The bull case for ZKP (and private crypto as a whole!)

$ZKP is the centerpiece of Panther’s vision.

The bull case for ZKP (and private crypto as a whole!)

Table of Contents:

To infuse DeFi with privacy, private crypto cannot be a rarity. Panther proposes an system that involves its ZKP token that can empower users across Web3,  as a part of a de-facto privacy solution for the DeFi. To keep this network functioning as intended and improve user experience, Panther requires an architecture and design that incentivizes the right actions.

To create enticing incentives means aligning the interests and behaviors of all network participants while minimizing destabilizing conduct to the greatest extent possible. Game theory offers a framework to model these intentions and understand how they work within complex real-life settings. Thanks to this, we can create optimal cost structures for using and contributing to Panther’s Multi-Asset Shielded Pools, helping inform governance decisions.

In this piece, we’ll discuss the mechanisms through which $ZKP can be used and become attractive, therefore accruing value. We’ll divide it as follows:

  • The need for Panther in the PriFi ecosystem.
  • Token utilities (which inform the Market Capitalization).
  • Tokenomics (which determine how the project’s internal economy fluctuates over time).
  • External and internal factors driving TVL, the metric in DeFi that’s most correlated with token appreciation.

We’ll also explore the 3 Key Metrics for Value Accrual, which will help you assess whether you think our estimations for the future price of $ZKP are correct.

The need for Panther: Why Panther is necessary for a private crypto ecosystem.

There is, without a doubt, a clear disconnection within the Privacy Finance ecosystem.

The segment of private crypto is one of the oldest and most popular use cases of zero-knowledge and privacy technologies within the blockchain industry. these (for the most part organic) developments have given us Layer-1 blockchains that can conduct private transactions among individuals but are unable to connect to the existing DeFi ecosystem or host their own.

On-chain mixers and “Private DeFi” tools seldom accomplish this mission, as they are often not decentralized nor compatible with DeFi in the most popular chains. Layer-2 solutions fail for similar reasons. The chart below, although non-exhaustive, illustrates this quite well:

The existing privacy ecosystem includes a number of players successful in their areas but fundamentally unable to address a wider market.

Having a private crypto ecosystem consist of several isolated projects is a bigger problem than it seems at first. Once you realize that this disconnection generates a lack of network effects, making the existing efforts unlikely ever to become default solutions:

  • Assets based in various Layer-1 blockchains represent single points of failure that, even if successful, lock value away from each other.
  • Private DeFi ecosystems that aren’t EVM-compatible difficult their inclusion in the current panorama and force users to not participate in existing, prosperous economies.
  • Single-use solutions, such as mixers, can hardly grow into their own DeFi ecosystem, offering few possibilities to users.
  • Other initiatives that try to connect these dots lack incentives for users, do not have systems to accrue value on their own or lack the funding and support by incumbent members of the industry.

How Panther and $ZKP can help private crypto stand out

With a privacy-oriented protocol providing interchain liquidity for all decentralized applications, Panther introduces several synergic unique systems. These, such as Multi-Asset Shielded Pools enabling private liquidity and transactions for all crypto assets; an interchain DEX offering scalable and affordable Interchain liquidity; and trustless data proofs that enable a trustless and privacy-preserving data economy for Web3, allow Panther protocol to stand out as an end-all-be-all solution in the PriFi panorama.

To illustrate this in a simple way, we can use a TAM-SAM-SOM structure, going from the use cases Panther can immediately service to those it can eventually encompass. Panther can service:

  • A Serviceable Obtainable Market of retail investors concerned about the transparency of Layer-1 blockchains. Panther’s interchain features can help attract users seeking yields and exposure to incentives in different blockchains, creating a positive Alpha for institutions to follow.
  • A Serviceable Available Market encompassing the entire existing DeFi economy, as well as those attracted to it thanks to enhanced privacy. With Panther having proven its usability in the retail market, it can be used by institutions as a decentralized version of institutional Dark Pools, which we’ll explain below.
  • A Total Addressable Market of all Web3 activity, a fully private economy on the blockchain, DeFi as a whole across multiple chains, and all digital assets.
The different levels of market demand for Panther.

We’ll continue to expand on how Panther can connect all the dots existing solutions can’t, drive value towards its economy, and, ultimately, accrue value for its governance token.

