Rhino.fi (DVF)

Layer 2 "gateway to multichain DeFi". rhino.fi (formerly DeversiFi) claims to be the easiest way to access DeFi opportunities on Ethereum: invest, trade, and send tokens without paying gas fees.

Basics

• Based in:
• Started in: 2017
• Mainnet release: 2-2018
• From their blog (1-2020):

"Effective immediately, DeversiFi has migrated to a new back-end codebase, resulting in 10x higher performance, improved order management and a new dynamic fee schedule, paving the way for the StarkWare upgrade in Q1-2020."

 History

• Moved from Ethfinex to DeversiFi (2019) and then into Rhino.Fi (14-7-2022):

"DeversiFi is no more. Now, we’re http://rhino.fi We’re no longer just a #DEX. We’re a frictionless #Layer2 gateway to multi-chain DeFi."

• Ethfinex a matching relayer that mirrors the Bitfinex orderbook, spun off (2019) from Bitfinex and rebranded as DeversiFi. DeversiFi used to be a non-custodial decentralised exchange on Ethereum that utilises StarkWare’s zk-STARKS and Validium as a layer 2 scalability solution.
• From their whitepaper:

"The Nectar (NEC) token was launched in February 2018 with the primary purpose of incentivising liquidity on the Ethfinex centralised exchange. Traders who provided liquidity to the order books were rewarded with NEC tokens when their limit orders were matched. Tokens were issued in proportion to each trader's share of total exchange maker volume. This was not only a novel concept at the time, paving the way for a host of copycat exchange tokens, but also acted as an effective mechanism to distribute the token to those who had the greatest involvement with the exchange. Furthermore, 50% of Ethfinex exchange trading fees were pledged to NEC holders via a set of smart-contracts on the Ethereum blockchain to token holders. As of 20th September 2019, there are 17,807 ETH1 (~4.0 million USD) pledged to holders. The original NEC 1.0 model was inflationary, such that the amount of NEC issued per USD value of trading volume on the exchange decreased over time. Traders were incentivised to provide liquidity to the exchange sooner rather than later due to the declining issuance schedule. The token was also used to make governance decisions via a community portal at Nectar. Community. For example, NEC holders were issued temporary voting tokens which they were then able to use to vote new tokens onto the exchange. There were 14 such voting rounds leading to over 40 new tokens being added to Ethfinex.3"

Audits & Exploits

• Bug bounty program can be found [insert here].
• From L2beat (13-10-2022):

"Funds can be stolen if…

1. a contract receives a malicious code upgrade. There is a 14 days delay on code upgrades.

Funds can be lost if…

1. the external data becomes unavailable (CRITICAL),
2. the proof system is implemented incorrectly.

Users can be censored if…

1. the committee restricts their access to the external data,
2. the operator refuses to include their transactions. They can still exit the system.

MEV can be extracted if…

1. the operator exploits their centralized position and frontruns user transactions."

• From their website (4-6-2020):

"Funds traded on DeversiFi are secured by heavily audited smart-contracts. If DeversiFi goes offline, you can always retrieve your assets. Trade from your choice of private wallet or enterprise custody solution."

• Has done audits by PeckShield (2019).

Governance

Admin Keys

• From L2beat (13-10-2022):

"The system has a centralized operator. The operator is the only entity that can propose blocks. A live and trustworthy operator is vital to the health of the system. Typically, the Operator is the hot wallet of the StarkEx service submitting state updates for which proofs have been already submitted and verified.

Force exit allows the users to escape censorship by withdrawing their funds. The system allows users to force the withdrawal of funds by submitting a request directly to the contract on-chain. The request must be served within a defined time period. If this does not happen, the system will halt regular operation and permit trustless withdrawal of funds. If enough time passes and the forced exit is still ignored the user can put the system into a frozen state, disallowing further state updates. In that case everybody can withdraw by submitting a merkle proof of their funds with their L1 transaction.

The system uses the following set of permissioned addresses:

1. Governor 0x3a74…D8aA (EOA) Can upgrade the implementation of the system, potentially gaining access to all funds stored in the bridge. Currently there is no delay before the upgrade, so the users will not have time to migrate.
2. Data Availability Committee0x6a8e…d1e (EOA), 0x3bf2…fd3 (EOA), 0xf872…132 (EOA), 0x70ee…617 (EOA), 0x51ab…ff2 (EOA), 0x2b65…b64 (EOA), 0xfbd7…6cb9 (EOA) Validity proof must be signed by at least 4 of these addresses to approve state update.
3. SHARP Verifier Governor 0x3DE5…F5C6 (EOA) Can upgrade implementation of SHARP Verifier, potentially with code approving fraudulent state. Currently there is no delay before the upgrade, so the users will not have time to migrate.
4. Operator 0x8A6c…6ae5 (EOA) Allowed to update the state of the system. When the Operator is down the state cannot be updated."

