The role of Panther’s Reward Points
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Panther Reward Points (PRPs) are a unique solution designed specifically for Panther, providing an economic flywheel to bootstrap protocol activity together with Panther’s Automated Market Maker (AMM). On this blog, we explain why PRPs are important, how they function, and what the role of PRPs are when it comes to protecting your onchain privacy.
How does Panther achieve Privacy?
When users deposit their assets into Panther´s Multi-Asset Shielded Pool (MASP), they become private. For each transaction, there’s a ‘’receipt’’ in the form of an Unspent Transaction Output (UTXO). The protocol tracks the UTXO and will then use the deposited assets onchain upon user request, internally tracking who did what by spending and generating new UTXOs for the said user. Onchain analysts can see a number of transactions all being handled by the protocol addresses, but can not deduce who did what. If there are only 10 users in the protocol, or if there is minimal volume, it will be easier for onchain analysts to link certain transactions to users. So privacy first comes in the form of actions (internally represented via UTXOs), and is then practically achieved via the volume of actions relative to the total number of users. Commonly referred to as the anonymity- or privacy set, the collection of all possible users that could have performed a specific action, preventing onchain analysts or AI from linking transactions to users.
Why does Panther have Reward Points?
Panther’s privacy works via the anonymity set: more users and more actions equal better privacy, or a larger anonymity set. Realistically, this is what a user would care about the most, assuming privacy is the end goal. That is why the Panther Protocol values and encourages these elements: through Panther Reward Points. PRPs are not tradable assets. It exists only inside private accounts, accessible only to its owner, increment-only by protocol rules, decrement-only by zero-knowledge proofs. Each action, from signing up to depositing assets and holding them inside the protocol, rewards users with PRPs, analogous to loyalty points. As Panther expands the protocol's DeFi adaptors, such as zSwap, users will find more ways to use their private assets and generate PRPs. The protocol expands its anonymity set, offering greater privacy with each action. Users earn PRPs for helping the protocol.
How are PRPs calculated?
PRP calculations are configured and voted in through the Panther DAO. Some actions are simple and easily identifiable, such as PRP vouchers for signing up or doing DeFi swaps. But others are more complex, for example, PRPs earned on deposit and the PRPs generated over time.
PRP rewards come from three main sources:
- Flat reward: 10 PRP for every MASP transaction, regardless of the transaction size.
- Time-based yield: Targets 10% APY on shielded assets based on how long and how much value is shielded.
- Deposit bonus: A reward of 0.01% of the deposited amount.
Understanding UTXOs and Their Limitations
As mentioned earlier, UTXOs act as receipts that are conceptually simple but more complex than one might assume. UTXOs are a static representation of what has happened onchain. If a user deposits 1 ETH, there would be a UTXO saying that the user has 1 ETH. And if a user deposits another 0.5 ETH, there would be a UTXO showing that the given user has 1 ETH, plus another UTXO showing that the user has 0.5 ETH. When a withdrawal is being made, the protocol spends the relevant UTXOs and then creates new ones with the remaining balance. For example, withdrawing 0.8 ETH might spend both the 1 ETH and 0.5 ETH UTXOs, leaving a new UTXO of, say, 0.7 ETH. A UTXO doesn't display the current market value of 1 ETH, nor the rest of the user's holdings, nor how long each has been held. How do we go about determining an asset's annual yield if all of the information is trapped in a static UTXO that cannot infer on real-time values? The problem here is solved with PRPs, and why $ZKP isn't directly attributed. Instead, Panther users swap PRPs for $ZKP via the one-sided automated market maker (AMM). Just ponder for a moment on how you would attach a $ZKP value to a UTXO without running into fair value or liquidity issues. Additionally, using real-time price feeds would compromise privacy as external oracle calls could leak information about user activity patterns.
Solving the Valuation Problem: Scaling and Weighting
Panther Protocol solves this limitation by first predetermining the asset's value for the UTXO to recognize. This is done via scaling and weighting factors. Each token may use a different decimal value, so a scaling factor is applied to normalize the values among the rest. This scaling factor is set once when a token becomes a zAsset and can never be changed. Then a weighting factor is applied against this value to approximate that token's US dollar value. The weighting factor is periodically updated via DAO votes to follow token price changes, and could even be adjusted to make one asset more desirable than another. This method allows tracking the approximate value of UTXOs, but the limitation is that it is not a real-time value; it is a preconfigured one that becomes outdated between updates.
The PRP Value Assumption
Given that PRPs are only exchangeable for $ZKP and the access point is a one-sided AMM, another assumption is required: a target ratio. The Panther DAO’s target launch AMM ratio is "10 PRP: 1 $ZKP.’’ This real-time ratio will fluctuate over time, depending on the number of users claiming rewards or waiting for the AMM to recharge (recharges occur when $ZKP is added to the AMM), as explained in this article.
Due to the limitations of UTXOs, all yields are calculated statically. For reward calculations, PRPs are worth 0.01 $ZKP (equivalent to $0.0015 at the assumed $ZKP price of $0.015, preconfigured some time ago). The worth of $ZKP can be changed at a later date via weighting factor updates.
PRPs to Bootstrap Protocol Activity
The purpose of PRPs are to encourage protocol usage and should not be classed as a primary yield-bearing mechanism with a fixed return. There are multiple dynamically changing values being used that no other privacy protocol has attempted. PRPs are a key feature of Panther protocol, and help solve a bootstrap problem that other privacy protocols have - together with Panther’s AMM! PRPs help protect the users' on-chain privacy, and are an important part of Panther’s solution to stimulate protocol activity within its core architecture.
About Panther Protocol Foundation
Panther Protocol Foundation is a non-profit organization that supports the ecosystem through research funding, open-source development grants, and ecosystem initiatives.
The Foundation does not operate the protocol, deploy smart contracts, host interfaces, custody assets, or provide financial or digital asset services.
For more information, visit www.panther.org
To learn more about Panther Protocol, visit www.pantherprotocol.io