Token Utilities: The objective value of $ZKP

As you know, some of the behaviors that Panther incentivizes are:

  • Privately staking $ZKP to earn rewards for adding digital currencies to Pools and increasing MASP’s anonymity set. This increases the availability of $ZKP and drives its value up. Panther can act as a price discovery mechanism for privacy, bringing in new users for a positive feedback loop, eventually lowering the cost of privacy.
  • Bootstrapping the growth of the protocol by encouraging the DAO to buy back $ZKP tokens to create reward programs.
  • Relayers paying fees privately on behalf of users, furthering anonymity, to earn $ZKP.

Asides from what’s been mentioned above, $ZKP can also:

  • Be staked by token holders to secure the interchain DEX in an AMM model.
  • Be optionally used by users to pay for services on the platform at a discounted rate, such as:

(i) to pay for mint and burn fees associated with zAssets;

(ii) to pay transaction fees for sending zAssets;

(iii) to pay for selective disclosures; and

(iv) to pay for DEX trades.

  • Be used by the DAO to pay for services provided to the protocol such as:

(i) to pay incentive fees to privacy stakers;

(ii) to pay relayer service fees;

(iii) to pay DEX stakers securing vaults;

(iv) to pay DEX liquidity providers (LPs); and

(iv) to pay voting stakers.

The DAO can purchase $ZKP from the open market using the fees collected from users receiving discounts. These fees will then be used by the Panther DAO to pay for all the services above. This makes ZKP either inflationary or deflationary depending on network activity.

As $ZKP increasingly expands to multiple chains, the Panther DAO can be platform agnostic and benefit from a wider variety of users.

The relationship between token utility and Market Capitalization (Key Metric #1)

A token’s utility is a primary informer of the possible demand for it, which, with a limited supply, should result in a price increase.

Panther leverages these dynamics with a mechanism that rewards users for holding on to their tokens via staking, which in turn makes the network more secure and the tokens more scarce. This should have the effect of driving the system stronger and more attractive and the token up in value.

For our purposes, we can call Market Capitalization (MC) Key Metric #1 as it is a direct function of the value of our token and will help us determine its target price. Below, we’ll see how a project’s MC relates to its performance in DeFi. However, before that, let’s examine tokenomics, which play a crucial role in understanding how supply and demand dynamics behave through time:

Tokenomics, inflation, and distribution.

Every token with a release schedule presents, on some level or another, inflation. As ZKP tokens hit the market with different programmed vesting schedules, this inflation will continue over 144 months. After this, all 1 Billion $ZKP will be in the market and no more will ever be minted.

Let us revisit three key charts:

Top: $ZKP supply and key metrics at launch. Bottom: $ZKP allocations per stakeholder.
Token release schedule per stakeholder, mapped over time.

With an initial token price between $0.40 and $0.60, and 110M $ZKP circulating, we can estimate Panther’s market cap at launch to be between $40M and $60M. This means that we can assume Key Metric #2, Fully Diluted Value (FDV) to be around 10 times the initial MC, or $400M.

A healthy balance between Key Metrics #1 and #2 is key to a healthy project, as it signals high trust in the utility of a token and a potential for growth in demand unlikely to stagger due to inflation. We can call this function MC/FDV ratio.

Here is how some well-known projects fare in this metric:

MC/FDV ratios for well-known protocols.

As you can see, with an MC/FDV ratio of 10%, Panther still has room to realize its potential while performing better off-the-bat than some existing DeFi projects. However, our goal is to increase this number as fast and steadily as possible.

Panther’s initial supply is likely to see a high number of tokens enter the Staking program, with progressive utilities informing a balance between supply and demand for $ZKP. Therefore, we can foresee the MC/FDV ratio becoming healthier and healthier as new tokens get slowly minted and staked, and demand grows exponentially. In this case, what Panther aims to do is to create multiple sources of demand for the token to experience a supply shock.

Other dynamics to keep the token scarce (AMMs, reactors, bonds, staking).

Besides staking, the selling pressure for $ZKP can also be reduced through creating incentivization programs and participating in DeFi mechanisms such as AMM Liquidity Pools, Reactors, Bonds, etc. As a privacy liquidity solution, Panther is uniquely poised for DeFi actors to purchase and stake $ZKP to gain access to this liquidity. While MC/FDV is highly important, this metric too is a direct function of Key Metric #3, Total Value Locked (TVL). Over the next and final section, we’ll analyze how Panther can attract TVL and how Panther’s internal and external dynamics can help this TVL grow.

