Chainflow Capital x PolyWhirl AMA-style Interview
The following is an AMA style interview conducted by our strategic investor — Chainflow Capital. The main objective of this was to clarify on our vision and goals for PolyWhirl; the team’s experience and how we differentiate ourselves from our competitors.
About the hosts
PolyWhirl is a completely decentralised platform for making private transactions on Polygon. PolyWhirl will allow you to de-link a funds transfer between wallets and thus allow users to regain compromised anonymity without risking the use of a centralised platform that may seize funds or impose sudden KYC requirements. Its competitive advantage lies in an innovative feature set (including cross chain private transfers), and unique token utility — with all protocol revenue either used for token buyback and burns or redistributed to stakers of the $WHIRL token.
Chainflow Capital is an activist venture capital fund leveraging massive investment networks and deep market knowledge to back category winners. With a track record as a repeat outperformer, we have garnered insights on critical elements that are the hallmark of successful projects. We help our projects succeed by leveraging our large marketing and investment network, via the provision of strategic consulting services and with substantial financial backing.
— Conducted by Joseph Colbert, Head of Business Relations at Chainflow Capital
Joseph: Thank you for taking the time to speak with us Whirl and Gust, we are very excited about what you are building. To start off, could you provide a brief introduction to PolyWhirl and its use case?
Whirl: Sure — PolyWhirl is a way for anyone on chain to regain anonymity if they somehow manage to link their identity and address on chain. Many defi participants do not fully realise the consequences of doxxing and linking their wallets to their identities, which can lead to unwanted scrutiny from peers, scammers and regulatory bodies. PolyWhirl will effectively provide a way to reverse a loss of anonymity by allowing users to transfer funds to a completely new address. This is also particularly useful for institutions or professional traders who trade in large volumes; without anonymity, they may not be able to obtain best trade execution due to issues such as frontrunning. Another interesting use case is the ability to make anonymous payments; for example, if you hire someone for a service, you can generate something akin to an anonymous voucher. By depositing money on PolyWhirl, you can provide them with a secret note and they can use it to withdraw money out of the protocol and thus provide payment without revealing the source of the funds.
Joseph: Thanks Whirl, there is definitely a huge need for the use cases you outlined and I can imagine many more! Our community would love to learn more about who is behind the project, are you able to give us some background on yourself and the team?
Whirl: Gust and I are both Web3 developers who previously worked at the same company and have been good friends for the last 3–4 years. We were both fans of Polygon when it launched and were using it actively when we realised there was a need for something like the PolyWhirl protocol to exist — and set out to build it ourselves. As a team, we have 3–4 years of experience developing for Web 3 protocols. Gust was also previously a project manager at a large cryptocurrency project, and he is using that experience to lead up the project side of PolyWhirl. We also recently added superhero full-stack developer to the team who is even more experienced in Cryptocurrency than us and has been developing for just as long.
Joseph: Thanks for the introductions. Do you plan to expand the team with the proceeds of the raise?
Whirl: Certainly — we are planning to hire at least two developers to accelerate our roadmap. This will likely be a front end as well as a solidity developer. In fact, we are in touch with a solidity developer right now and might add them before the raise is complete!
Joseph: One exciting part of your project from an investor’s perspective is the utility of the $WHIRL token — are you able to run us through this?
Whirl: The Whirl token was designed to be more than just a simple governance token, and actually captures the value of the protocol itself. The token is how we achieve complete decentralisation and have a self-sustainable path for the protocol itself. Something which a lot of privacy protocols miss, including our closest competitor Tornado, is that they build a great product but design a token that is destined to lose value. Nobody wants to hold a token that is falling in value due to increased supply with increasing use regardless of the utility it provides, and most retail DeFi investors are not truly interested in the governing the protocol. We addressed this issue with our Whirl token. The supply of token is distributed in such a way that the people who hold it are rewarded. This is done by redistributing 80% of the protocol fees generated by the protocol to stakers of $WHIRL Token. If we see the same amount of capital movement as we saw on Tornado, this could potentially be tens of millions of dollars in fees every week, and taking 80% of our 0.5% transaction fee translates to a lot of money distributed to holders of the token. 20% of the protocol fees are going to be used to buy back and burn the tokens too. The token is deflationary from the point of time it is released to the community, which we feel is extremely important to maintain value. To have a successful DAO, you need a lot of people to hold and interact with the tokens, and it is imperative that the token price action incentivises people to hold on to the tokens.
Joseph: It is certainly exciting to be able to invest in the $WHIRL token. What is your strategy to encourage users of the protocol to choose PolyWhirl over a competitor?
Whirl: That’s a great question! We definitely recognise that we need to drive users towards PolyWhirl instead of competitors. The main value we will provide to users is by having a larger pool — and the more people that deposit after you, the more likely you are to have a higher degree of anonymity. We are also going to do an education campaign as most retail crypto participants are not aware that protocols like us exist, and many of those who do find solutions such as Tornado much too complicated. We aim to make our protocol a lot more retail friendly, even for people who aren’t crypto natives. Further — we will drive utilisation through our reward tokens that will likely more than offset your fee for transacting with the protocol.
