Panther Protocol | Oliver Gale - Alpha protection through privacy | ETHDam 2024

[Music] all right up next we have Oliver Gail uh from Panther protocol take it away thank you very much man thank you very much hi everyone how's everyone doing I'm Oliver uh CEO co-founder of Panther uh protocol and uh in keeping with the theme of eth dam I'll be talking about the problems that we face in web three economies around privacy how we can address them particularly Panthers focused on preservation of alpha reducing alpha decay for uh Financial defi use cases in web 3 so you know when we talk about the scale of the problem 99.4% of assets on web 3 today are on pseud Anonymous public chains so that's approximately $2.5 trillion worth of assets uh the remaining assets would be on chains like Monero Zach locked in tvl on something like rail gun tornado cash Etc so qu to Panther's uh thesis is that the existing Network effects of protocols like ethereum are not going to be uh overcome there are complimentary Solutions sort of Standalone l1s and l2s being built which will provide end to-end privacy but uh meanwhile there will continue to be a vast majority of liquidity held on suud Anonymous ledgers and that uh uh the solution the long-term viable solution is is to bring privacy enhancing Technologies to existing liquidity and network effects as opposed to building an entirely new infrastructure and asking liquidity to migrate some will but the majority of liquidity on Unis swap for example is likely to stay on Unis swap so um and you know so there's there's two sides to it the reason that I got into the Privacy space in the first instance is the human rights fundamental right to privacy and the belief that a healthy Society needs to have uh a fair balance of power and that a surveillance state does um erods our rights personal Liberties our right to vote uh without being subjected to coercion or oppression so this is the reason number one for doing it uh like going through this journey now it's been about four years building Panther and sort of when you get into the problem solution product Market fit space uh we realize that most people actually are not concerned about their personal Liberties they just want a product that works and so um when we looked at who's likely to be the actor that has a problem that really needs privacy from a financial perspective it would be asset managers Brokers financial institutions those players who have a Competitive Edge or Alpha on the market um who suffer at the hands of things like a pit Anonymous Ledger or uh a me pool that broadcasts not only what they're doing but who they're doing it with and to what extent so solving these Financial use cases is the sort of first use case for uh Panther so you know when you look at solutions that bring privacy to a protocol like ethereum or other student anony the smart contract protocols the first thing that probably comes to mind is tornado cash and tornado cash you know exemplifies what when we started building we hypothesized may happen probably would happen which would be that this decentralized onchain mixer would attract illicit funds and then be subject to uh like law enforcement regulatory enforcement and um so you know of course that happened and even worse the personal Liberties of some of the development team um have been you know threatened now and they find themselves in a place where they risk losing their personal freedom which is an ideological and something that we strongly um believe is unfair and prejudicial and a violation of Human Rights but that's not what you know this presentation is focused on um except in so far as as a builder myself and uh for our team we have to be conscious of the landscape that we're building in so when you build what effectively is an onchain mixer you then have to deal with uh threats to your personal Liberties and what I think is equally compelling is the commercial viability of a system that in Practical terms has been sanctioned when I say like commercially viable what I'm talking about is 30,000 licensed financial institutions globally 60 million point of sale terminals that accept Visa Mastercard American Express Etc day-to-day use mainstream adoption of blockchain technology for payments and financial use cases so if you don't have a compliance system and framework which is adequate for these you know 30,000 institutions realistically you're building a niche solution for hardcore users and you're not building something which has practical application in people's day-to-day lives so the core Panthers design thesis from 2020 when the project started was how do we reconcile privacy and compliance infrastructure which is now a popular discussion Point particularly post tornado cash but from you know our perspective um having been building web 3 Financial infrastructure for over a decade it was like a well obviously um compliance officers don't approve infrastructure that is going to expose them uh and the the institution so any system needs to prevent Bad actors from abusing the system and it needs to uh navigate regulatory ambiguity so travel rule is a very painful uh prerequisite to solve for but I think like if you want to generalize the problem our view as well is that look there's a huge diversity in geographies and then there's a huge diversity amongst the financial institutions they have different product different risk appetites even when they have the same products different human beings managing your compliance system and so fundamentally if your compliance system isn't modular and agnostic to their requirements then you're not going to be able to create a one-size fits all so our our philosophy is it's not sufficient to have um I mean it's not sufficient or appropriate to have sort of compliance by committee um which is what I've seen a lot of in the sort of web 3 uh onchain mixer space um so you need you know affordability is important Panther uses ZK snarks this type of computation can be expensive that's uh you know any Financial Service should uh make sure it's price sensitive um sufficient anonymity set and integration with existing D5 protocols so when it comes to the anonymity set this is something that uh is a big problem it's the network effect that essentially any sort of onchain shielded pool solution needs to generate and Foster and in some systems you'll find that for example something like tornado cash they have to bootstrap