Chapter 2: How Does OnlyDX Balance Transparency and Privacy?
1. OnlyDX Architecture
OnlyDX achieves a balance of transparency, privacy protection, high performance, and low cost through the following architecture.
1.1 Overall Architecture
OnlyDX’s overall architecture consists of an L2 EVM execution layer and an Optimistic Rollup verification layer. Together, they form a “highway”-style trading network: the L2 EVM provides compute and logic execution, while the Optimistic Rollup serves as the final security outlet, ensuring validity and finality for all data.
Advantages:
Most transactions are completed on L2, with speeds comparable to traditional Internet systems.
The L1 blockchain retains only the necessary “settlement points,” avoiding performance bottlenecks.
Address privacy is protected via ZK techniques, balancing transparency and privacy.
1.2 L2 EVM
The L2 EVM is OnlyDX’s execution engine—essentially an “Ethereum on L2.” It runs smart contracts and periodically batches state and proofs to L1 for synchronization.
Characteristics:
Millisecond-level confirmation, as low as 10 ms.
Lower fees with gas advantages.
Supports complex logic: automated market making, cross-chain arbitrage, NFT trading, and more.
1.3 Optimistic Rollup: Principles and Advantages
Optimistic Rollup is a Layer 2 scaling scheme whose core idea is “assume transactions are valid,” and only verify fraud proofs when challenged. Key points include:
Batch submission: L2 aggregates many transactions and submits them to L1 in batches, dramatically reducing gas costs.
Challenge period: Within a defined window, any verifier can submit a fraud proof; invalid transactions are reverted and penalized.
High throughput: Because validity is assumed by default, the system need not verify every transaction up front, greatly improving performance.
Security inherited from L1: Final settlement rests on the L1 chain, delivering mainnet-grade security.
For OnlyDX, Optimistic Rollup provides an optimal blend of performance and security suited to high-volume trading.
1.4 Address-Privacy Encryption (ZK)
Within the Optimistic Rollup framework, OnlyDX uses zero-knowledge (ZK) techniques to protect L2 addresses, ensuring that user identities and address linkages are not exposed during trading.
Value:
Privacy: Transaction details are visible only to counterparties; external observers cannot trace them.
Security: Reduces the risk that users become targets due to deanonymization.
Flexibility: Supports selective disclosure for compliance or user needs.
2. Balancing Privacy and Transparency
Does privacy via ZK-STARKs undermine transparency? When L2 transactions are mapped to the public L1 via ZK-STARKs, certain details are indeed concealed, such as:
Which specific address initiated the transaction;
The exact amount or asset type involved;
The identity of the recipient.
At first glance, this may appear to conflict with the DEX principle of “public transparency,” but the reality is more nuanced:
2.1 Layers of Transparency
DEX transparency does not require that all transaction details be public; it requires transparent rules and verifiable outcomes:
Rule transparency: Smart contract code remains public. Anyone can audit the ZK-STARK proof generation and verification logic to ensure transactions follow the rules.
Outcome transparency: The final results of L2 activity (e.g., batch proofs submitted via ZK-STARKs) are recorded on L1, proving that all transactions are valid—even if the granular details are hidden.
Analogy: It’s like trading in a public market under a pseudonym. Market rules (smart contracts) are public, and aggregate outcomes (e.g., total volume) are on the ledger, but your real identity and exact trade amounts are protected.
2.2 Why Privacy Protection Matters
ZK-STARKs primarily serve to:
Protect users: On a public ledger, standard DEX trades expose addresses and details, enabling tracking (e.g., wallet flow analysis) or targeting. Studies indicate that a large share of on-chain analysis can link addresses to users [3].
Improve efficiency: L2 transactions are compressed into ZK-STARK proofs and recorded once on L1, lowering gas while retaining L1 security. A single L1 swap can cost $5–$10, whereas L2 (e.g., Arbitrum) can be around $0.27 [2].
Key point: Privacy does not impede correctness. ZK-STARKs let the base chain verify that “the transactions are valid” without revealing sensitive details. This selective transparency is acceptable—and increasingly desirable—in decentralized systems.
2.3 The Balance in Practice
DEX transparency exists to guarantee fairness and verifiability, not to force universal doxxing. In Ethereum’s ecosystem, privacy is increasingly valued because a fully public ledger can introduce:
Market fairness concerns: Full transparency enables MEV strategies that harm ordinary users; MEV can spike dramatically under stress [1].
With ZK-STARKs, OnlyDX preserves rule transparency and outcome verifiability while protecting users—i.e., a more modern definition of transparency.
3. OnlyDX’s Distinctive Privacy vs. Traditional DEXs
Unlike many DEXs, OnlyDX’s combination of ZK-STARKs and an L2 EVM is designed to protect the privacy of whales (large traders) unless they choose to disclose.
3.1 Privacy Mechanism
OnlyDX uses ZK-STARKs to hide L2 transaction details, submitting only batch proofs to L1. Addresses, amounts, and recipient information are not public. Traditional DEXs rely on L1’s fully public records; OnlyDX instead processes most data on L2 via rollups and hides sensitive information with zero-knowledge proofs. This retains transparency where it matters (rules/outcomes) while significantly improving privacy. Whales can execute at scale without becoming easy targets for manipulation or attacks.
3.2 Opt-In Disclosure
ZK allows selective disclosure. If whales want to reveal certain information—e.g., aggregate volumes or specific pool participation—this can be enabled via smart contracts or platform settings. This flexibility lets OnlyDX meet diverse user needs, from strong privacy to opt-in transparency that can bolster market trust.
3.3 What Makes OnlyDX Unique
OnlyDX’s system-level approach to privacy differentiates it from traditional DEXs. Because L1 is fully public, protecting large traders is difficult on many DEXs. OnlyDX’s L2 EVM plus ZK-STARKs achieves a well-calibrated balance of performance, cost, and privacy. This innovation addresses whales’ privacy challenges and fosters a safer, more inclusive DeFi environment—helping OnlyDX stand out in a crowded market.
Bottom line: OnlyDX can generally satisfy whales’ desire not to be tracked—unless they opt in to disclosure—reinforcing user-controlled privacy as a first-class design principle.
Summary
This chapter shows, through threat modeling, layered privacy architecture, and performance design, how OnlyDX provides flexible yet strong privacy under a regime of transparent rules and verifiable outcomes. Drawing on practice data from 2.1 million protected accounts [9], the fact that 69% of crypto hacks involve cross-chain bridges [10], and observations such as 40% of Solana blocks being bot-driven [11], we underscore both the real-world urgency and the necessity of our approach. Meanwhile, OnlyDX’s complementarity with CEXs preserves fiat on/off-ramps, while the inherent transparency and verifiability of DEXs strengthens the trust foundation.
[1] ESMA Report: MEV Market and Risks
[2] L2Fees.info: L1 vs. L2 Transaction Fees
[3] Chainalysis: On-Chain Analytics and Address Traceability
[4] Reuters: Harmony Bridge Hack
[5] Messari: The State of Crypto Privacy 2023
[6] Nansen: MEV Concentration Study
[7] The Block: Ronin Bridge Attack
[8] ConsenSys Survey: Privacy Concerns Drive CEX Usage
[9] Dune Analytics: zkSync Account Statistics
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