Joseph: That sounds quite exciting. One question that springs to mind is how you will reward stakers of the Whirl token if the token is deflationary? Typically we see projects distribute more of the native token as staking rewards. Are you able to explain how this works?
Whirl: Certainly! Our protocol will initially allow users to move 3 tokens across the protocol in a traceless manner; USDT, MATIC and WETH. Whenever you deposit your funds, 0.5% of the funds are taken off as a fee and are deposited onto a separate smart contract. For example, if someone deposits 10 ETH, 0.5% will go to the smart contract in WETH. This contract will then disburse the tokens to stakers, so stakers will effectively get 0.5% of all volume going across the platform. The fee itself is not paid in Whirl token — it is paid in the token that you are trying to mix i.e. USDT, MATIC or WETH to begin with. The burn functionality will be a separate smart contract. As mentioned, 80% of protocol fees will be given to the stakers, but 20% will be distributed to the burn contract and all of these funds will be used to buy back tokens from Quickswap and burn them. We aim to do a burn every month. We are going to be using Chainlink’s VRF on chain to decentralise and randomise the timing of the burn process itself, so there are no concerns of people frontrunning the timing. We are aiming for a completely decentralised burn function — where a simple function is called and that function will decide the next date of the burn and swap all the tokens for Whirl tokens and sell it off in the same transaction.
Joseph: You have clearly done a lot of careful planning, and we are quite excited by what we hear! You’ve already touched upon several things, but are there any other key differences between PolyWhirl and your main competitor Tornado Cash?
Whirl: Other than the incentivisation structures to both investors and users of the protocol described above, we are designing a process for cross chain anonymity transactions — which means you can use the protocol to deposit on one chain and withdraw on another chain in a completely decentralised way. This is 8–10 weeks away but will be a particularly useful feature on Polygon. The differences already highlighted in conjunction with our greatly simplified UI and education campaign gives us great confidence in our competitive positioning!
Joseph: That’s great to hear! Another key question we have is whether PolyWhirl will be as safe and decentralised as tornado cash?
Whirl: It certainly will! We are using the same maths and technology behind Tornado Cash as it is tried and tested and thus benefit from the extensive real world stress testing the core code has already undergone. Tornado has proven the maths — so our baseline protocol security is sound. Think of our technology like Sushiswap vs Uniswap v2 — an improvement based on community suggestions that addresses and improves many pain points.
Joseph: Will the protocol be trustless at launch?
Whirl: This is a valid question — a trustless launch means we will be giving up the access keys to the contract. We are not going to be doing that at launch, simply because that will mean we will leave everything in the community’s hands at launch. If you look at our roadmap — we will become completely trustless one year after launch. This is a strategic decision as it allows us to remain nimble and address any unseen bugs and add new features. It will also allow us to avoid the issues that Tornado faced in their early days where large whales were colluding to take the procotol in a certain direction. The other important reason for delaying this process is to build up our DAO in order to have as many zkSNARK contributions as possible. As an aside, we will also have multi sigs for the management team itself to prevent issues in the rare chance that a team member turns rogue and intends to corrupt the protocol.
Joseph: Obviously Polygon is a hot space at the moment and PolyWhirl will definitely be well utilised. What is your view on the future of Polygon liquidity once ETH2 progresses, and are you planning anything to help preserve the value of investors tokens if this does happen?
Whirl: That’s a good question! We’ve already designed the roadmap and tokenomics for this case. A lot of people question why are we releasing so many tokens quickly. One of the key reasons why we wanted to ensure maximum circulating supply within only a few months is so we can expand to multi chains very quickly. If you look at our roadmap, we are planning to move multi chain in Q1 of 2022 — so we will be moving from being only Polygon and expanding to all EVM compatible chains. All of those chains will be bridged from the Polygon tokens itself, which is why we wanted to have the max circulating supply out there so quickly. When ETH 2.0 goes live, Polygon and BSC will likely feel the heat and we are ready for that. We are planning to deploy our protocol on different chains on the same timeline as ETH2.0 deployment, which we expect will be in 3–4 months. Thus, any liquidity lost on Polygon will be made up for on ETH 2.0 itself. We are also looking to move to AVAX, BSC and other well-known EVM compatible chains where there is also volume. This will also allow arbitrage opportunities for all the stakers on different chains, because if they are staking on one chain but there is a higher volume on another chain, they can arbitrage it out. The protocol will grow across all chains and thus we are not worried about volume leaving Polygon!
Joseph: Other than tornado cash, who are your competitors?
Whirl: We’ve been mostly watching Tornado Cash. Obviously we mentioned Tornado is a competitor and they have been stagnant for the last 1.5 years. Swirl cash on BSC is a good competitor, but it looks like their community is shrinking — BSC is lacking volume and they have failed to move multichain. The great thing about this space is that the private transaction field is so young — only a few protocols exist now. There are a couple of new protocols that are also moving onto the private transaction space, but nothing that makes us worried about what we are building here!