External and internal factors driving TVL (Key Metric #3).

It is a fact that, in DeFi, TVL is often seen as an approximate of the value of a protocol itself.

Understandably, the more people feel comfortable locking away value in a protocol, using it to realize financial gains, and transacting through it, the more valuable a stake in it is perceived to be.

TVL in DeFi protocols, at its highest peak, exceeded $258 Billion by some metrics. Panther needs to prove itself through time to attract TVL, which, given the utilities it can provide to the market, shouldn’t be hard to do.

Balancing MC and TVL is key to driving the value of $ZKP, in what we can call the MC/TVL index. The lowest a project’s MC/TVL ratio, the more it is perceived as successful and undervalued. Having a TVL higher than a project’s MC can be seen as a detonator for protocol growth. Given a MC of $40M, reaching a similar TVL should not be a too complicated feature for Panther given its institutional backing and investors. High staking levels, which we also project for, should help establish this trend. Without going any further, a 30% staking ratio should lock away close to $13M from Day 1. This, a circa 30% MC/TVL ratio, would put Panther ahead of several DeFi projects.

With Panther lowering its MC/TVL ratio, strong incentives, and growing utilities, a hike to a token price near $2.5 — $6.0 is not out of the question as the protocol conquers its SOM (see above) in the short to medium term. In the medium to longer term, capturing more SAM items may multiply this even further.

Here’s how we envision this to happen as TVL grows faster than protocol inflation:

Success Factors Driving TVL

A token-agnostic digital economy based on private crypto

Private digital stable currencies that can interact with DeFi do not exist in the crypto market, as privacy coins have values determined by market fluctuations. This poses a direct hurdle to the adoption of cryptocurrencies for commerce and a limitation towards the kind of markets that can be created in the crypto economy. Furthermore, there are clear limitations to what can be achieved by minting stablecoins, even privacy-oriented ones, following any one single method in any one chain.

The blockchain ecosystem needs an equivalent to cash, whose total value (M1 supply) sits around $15 Trillion. A proxy to this, stablecoins are among the most critical assets of the crypto economy, although transacting with them isn’t yet capital-efficient.

Panther does NOT aim to create decentralized stablecoins, but propones a solution to each of these issues by hosting private, token agnostic transactions on Multi-Asset Shielded Pools on the Polygon network with access to cross-chain interactions. By remaining token agnostic, existing stablecoins, shielded as Panther 1:1 collateralized zAssets, do not threaten the Panther ecosystem. Should any one of them fail to maintain their peg, users will simply move on to use another shielded stable asset.

Users wrapping stablecoins in Panther to enable private exchanges will also get rewards for doing so, eliminating impermanent loss risk. And, with 1:1 representations, zAssets defeat the capital inefficiency of minting stablecoins via overcollateralized lending mechanisms.

Putting institutional dark pools on-chain

It is unknown what percentage of all volume exchanged happens through dark pools, to the extent that some wonder whether official exchanges showcase valid data at all.

The most significant effect of Panther’s success in the retail market and second most important milestone in obtaining a Serviceable Available Market is bringing institutional dark pools on-chain.

Institutional dark pools, in short, are traditional versions of what Panther aims to create. Within them, capital institutions pool assets to trade with each other privately, preventing their trades from making a public record that drives prices in one direction or the other.

According to some experts, dark pools “have grown so much over the years that experts are now worried that the stock market is no longer able to accurately reflect the price of securities.” Some estimates say that dark pools are responsible for 18% of U.S. and 9% of European trading volumes, with some extreme calculations pointing to figures closer to 40% worldwide.

If the bull case for DeFi is to bring every financial instrument on-chain, then Panther’s bull case is to get dark pools on-chain. This, with an estimate between 18–40% of the total industry and the advantages outlined above, should be a desirable enough target that positions Panther as a zero-knowledge industry TVL black hole.

A move to interconnect chains privately

The Panther protocol is chain-agnostic and bets on a multi-chain future.

With many Layer-1 blockchains, all proposing different values, ideas, and mechanisms, Panther creates the infrastructure to connect them privately, rather than expecting one of them to take over everything.

