Could Panther Protocol enable private crypto donations?
Table of Contents:
Even when using open and permissionless blockchains, some things are best left private
Polarizing views
Surveys like the Edelman Trust Barometer reveal increasing polarization, particularly on social and political issues, with many participants expressing reluctance to collaborate with those who hold opposing views. At the same time, as crypto donations gain popularity, so does donor traceability.
Whether donating to a social cause, charity, or other non-profit, donors may fear backlash or unwanted attention for supporting certain causes. Real-life examples underscore the risks associated with traceable donations. Chainalysis has tracked donations back to donors' wallets linked to events like the January 6th Capitol Riot, the Canadian "Freedom Convoy" and high-profile alt-right organizations. While these cases involve highly controversial donations made using cryptocurrency, they also highlight the potential for donor identities to be exposed, potentially leading to serious repercussions.
The problems with “private” donations today
Many high-profile charities have adopted technology that enables donors to contribute using cryptocurrencies. Organizations such as Habitat for Humanity, United Way, Oxfam, and Doctors Without Borders now accept crypto donations; however, these solutions often rely on centralized third parties, such as Bitpay or Silentdonor. This reliance introduces not only the risks associated with centralization but also the potential disconnect between the donation and the donor, which can pose challenges for donor stewardship and require charities to find alternative methods to capture donor information for relationship-building. Additionally, inefficiencies can arise when crypto is automatically converted to fiat currency before the donation is processed. It's also important to note that donors who wish to claim tax benefits for their charitable contributions must maintain accurate records of their donations.
This blog article explores whether Panther Protocol could solve this problem.
Could Panther Protocol preserve the privacy of donors?
Panther Protocol is being developed to enable privacy-enhanced on-chain transactions, without compromising compliance enablement. Panther Protocol is set to accomplish this by supporting licensed digital asset service providers to operate trading zones (Zones) where rules can be established to help Zone Managers align their Zones with the regulatory requirements of the jurisdictions in which they operate.
In its initial releases, Panther Protocol will support use cases tailored to financial service providers, such as swaps. However, the same technology will also address the privacy concerns surrounding charitable donations, allowing donors to support causes without fear of exposure or backlash while safeguarding their identities and financial information. Below, we explore how this innovative approach offers a solution to the challenges of donation privacy.
How Panther preserves user privacy for financial transactions
Users will be able to create zAccounts to access Panther's Shielded Pool. Supported crypto-assets will be secured in a Vault smart contract, and an equivalent zAsset will be issued. These zAssets will be 1:1 collateralized "shielded" versions of the original tokens, usable within the Panther dApp.
These features preserve user privacy through the use of zk-SNARKs and zero-knowledge proofs, which allow transactions to be validated without revealing any details. Users will deposit cryptoassets into Shielded Pools and receive zAssets, privacy-enhanced versions of the original tokens. These assets will be useable across multiple blockchains while maintaining confidentiality. For more in-depth information about how Panther Protocol works, please see here.
Panther Protocol for Charities?
Panther Protocol has the potential to integrate into non-profits’ tech stacks. Each Zone within the Protocol can be customized with specific rules that adhere to the regulatory requirements of the jurisdiction in which it operates. For example, in the case of a charity, a Zone could be configured to disclose information only to law enforcement while preserving donor privacy. By doing so, charities can establish rules and compliance measures that satisfy regulatory requirements and ensure transparency.
Applying Zones to donations
An entity operating as a Zone Manager in Panther Protocol can facilitate private donations by setting up a Zone within Panther's Multi-Asset Shielded Pool (MASP or Shielded Pool). Donors would deposit cryptoassets into the Zone, where the recipient receives donations. In return, donors would receive zAssets—collateralized, privacy-enhanced versions of the original assets—that preserve the privacy of the donor’s identity and transaction details. The donor would then transfer the zAssets to the charity, which could convert them back to their original form (non-zAsset) and withdraw to a digital wallet, if desired. We explain how, below.
Panther Protocol could be a viable solution to charities looking to accept privacy-enhanced donations. The charity and donor would each register for a zAccount, using PureFi, Panther Protocol’s KYC partner’s process.
Having connected their respective wallets, the donor would deposit the asset(s) intended for donation into the Panther Vault, receiving, in exchange, a fully-collateralized zAsset that represents the digital asset being donated (e.g. zEth). At this point, the zAssets will reside within Panther’s Shielded Pool, which enables the transfer of digital assets to other zAccount holders (i.e. the charity recipient of the donation). Within the Shielded Pool, a set of smart contracts, safeguarded by cutting-edge cryptographic techniques, will preserve the privacy of pool users.
The donor can then initiate a transfer of ownership of the donated assets, with the transaction taking place within a Zone, managed by a VASP or other licensed entity operator. Once transferred, the charity recipient can choose to either keep the assets in the Shielded Pool, or withdraw the zAssets back to their original digital asset form using a similar process to the donor’s deposit.
When transacting using Panther Protocol, parties will receive rewards for depositing and sending assets. Rewards are received in Panther Rewards Points. The charity recipient, upon withdrawal, would pay fees to the Protocol. Similar to how some charities encourage donors to cover PayPal or Credit Card transaction fees, charities using Panther Protocol to accept privacy-enhanced donations may also encourage donors to contribute a small amount to offset any costs incurred by the platform.
For future iterations of the protocol, it is worth noting that Panther Protocol’s Zones are scalable and modular. A charity could, in theory, utilize different Zones to receive donations across various jurisdictions, each with its own set of rules tailored to meet the specific regulatory requirements of that region.
Privacy requirements for charities
Beyond addressing the lack of privacy on open blockchains, Panther Protocol’s Zones could, in the future, help uphold privacy obligations that charities have towards their donors’ information. Privacy legislation in many countries, including the European Union, Australia, Canada, the UK and more, requires that donor information should not be used or disclosed for purposes other than those for which it was collected, except with the donor’s consent or as required by law. Panther Protocol’s advanced cryptography will help to keep this information safe.
Conclusion
Panther Protocol offers a promising solution to the challenges of private crypto donations in a polarized world. By leveraging Panther’s privacy-preserving features, charities will be able to ensure that donor identities and transaction details remain confidential, protecting them from potential backlash or unwanted attention.