I’m on the fence with this idea. It doesn’t ad yield at all but adds a reason for regulators to look closers. I am not the type of person that needs cover my tracks. What actual legal value does doing so provide? Is it the whole “right to bear arms” argument that if we don’t protect yourself big brother will come a knocking?
I am in a unique situation regarding taxation, bit this seems like a method for tax evasion. I could be wrong.
There is also the idea that when you withdraw you might be granted a token that has a shady blockhain history. But I suppose this is already the case with vaults.
It does one great value in that the vault is no longer locked simply to the ytoken that is in the wallet they might get compromised.
I see a fair amount of downside, but no real upside outside the novel history wash and the ytoken security upgrade.
I am Japanese.
Implementing this proposal would probably make YFI outlawed in Japan.
In 2017, Coincheck, which listed Monero and other products, had a massive Gox case, and the regulators got tougher.
Since then, currencies with privacy and money laundering potential have been banned from the whitelist.
Be aware of the risks that arise when implementing this feature.
Diversification is important, but compatibility with regulators is also important.
It can do more harm than good. If you want something like this you have other options.
I think that few people will come to yearn because of this and much more will just leave
It sounds like the resounding consensus is to make this optional by providing an integration external to yearn that people in regulatory regimes that are friendly to financial privacy can take advantage of. Keep it out of yearn’s core design, so as not to affect the product in regimes that are not favorable for this kind of integration.
On complexity: Could we make this simpler by allowing some form of UI that the user starts with any coin (e.g ETH) and selects the vault to use and whether to mix or not, then the (contract?) automatically converts to the relevant vault coin, mixes, and deploys into the vault?
I would add to this that assets of people not using the mixer don’t get mixed in any way with the assets of people using the mixer. I know of people who had a nightmare proving legitimacy of their coins when just transferring their coins to a centralised exchange.
As an advocate for privacy, I think this a fantastic idea. Thank you @jimsox for proposing this. I understand the critique that we will bring unnecessary regulatory attention, but personally I believe it’s a worthy trade-off. Regulators are so many years behind I couldn’t imagine this posing a serious threat anytime soon. BUT… if we had to, in a worst case scenario, couldn’t we just revoke the privacy mixing ability?
I think that having it be an external integration would maintain this? It would be clear that all balances owned by the mixing contract are treated separately from those owned by accounts/contracts that have a balance with the Vault directly. I don’t think this would “taint” all Vault shares directly.
In likelihood, institutions will not invest in defi because of the publicly verifiable aspect. They require the ability to deposit without an amount being linked directly to their address, while also sharing contents of deposits with regulators and a verifiable link for risk managers to audit deployed funds.
Privacy is the prerequisite for fungibility. Stolen funds have already been deposited in yearn thus it would be a liability in terms of pressure to create blacklists if deposits are not mixed.
Issues of origination (in any direction) arent relevant when provided with the minority of secrets within the mix. Again, taint does not apply in this regard.
To the contrary. It is irrelevant what regulators in any jurisdiction have chosen, institutions frequently incorporate internationally to avoid such limitations. Existing regulation requires privacy for investors using institutional infrastructure.
Then, not only is there no established case law, you are merely interpreting what may occur. Mixers are already compatible with current regulation, competitors will adopt privacy solutions.
P2P exchange allows interaction with anyone, thus allowing trade between any blacklisted token into a whitelisted one.
Oh, I thought the external integration meant that it would not be part of yearn protocol, but still deposit into the vaults directly after being mixed.
No no, the mixer would be the external integration. The mixer (the contract inself) would be a depositor into the Vault, basically saying “these people are using it via a mixer” and “these other people are not using it via a mixer”
The mixer is just using the Vault to earn extra yield on their deposits.
Since ERC-20 coins are fungible, the mixer depositing mixed funds into the vault would essentially mix the funds again with non-mixer Vault users funds right? What I’m trying to say is that mixed funds being in the same pool as non mixed funds at any point in time would make all of the funds in that pool “tainted” no?
Deposit funds in Vault and receive shares, put shares into mixer
Put funds into mixer, and mixer deposits funds into Vault
(1) Seems easier to pull off, as the shares are just ERC20s and can be trivially interoperable with how Tornado works. (2) would require some further integration for deposit/withdraw into the Vault.
Either scenario I would argue it’s very clear who interacted with the mixer, and who did not. I don’t think either scenario puts users at risk of being “tainted”, other than the mere fact that they had participated alongside funds in the mixer. You’ve either interacted with the mixer, or you did not.
Great idea, but it should be implemented under proper legal guidance and there should be contingency planning if it attracts the wrong kind of attention.
Ive closed the poll, its been open for a month now, with 76% in favour of starting the dev process.
I think doing anything on this now would be unwise however, I think getting v2 vaults up and working should be the first priority.
In the meantime ill go back through the thread and summarise everyone’s pros and cons. There are definitely some legitimate concerns here that need addressing and agreeing on before we proceed.