Zero-knowledge identity provider Keyring and DeFi lending protocol Euler Finance have joined forces to launch verified vaults on Avalanche in a bid to make decentralized finance more compliant.
In a press release shared with The Defiant, the projects said the launch comes with $3 million in incentives tied to hitting specific capital targets and introduces a new way to control access to DeFi.
The vaults integrate multiple DeFi components, including Euler’s lending protocol, Multipli’s xUSDC yield-bearing instrument, and price feeds from the Pyth Network. Depositor access is restricted through Keyring’s “zkVerification” layer, which uses advanced cryptography to verify users’ identities without sharing any personal information.
How the Incentives Work
Alex McFarlane, co-founder and CEO of Keyring, told The Defiant that Three Sigma, a cybersecurity firm, has reviewed the vault’s zero-knowledge system and its approach to data safety through shared computing.
Asked how Keyring would manage yield sustainability if deposits hit the full $500 million target required to trigger the maximum incentive package, McFarlane said the vaults function as a curated access layer to other DeFi yield sources. He explained that the “key number to look at is $50 million,” suggesting that once total value locked (TVL) surpasses that level, “the incentives will revert to that of normal DeFi lending.”
“In general, the collaterals we are working with all have high APY (for example, Multipli’s xUSDC has historically been around 10%). However, for those yield chasers, we will soon have Season II incentives up to >$1 billion in TVL,” McFarlane explained.
While the current vaults are based on xUSDC, McFarlane said the system is “agnostic of the underlying assets,” and may eventually support “other stablecoins, tokenized stocks and even other blockchains.”
KYC Enters DeFi Space
The vaults’ reliance on existing identity checks from centralized platforms also raises questions about user verification. When asked whether Keyring provides an additional layer of screening in case a user slips through KYC on platforms like Binance, McFarlane argued that further checks would only add “data liability” without increasing security. He said Keyring’s model inherits the safety of off-chain identity checks, without duplicating them on-chain.
“In general, we suggest that the regulated entities have significant scrutiny for failures in KYC. There is nothing to add from additional checks other than data liability for users. Fake identities are abused daily in traditional finance; Keyring simply brings users the inherited safety of offchain identity without the liability,” McFarlane said.
The launch is supported by Avalanche, Multipli, Turtle, and Pyth, with incentives distributed through Merkl, a decentralized smart contract using zero-knowledge proofs. The $3 million figure reflects the combined value of token rewards, some of which vest over time or are not immediately transferable.