a privacy set for eth and then they have to do one for usdt and one for usdc that's a problem because the long tail of Assets in web 3 will not have um the same Network effect and may never acre the necessary Network effect to offer true privacy because functionally you're talking about statistical privacy you're not talking about absolute privacy I don't think you're ever talking about absolute privacy there's always some information leakage uh so Panther addresses the anonymity set with what is called a multi-asset shielded pool so our shielded pool can accept nfts erc20 tokens other token standards and they all share an anonymity set which is driven by the quantity of liquidity held in the smart contracts as tvl and also the transaction throughput uh we also address something else which is the anony anonymity set across the financial actors which is part of our Core Design so uh in in one sentence Panther is a privacy primitive for defi infrastructure that offers modular compliance systems uh we have have a number of services uh I think it's on this slide so the shielded pool is the multi-asset shielded pool we have defi adapters adapters are Integrations into thirdparty smart contracts that allow you to essentially route your transaction to the third party Financial Service execute it and return the output to Panther protocol so we built adapters so far for UNIS swap Power Swap quick Swap and kyber swap is in process we're focused at this moment in time on building the adapters into the Dex ecosystem but functionally you can build an adapter into any smart contract protocol if it involves some token mechanic it could be a security token it can be a native gas token or anything in between um decentralized kyc Panther is built our our sort of V1 protocol will have uh an integration with Integrations done with pure they're a nonchain compliance provider we built the ZK circuits to allow a user to self submit kyc information through the purify protocol checks are run based on conditions which are set by The Zone Manager the user is given a zero knowledge credential and they can use that credential to access zones and zones are the compliance like they're the core building block of the compliance system so what a zone is is a logical partition of the shielded pool every Zone has a Zone Manager The Zone manager has a Zone ID every utxo in the shielded pool is assigned The Zone ID as well as a transaction identifier as well and the Zone Manager is responsible for setting the compliance systems and thresholds so they will determine what the prerequisites are to enter what essentially is a Walled Garden by default everyone is excluded so you can say panther operates on inclusion set The Zone Manager defines what's necessary to enter the zone They Define the transaction limits they design and define whether uh sorry define whether zones can do inter Zone transfers so if you think of things like payment networks operating in consortiums or asset managers with portfolios and different jurisdictions you may configure different zones for each of these use cases jurisdictionally or by type and uh the Zone Manager also is is uh responsible for data management so if you think about uh a universe of zones they all share first of all the same shielded pool which is really important we if we're talking about Panther supporting uh theoretically every financial institution on Earth We're not asking each of them to bootstrap their own anonymity set not across assets and also uh not within each Zone that would be most likely an inserm mountable challenge for most of them every Zone shares the anonymity set the key is none of the zones share users and none of the zones share transaction outputs so from a compliance perspective and uh we've been having these discussions with governments Banks asset managers Brokers we sit down with them and I think this is the sort of diagrammatic infrastructure that we begin the conversation with um this is of what I'm mentioning this system works from a compliance perspective and it works from a product perspective for financial institutions the institution can utilize the panther compliance layer and integrate their own compliance system so you may have all the way on the left side of the spectrum a dow may say we're going to use this infrastructure we're going to deploy a compliance system which is connect your wallet and the data storage system is we don't store the data and they can operate that the key here is that the Zone Manager whoever that entity or group of entities is is responsible for this infrastructure which is critical on the other side of the spectrum you can be the most regulated financial institution and say we have existing compliance systems we don't wish to change anything we're not interested in migrating our compliance on chain everything is as is we need it to be that way we're interested in onchain private execution for protection of our portfolio Alpha for example Panther supports that as well they may say we want the data stored onchain Panthers built an NPC data safe for our V1 that's one implementation data can also be stored offchain um and then the rest of the diagrams sort of uh indicates that this in this case institutional Zone can do private pair topair transactions between users within the zone or cross zones they can do uh what we call ZR uh sorry um Z swaps Z trades uh which are peer-to peair swaps within a Zone and then they can do Z swaps which are uh swaps which are routed through adapters to third party amms and Central limit order books on chain um and so we're agnostic in terms of what adapters can be built what compliance systems uh are integrated and deployed and then um there's a couple of other cool features that we had to build in order to facilitate um a better uh privacy product so one is account abstraction uh relays are responsible for paying gas fees Relay can accept different forms of payment when I have a conversation with a broker they're typically not interested in using a gas token the accountant doesn't want to manage it the volatility may be prohibited under the regular atory guidelines so being able to paint something like a stable coin is a useful feature the other thing we've done is introduce uh this uh the relayer network also has what we call a z Miner Z miners are essentially a network of uh nodes who are responsible for batching transactions and so a batch can be one transaction