DAO

• Governance went live (17-8-2021). DVF token holders can now participate in the governance of the DeversiFi protocol.

Token

Token allocation

• NEC From their support (4-6-2020):

"Community: 209,756,830 

DeversiFi: 100,000,000 (5 year vesting, 20% unlocked per year)

    -of which 10,000,000 allocated for community bounties

Bitfinex: 308,387,549 (5 year vesting, 20% unlocked per year).

    -of which 9,400,000 allocated for community bounties"

• From Crypto Briefing (26-3-2021):

"DeversiFi Token (DVF) will have a total supply of 100 million, according to the token contract address shared in the official blog post. The team says it would give out ~50% of the token supply as rewards to liquidity miners and traders to incentivize adoption. As for existing NEC token holders, only 7% of the DVF tokens will be airdropped to them based on a snapshot taken on Mar. 25. However, this will exclude Bitfinex, DeversiFi founders, and a few other large NEC holders."

• From Crypto Briefing (18-5-2021):

"In March, the DeversiFi team launched its governance token, DVF. More than 50% of the supply was reserved for liquidity mining rewards. Under the latest investment round, 12.5% of the total supply of DVF was sold to the investors for their long-term stake in the DEX."

Utility

• NEC. From their support (4-6-2020):

1. "Unique trading fee discount structure which benefits all Nectar holders
2. Deflationary supply via a weekly Buy and Burn model utilising up to 50% of exchange revenues from trading fees
3. Governance decision making by an open and decentralised community via earned Reputation (REP), gained by NEC staking mechanisms."  

• From Crypto Briefing (26-3-2021):

"The new DVF tokens will need to be staked on the DEX to acquire governance voting rights and be eligible for a share of fees. The DEX fees will be divided between token holders and liquidity providers."

Token Details

• Its first token was NEC and then in March 2021 they announced a new token, DVF.

Coin Distribution

• From Crypto Briefing (26-3-2021):

"NEC tokens were highly concentrated between a few large holders–Bitfinex, DeversiFi, and others controlled more than 90% of the token supply. Thus the team agreed to issue a new community-driven governance token to replace NEC tokens. This time, the team ensured the majority of its token supply is reserved primarily for the community." This translates to 50%.

Tech

• Whitepaperor docs can be found here.
• Code can be viewed here.
• Built on: Ethereum, built using StarkEx

How it works

• From L2beat (13-10-2022):

"Each update to the system state must be accompanied by a ZK Proof that ensures that the new state was derived by correctly applying a series of valid user transactions to the previous state. Once the proof is processed on the Ethereum blockchain the L2 block is instantly finalized. The system state is represented using Merkle roots.

The balances of the users are not published on-chain, but rather sent to several well known and trusted parties, also known as committee members. A state update is valid and accepted on-chain only if at least a quorum of the committee members sign a state update."

Upgrades

• Had a huge overhaul with Nectar 2.0 which introduced burnings, governance, no more whitelist and many other new additions.
• From Week in Ethereum (7-12-2020):

"Deversifi’s validium (off-chain data held by committee) upgrades to StarkEx v2 which includes fast withdrawals and a Turing-complete STARK proof language, though non-conformant ERC20 tokens (OMG, USDT) won’t work for another month."

Liquidity Mining

• From EthHub #143 (7-12-2020):

"Nectar Beehive V1 went live this week which is a liquidity mining program for the DeversiFi Nectar token (NEC) with the goal of bootstrapping community and liquidity in their ecosystem."

Other Details

• Uses 0x

Privacy Method

• From their website (4-6-2020):

"All transaction data is handled off-chain with only commitments to the new state being periodically published to the blockchain. This means that you don't need to worry about your proprietary trading strategies being copied, or your trading activity being interrogated in any way."

Data Availability Committee

• From the announcement of their DAC (6-2020):

"In order to achieve privacy, DeversiFi trader’s balance data will be moved off-chain, rather than storing it on the blockchain. There are several other privacy achieving methods that are currently being researched by StarkWare that could be implemented in the future, without requiring data to be stored only off-chain by a committee. However, the current approach was chosen as a pragmatic solution following conversations with large customers and will be improved in the future.

The Data Availability Committee has three main functions:

1. Protect user trading privacy by allowing balance updates and trades to be hidden from other users.
2. Check the balances state and if valid sign to allow the merkel root of the state to be updated on-chain.
3. Publish all balances data if DeversiFi and or StarkWare were ever to go offline or withhold data."

