Analysis of Anoma: A Privacy Payment Platform for "Barter"

Source: Rhythm Research Institute

On November 18, the privacy network Anoma Network announced it has raised $26 million, led by the venture capital firm Polychain Capital, with participation from Fifth Era, Maven Capital, Zola Capital, Electric Capital, CMCC, and others.

Previously, on April 27, the project completed a $6.75 million funding round, also led by Polychain Capital, with other participating companies including Electric Capital, Coinbase Ventures, FBG Capital, CMS Holdings, Lemniscap, Cygni Labs, and Walden Bridge Capital.

The privacy sector has always been a focus for VCs, and with backing from capital like Coinbase, Anoma Network is also worth paying attention to.

Overview

Project Introduction

Anoma is a proof-of-stake public chain that focuses on privacy payments. Regardless of the number of participants, it allows them to engage directly in transactions, enabling barter without the need for a base currency, and everyone can freely choose any asset for private transactions.

Anoma was first launched in March, released its white paper in April, open-sourced its code repository in June, published its Vision paper in July, and recently launched its testnet, Feigenbaum.

The project aims for Anoma to help communities around the world regain control over their economic sovereignty, prevent third parties from using data without consent, thus protecting personal transaction privacy, and hopes to solve the large-scale coordination problems that humanity has previously been unable to address, specifically the inevitable mismatches in barter transactions, where A has what B wants, but B does not have what A wants.

Anoma aims to create a system that allows any digital asset to serve as a means of exchange or payment, enabling individuals to choose any asset class for transactions. Unlike existing financial platforms, Anoma's goal is to facilitate users' ability to use any asset in private payments, rather than introducing specific assets as currency.

Here, "any asset" refers to goods, services, or anything of value that can be digitally represented, including assets created on Anoma, assets from other blockchains transferred to Anoma through interoperability protocols, and fiat currency in the form of stablecoins.

Project Model

To achieve this vision, the project adopts three main design architectures, which can be considered its three characteristics, as follows:

Privacy Payments

Regardless of what assets customers wish to use, transfer, or trade—be it currency, NFTs, goods, or services—the project maintains the confidentiality of customers' financial and transaction data.

In Anoma, to protect user privacy and prevent others from tracing collected data, the sender, receiver, amount, and asset denomination are all encrypted, with zero-knowledge proofs ensuring the transfer of funds. Moreover, there is a unified shield pool shared among all assets, rather than each asset being shielded individually. This way, the more participants there are, the more assets there are, and the more frequent the transfers, greatly increasing the confidentiality of asset transfer data, which constitutes the private digital cash system in Anoma.

Barter Transactions

The project repeatedly emphasizes "barter," which is a trading plan where parties exchange goods or services directly for other goods or services, essentially enabling barter without the need for a medium of exchange, cash payments, or third-party involvement. This is the earliest form of trade used by humans before the advent of currency, but participants must have a double coincidence of wants to successfully trade: both parties must have what the other wants, and both must be able to transfer the trade.

Due to these limitations, along with the need for traders to easily transfer related goods or services, this can be somewhat challenging, but these can be easily realized in Anoma.

Anoma implements a digital barter program that facilitates the exchange of goods, services, or digitally represented value. N-party barter allows for value exchange among all parties when there is mutual demand, without the need for a specific currency as a medium of exchange, and without requiring a double coincidence of wants.

The protocol provides three examples of asset transfers:

First: Two participants, one asset type

A and B are from different countries. After dining together, A wants to pay B for the dinner using BTC. In this case, both parties are trading, where the sender's asset type (BTC) matches the receiver's asset type. Through zero-knowledge proofs, the Anoma blockchain can easily resolve this transaction, and on Anoma, observers will not be able to infer any information about the transaction between A and B, effectively protecting the privacy of the traders.

Second: Two participants, two asset types

A buys coffee at a café but primarily holds BTC in their mobile wallet, so they want to pay for the coffee with BTC. In this example, the transaction involves both A and the café, but the sender's asset type is BTC while the receiver's asset type is fiat currency, which are not consistent. In this case, through Anoma, A spends BTC, and the café receives fiat currency.

This transaction is facilitated by Anoma's custom state machine, which has a built-in trading system that supports cross-chain asset transfers and settlements. Within Anoma, the chain automatically facilitates the exchange between BTC and fiat currency at the best market price at the time, with all intermediary transactions benefiting from zero-knowledge proofs, allowing different asset types to share an anonymous set, thus ensuring privacy.

Third: Three participants, three asset types (N-party barter)

There are A, B, and C. A holds BTC and wants DOT, B holds ETH and wants BTC, and C holds DOT and wants ETH. The items that the three possess and desire are perfectly mismatched. In this case, Anoma's intent matching system can simultaneously match and resolve all three participants' demands, which is what Anoma refers to as "barter transactions." Moreover, the number of participants can increase sequentially; three-party barter can be extended to N-party barter in the same manner.

N-party barter can occur through any number of parties exchanging goods, thereby increasing the chances of finding suitable trading partners, allowing multiple parties to exchange assets diagonally within a group. Anoma users can exchange any type of asset, including cryptocurrencies, stablecoins, fungible assets, non-fungible assets, or any other type representing more complex valuable items.

Matching Trading Partners

In a landscape filled with various trading partners, it can be quite challenging for users to select their desired trading counterpart. However, through this project, users can choose their preferences and group with other users who share similar preferences, thereby expressing a common intent and creating N-party atomic solutions.

Anoma consists of two main components: a distributed ledger and an intent matching system. They complement each other but can also operate independently.

The intent matching system plays a crucial role here by using an Intent Gossip system to run its nodes, token exchange matchers, and RPC servers to request new intents, submitting transactions from matched intents to the distributed ledger, thus helping users automatically discover trading partners.

Project Details

Token Economics

Anoma's native token is XAN.

The first function is as a governance token. It is used for incentives, ensuring that participants fulfill their obligations in specific roles when transforming future expected value into present value.

The second function is to pay transaction fees. Anoma users will incur certain fees when trading, which are divided into two types: one is the execution fee, which is charged in two stages—before and after settlement; the other is the transaction fee, which is proportional to the value exchanged in the transaction.

Team Background

Anoma was co-founded by Brink, Awa Sun Yin, and Christopher Goes, who met while working at the blockchain technology company All in Bits (also known as Tendermint), which established the Cosmos network.

The Anoma team has a strong professional and academic background, with team members having previously worked on significant projects at Cosmos & Tendermint, Polkadot, Tezos, and Chainalysis, possessing decades of combined experience in blockchain technology, cryptography, and programming language theory.

Adrian is the CEO of Heliax and a member of the Anoma Foundation Committee. He was also the third core protocol engineer building the Cosmos stack at Tendermint and wrote a graduate thesis on a censorship-resistant electronic voting system to help the Catalan people gain independence.

Awa is the head of product development at Heliax and the chair of the Anoma Foundation Committee. He has written papers advocating for the de-anonymization of Bitcoin and has served as a software engineer and researcher at Chainalysis and Tendermint.

Christopher is the head of R&D at Heliax and a member of the Anoma Foundation Committee. He previously led the design and development of the Inter-Blockchain Communication (IBC) protocol at Tendermint.

The three are co-founders of the Anoma project and have previously co-founded the Swiss proof-of-stake validator Cryptium Labs and the blockchain R&D company Metastate, as well as co-founding Helia.