that's going to be more expensive but if the use case is price sensitive and not so time sensitive you can batch transactions together and so this brings down the cost cost of execution um I can't say with certainty whether the cost is actually cheaper on aggregate than a Nat transaction it would it's going to be interesting to see if actually there's a configuration where Panther can say it's cheaper to process transactions through P Panther whil it's also delivering a compliance Gateway and a private uh product execution environment so this is the competitive landscape that we're operating within this diagram is um the byproduct of some research that Greenfield did Greenfield is not an investor into Panther so that was great because the competitive Matrix wasn't done by us and it's still favorable um basically Panther differentiates itself on the compliance systems uh which are driven by The Zone management system there are also some other things we do in terms of rate limits and RPC inspection we have selective disclosures which is this sort of um the de facto system that privacy mixers are relying on today is hey the user has full sovereignty however they can disclose sort of as I've pointed out it it doesn't that doesn't work like you you simply are not going to be able to get mainstream Financial actors to adopt a system where you say yes we understand North Korea may be running transactions through these pools but Alice and Bob your users or we can prove that we're not party to that it's um ideologically maybe it's sufficient but in practice it's not commercially viable their privacy systems are very hard to in today's moment in the industry to even get a financial institution to consider if you want to get them to integrate and adopt it and do things like prevent every single transaction you've ever done being published on chain connected to your Mastercard account and then statistically inferred and sold by nanson or Arkham intelligence or all the other actors who make money out of this it's not going to be done by having sort of a generalized homogeneous mixer um our test net is live as I mentioned we've been in development for just about four years it's been a long time we've had to really pivot the product stack initially the V1 of the protocol was designed to be retail Focus so we also were of the Paradigm and view that a selective disclosure would be sufficient post tornado cach we've somewhat inverted the strategy but with zones sort of enabled more less a configurable infrastructure we just deployed stage five test net uh last week and we have last I checked 3,000 testers we had 200 in January so it's been more than doubling every month which is great which is great we're going to have uh another four to five test net stages so May net is scheduled for uh developers may say may I think it's more like June um maybe maybe July uh and in connection with that we have a lot of activity ongoing in terms of deployment of the testnet but also um branding overhauls announcing the foundation open sourcing the technology stack and essentially decentralizing what has been a very Incognito project for quite some time now so you can get involved by going to Panther protocol. that's going to be panther. org shortly and uh you know getting involved in testet or talking to me or reaching out joining our socials whatever you want um any questions yeah yeah yeah hold on I'll come over with the mic uh thank you for the talk so if Zone a and Zone b share the same shielded pool then can I say that a withdraw from Zone a is indistinguishable from a withdraw from Zone B yeah if you're looking at it from uh an outsider's perspective the zones are not distinguished so they they're all within the panther smart contracts all withheld within the panther Vault so there's no external identifier that will say this is Zone A's user and this is Zone B's user Zone B can say that it's not their user and Zone a can definitively say yes this is my user and I know everything about them so from the perspective of Zone B they will be able to say well that's not us but it doesn't go beyond that so it is possible for Zone B to distinguish between two withdrawals zomie can say this is not my withdrawal okay thank you you're welcome yeah one more yeah so I'm Keen to learn more about how the kyc is managed from the perspective of you guys receiving a subpoena from some alphabet soup agency and so it looks like you mentioned maybe the kyc is offboard to some decentralized platform and another provider so I'm curious to to get some more information on that sure yeah so uh version one of Panther which is what we're going live with um is going to be well it uh it may be uh governed by the panther Dow that in itself is a whole political subplot um it may not be it may be governed by some other entity our responsibility as developers is to develop this IP and hand it over to the foundation the found Foundation decides what happens thereafter uh the objective is that it's open sourced uh and the objective thereafter is that it's useful and that the market sees utility in deploying zones so what we have done for call it you know the Genesis zone is we've integrated with purify so they would be an integration partner for an onchain deployment and purify essentially is a dow and set of smart contracts that route to web two solutions and web 3 solutions for web 2.

5 solutions for things like kyc on boarding transaction monitoring sanction screening Etc so they have the kyc K KYB tooling and they have the transaction monitoring tooling uh if a zone is run by a DA and the Dow sets limits which are going to be determined by their governance structure let's say it's you know photo ID basic information sort of standard verification uh uh the da is the one who is taking custody of the information and so the DA has essentially the decrypt key and that kyc information is stored uh in terms of the transactions on chain in encrypted format and as it pertains to the sort of say like a photo ID or onboarding information that would be held by the kyc processor which in this case is purifi but it will be accessible through the Dow's decryption keys that's uh okay I'm really sorry to have to cut you off there but we got to do have to get on with the next one I'm really sorry no worries uh I'm sure you're around hang out outside questions and stuff yeah any more questions you can find me uh hanging around thank you [Music]