• The committee consists of: Consensys, Infura, Nethermind, Iqlusion, StarkWare, DeversiFi and Cephalopod.

• From their blog (4-7-2020):

"Longer term, traders will be able to choose to have their data either stored off-chain (the current DeversiFi system), or on-chain. This new solution is called Volition and enables traders to benefit from both privacy and high TPS, whilst not relying on the DAC. Traders will be able to choose between Validium and zkRollup. For more information about this revolutionary new technology, see the StarkWare Volition announcement

As well as Volition (a choice between off-chain, or on-chain data via the security of a ZkRollup), StarkWare will also remove the need for the DAC to keep trade data private, meaning the Quorum of DAC members can be increased from the current seven."

Their Other Projects

Validium StarkEx

• The technology being used (StarkEx) by the exchange has its shortcomings and operators can freeze users’ funds.

necDAO

• From the whitepaper:

"necDAO will have scope to govern:

1. A whitelisted tokens registry (dictating the assets which can be traded on DeversiFi)
2. The Ethereum Name Service records registered for the DeversiFi smart-contracts
3. Ownership of the Nectar ERC20 Token controller smart-contract for future upgrades
4. The management of the earned exchange fee pot (around 17k ETH)

The necDAO will manage:

1. the "fee pot" (50% of trading fees collected so far during the Nectar distribution phase on Ethfinex, around 17k ETH).

When a nectar holder claims their reputation in the new DAO, they are asking for their proportional share of the “fee pot” to be transferred to the DAO. The "fee pot" will begin slowly dripping funds to the DAO via a vesting contract over a 3 year vesting. This allows vesting to be cancelled if vulnerabilities are later found, rather than having the full funds at risk in a complex smart contract. Future funding may come from other sources which the DAO develops or negotiates."

• From Formal Verfication (4-6-2020):

"Traders were able to decide what tokens they would like listed allowed by the Kleros dispute resolution court.

While only launching on the 24th January, necDAO only has 108 members. Interestingly, a total of 359 addresses have a NEC balance meaning only a third of holders are members. The number of NEC staked in the DAO is ~75m which equates to 25% of the circulating supply.

Looking at the the governance specific metrics, there have been a total of 19 proposals, 47% of which have been successful. Although votes seem to be growing on a month-by-month basis, voter turnout is low at just 32%. Proposal participation (where reputation can be further earned in successful cases) is even lower at 12%.

In the case of DeversiFi, a consortium of 7 members (see here for full list) keeps the off-chain data and if DeversiFi was to shut down, at least one of the 7 members must exist as well as be honest for users to get their assets back. "

Roadmap

• Can be found here (2-11-2020).

• From their blog (4-7-2020):

"Without giving too much away at this stage, the main three areas that we are concentrating on in the short term are UX Improvements & Wallet connectivity, DeFi Integrations and Better Withdrawals."

Pros and Cons

Cons

• From The Defiant (10-6-2020):

"DeversiFi decided to innovate by integrating a zk-Stark Layer 2 solution, allowing their platform to scale transactions per second dramatically while obfuscating the trading footprints left by the users of the exchange.

But the zk route means there is no composability to the main Ethereum chain. In layman’s terms, this means that DeversiFi’s order book is not readable by other smart contracts. 

This might not sound like a big deal, but consider this: DeversiFi’s order books will not show up in DEX aggregators such as 1inch or Paraswap, even if chances are they provide some of DeFi’s tightest bid/offer spreads and depth."

Team, Funding, Partners

Team

• Full team can be found [here].
• Will Harborne; CEO

Funding

• ParaFi and D1 had together invested (7-8-2020) $450,000, in tether tokens, in return for governance token nectar (NEC).
• Sponsors The Defiant (12-8-2020).
• From Crypto Briefing (18-5-2021):

"DeversiFi just raised $5 million in a funding round. The funds have been raised under a strategic investment from ParaFi, with participation from other venture capital firms and key players in the cryptocurrency industry, including Defiance Capital, Lightspeed Venture Partners, Blockchain.com, Delphi Ventures, Fenbushi Capital, OKEx, and Longhash Ventures. StarkWare, which powers DeversiFi, also contributed."

Partners 

• Is part of the DAOstack ecosystem (still as of 20-1-2020), turned into necDAO.
• Is building (27-1-2020) the DEX with Starkware.
• According to their website (4-6-2020): Consensys, Starkware, Ledger, WBTC, Infura and Bitfinex.
• Participated in the DeFi Alliance’s accelerator program (18-9-2020).
• Founded L2² together with Loopring (22-12-2020).
• MAMA, a member, according to their website (27-4-2021).
• Is a member of Asia DeFi Network (ADN) according to the website (13-7-2021).

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