Payy

Payy is a payments-focused ZK networkA constellation of nodes (peers) that communicate via a peer-to-peer protocol, for example, in propagating transactions and blocks to other nodes., designed around private stablecoin transfers. Ethereum receives only state rootsA cryptographic hash succinctly representing a state using a Merkle tree. and the public deposit and withdrawal messages of each state updateA mechanism that allows to update the claimed state of a project. It usually involves verifying a state transition proof, but it can also be done in a trusted manner by a permissioned actor.. Balances live offchain as UTXO-style notes whose commitments form a sparse Merkle treeA hash-based data structure in which each leaf node is a hash of a block of data, and each non-leaf node is a hash of its children. The root of the tree is a cryptographic fingerprint of the entire data structure. Merkle trees (Merkle Patricia Tries) are used in Ethereum to efficiently store key-value pairs. maintained by the Payy validatorsIn the context of L2s, a Validator is an actor that validates the correctness of state transitions. For optimistic rollups this corresponds to challengers, and for ZK rollups this corresponds to the onchain verifier.

Privacy considerations

To spend notes, the user’s clientSometimes labelled interchangeably as a “node”, they are tasked with processing transactions and managing the blockchains's state. They run the computations for each transaction according to the rollup's virtual machine and protocol rules. If comparing to Ethereum clients, these would be execution clients such as Geth, as opposed to consensus clients. generates a Noir utxo proof that demonstrates ownership of the input notes and conservation of value; the public inputs of that proof are the commitments of the two notes consumed and the two notes created. Transfers therefore hide who paid whom and how much, but they do not hide which commitments were consumed: the deployed circuits do not use nullifiers, and a spend names its input commitments directly, which the nodeA software client that participates in the network. then marks as spent. Anyone with Payy blockAn ordered list of transactions and chain-related metadata that gets bundled together and published to the L1/DA layer. Nodes execute the transactions contained within blocks to change the rollup chain’s state. Protocol rules dictate what constitutes a valid block, and invalid blocks are skipped over. data can follow the resulting spend graph.

Because only commitments are stored in the tree, a recipient cannot reconstruct a received note from chain data alone: the sender must transmit the note contents out of band. In practice it is done by an encrypted registry operated by Payy, which stores the recipient’s public key in the clear and serves each client the entries addressed to it. Thus it learns the delivery metadata even though it cannot read note contents.

Fees

The protocol charges no transfer or withdrawal fee.

Compliance

The deployed protocol enforces no compliance measures and contains no auditor key, view key or other mechanism that could retroactively decrypt past activity. Identity data is collected at the application layer: KYC is required for the Payy card and fiat ramps, but it is not necessary for using Payy L2Layer 2 (L2) is a category of technical solutions aimed to scale the base layer in a trust minimized way. This category includes solutions like rollups as well as state channels and plasma. Other solutions are able to scale further, but with the introduction of additional trust assumptions, which are therefore not trust minimized. Sometimes the term Layer 2 is used to refer to include these solutions too, like validiums and optimiums, but to distinguish between trust minimized and non trust minimized solutions they are often referred to as "light" L2s, opposed to "strong" L2s like rollups..

Anonymity setIn privacy protocols, anonymity set denotes all users, to which a particular withdrawal could be plausibly attributed. Anonymity set depends on a particular withdrawal, the size of the anonymity set is a metric for level of user's privacy.

Payy hides the contents of each note but not the links between notes, so its anonymity set should not be read as the set of all users. An observer of Payy block data sees a graph of opaque commitments; privacy rests on not knowing which address, asset or amount each node in that graph carries.