Panther Interchain bridges will remove the issue of impermanent loss from the markets with the most efficient cross-chain transactions, which will undoubtedly create network effects of its own. This makes Panther able to address the whole DeFi market as opposed to just sections of it.

Furthermore, Panther’s bridges will make it possible to connect multiple blockchains and have the TVL locked in them migrate back and forth (a key concept) among them.

Assume just 5% of the assets locked in each one of the top 5 chains fluctuating freely through Panther, looking for the best possible APYs. If 1% of this value ends locked in Panther either due to $ZKP fees, minting zAssets, staking, purchases, etc., this represents $1 Billion of TVL just due to bridge usage.

The value of the assets flowing through chains thanks to Panther is likely to be higher than 5% of all chains’ TVL, as transactions will rarely flow just in one direction and stay there.

The need for ZK Reveals

While institutional DeFi needs to happen privately due to institutions’ unique market needs, this has to happen in a fully-compliant way, which none of the incumbents accomplishes.

ZK Reveals (explained above) introduce a no-nonsense alternative for institutions to participate in DeFi privately without falling prey to the dangers of transparency. This, in turn, opens the gate for more of them to participate in the crypto economy and continue fueling innovation in the space.

With ZK Reveals, institutions can use Panther to protect themselves on-chain while still disclosing their transaction history at will to whomever they deem necessary.

Servicing the Metaverse and Web3 with full privacy for users

Although the current blockchain ecosystem is geared toward financial products and services, it is expected that people will eventually use this technology for much more than monetary reasons.

Blockchain solutions are vital for hosting the Metaverse, making the most out of IoT devices, hosting decentralized social apps, digital identities on the blockchain, etc. However, there is no way these solutions cannot be turned into a surveillance enthusiast’s paradise without built-in privacy features.

In the 21st Century, our digital footprints are already massive and, occasionally, problematic. Perfect transparency due to public blockchains can only make this problem bigger and harder to solve. Therefore, ZK Reveals and private asset transfers can be a critical piece to enabling these systems to protect their users. While Panther is not a Metaverse solution, its primitives and underlying systems, as well as state-of-the-art zero-knowledge technology, can help infuse virtual worlds with privacy.

Web 2.0 relies on user data to function, but Web 3.0 should strive to protect it. An ecosystem in which users’ crypto wallets can be seen by everyone will intrinsically suffer from surveillance

DeFi composability

Each of the tools mentioned in this article can be used and leveraged by the entire ecosystem, exposing Panther to serendipity and network effects. It is not far-fetched to envision the DeFi ecosystem composing and using Panther-produced tools to achieve results that we haven’t described here, some of which we might not even know of yet.

In this sense, it is helpful to think of Panther as a general-purpose tool rather than a privacy hammer. Thanks to the project’s open-source nature, Panther will deploy primitives that will strengthen and empower the entire crypto industry which, over a long enough timeline, should reflect positively on $ZKP’s price.

How does Panther fare when compared to other private crypto protocols?

As Panther debuted in the privacy community, enthusiasts from all sides of the ecosystem were intrigued by its proposal. Was it a stealth addresses project? A ring signature project? A roll-up? A privacy coin, like ZCash and Monero?

In reality, Panther is alike and unlike all of the above. Its protocol design is geared toward solving all the longstanding privacy problems in the crypto space without creating a system that silos itself from the rest.

We've extensively illustrated this point in our article about the PriFi ecosystem. Check it out to learn what makes Panther stand out from other projects in the private crypto ecosystem!


The information and data contained in this document is provided for information only and should not be taken as investment, legal, financial or other professional advice. Any opinions expressed in the document are the author’s alone, and do not necessarily represent opinions of Panther Protocol or any legal entity associated with that project. Nothing in this document is, or should be considered to be, a financial promotion or other offering or invitation to subscribe for or purchase any asset described or referred to in this document. Information contained in this document is only intended to be current as of its first date of publication and will not necessarily be updated. Any information obtained from third-party or external sources is taken from sources reasonably believed by the author to be accurate, but without providing any assurances as to its accuracy.

About Panther

Panther is a decentralized protocol that enables interoperable privacy in DeFi using zero-knowledge proofs.

Users can mint fully-collateralized, composable tokens called zAssets, which can be used to execute private, trusted DeFi transactions across multiple blockchains.

Panther helps investors protect their personal financial data and trading strategies, and provides financial institutions with a clear path to compliantly participate in DeFi.

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