilities. These features will bring even greater flexibility and security to DeFi interactions. 

For instance:

Batch Transactions: Batch transactions will enable confidential and anonymous token vesting schedules and private payroll distribution to employees, vendors, or contractors. This will make it easy to send payments to multiple recipients at once, ensuring each transfer’s privacy remains intact. 

Multi-Signature Support: Multi-sig functionality will empower organizations with shared control over transactions. From this integration foundation, DAOs, and businesses will be able to jointly approve and execute on-chain transactions with privacy.

Our roadmap ahead involves not just product completion but community involvement and rewards. To encourage active engagement, we’ll soon be launching an incentive program for testnet users. Early adopters who contribute and engage by testing and providing feedback will earn points, which will convert to real value at the mainnet launch. These points will bring rewards, reduced fees, and other benefits. 

Our users are at the center of everything we build. With the feedback from our early adopters and power users across DeFi, we’re giving the Labyrinth UI a complete makeover. This redesign will make privacy management easier, more accessible, and more intuitive for everyone.

Before the mainnet launch, we’re committed to a rigorous series of stress tests, ensuring Labyrinth’s stability and resilience at scale. With code freeze and audit on the horizon, these final steps will prepare Labyrinth to deliver the gold standard in private, compliant DeFi.

Labyrinth vs. FHE-based solutions: The superior solution for privacy and compliance in ERC-20 Transactions

In the race for compliant privacy solutions, Labyrinth’s Zero-Knowledge (ZK) framework surpasses alternatives like Circle and Inco’s Confidential ERC-20 framework, which relies on Fully Homomorphic Encryption (FHE). While FHE-based models offer some confidentiality only to p2p transactions, and no privacy for defi activities, they introduce high computational costs, fragmented liquidity, and centralized decryption control, putting user privacy at risk. Labyrinth’s ZK-based approach delivers full privacy by protecting both transaction details and sender/receiver identities, a level of security that FHE solutions simply cannot match. Built for Ethereum, Labyrinth integrates seamlessly with DeFi protocols, enabling private transactions without altering existing smart contracts or requiring new wallets, all while keeping liquidity unified.

Labyrinth’s Decom (Decentralized Compliance) framework further enhances compliance by allowing selective de-anonymization through threshold decryption and mutual accountability. Unlike FHE-based solutions, which centralize decryption key control, Decom ensures regulatory alignment without risking user data. Decom’s decentralized, on-chain transparency makes compliance visible and auditable while safeguarding privacy, ensuring users’ data remains secure unless lawfully required. With Labyrinth, privacy, efficiency, and regulatory compliance coexist, setting a new standard for real-world DeFi applications.

Laying the foundation for a new era of compliant & private on-chain transactions

As we enter the final stretch toward the mainnet, we are committed to doing things differently. Unlike prior protocols that risked freezing or exposing user assets when it comes to compliance, Labyrinth equips users with compliance tools to verify transaction integrity, share details with selective disclosure when required for users, or decom can find illicit activity without affecting genuine users, ensuring a safer and more resilient DeFi experience. 

Our vision is clear: to build a DeFi landscape where privacy, control, and accessibility are the foundation, not just features. We don’t just talk we show it. You can see it live on testnet today.  With Decom’s innovative compliance framework and private DeFi experience, we’re honored to have our community with us, shaping this new era of on-chain privacy.