Penumbra deep dive: shielded cross-chain PoS network and private DEX
Post824 words
Explains Penumbra as an IBC-connected shielded pool with private delegation, private governance and ZSwap sealed-bid batch auctions that reveal only net flow. Raised a $4.75M seed led by Dragonfly and is in stage 0 of mainnet.
Key claims
$4.75M seed led by Dragonfly
Unlike Zcash, no transparent transactions are supported
Mainnet is enabled in stages via governance
For a long time, sloths have been too lazy to care about privacy.
However, this is about to change. Soon sloths are going to be effortlessly transacting, trading & staking in private.
How?
@penumbrazone 🌒
Deep Dive 👇
@penumbrazone is a shielded, cross-chain network designed to allow users to securely transact, stake, swap, and market make without revealing their personal information.
By integrating privacy with proof-of-stake through a unique private delegation mechanism, @penumbrazone features liquid staking derivatives, tax-efficient staking, and on-chain governance with private voting.
🥷 Privacy is native to Penumbra
@penumbrazone connects to the @Cosmos ecosystem via IBC, functioning as an ecosystem-wide shielded pool. This allows private transactions in any IBC-compatible asset.
Users can also swap these assets using ZSwap, a private decentralized exchange that supports sealed-bid batch auctions and Uniswap-v3-style concentrated liquidity.
These sealed-bid auctions prevent frontrunning, offer better execution, and only reveal the net flow across asset pairs in each block. This design allows traders to create liquidity positions anonymously, maintaining privacy over their trading strategies.
↔️ Private Transactions
@penumbrazone records all value in a multi-asset shielded pool inspired by the @zcash Sapling design, enabling private transactions for any IBC asset.
Inbound IBC transfers shield the value entering the zone, while outbound IBC transfers unshield it, maintaining transaction privacy.
Unlike @zcash, @penumbrazone does not support transparent transactions, ensuring that the entire network always operates with a high level of privacy.
🔒 Private Staking
In traditional proof-of-stake systems like the @Cosmos Hub, delegations are public, making privacy difficult to achieve. Penumbra addresses this challenge by eliminating direct staking rewards.
Instead, it treats unbonded and bonded stakes as separate assets, with an epoch-varying exchange rate incorporating the value of staking rewards.
This design ensures that all delegations to a validator are fungible and represented by a single delegation token. Delegators gain capital rather than income, maintaining privacy while still participating in network consensus.
The total stake bonded to each validator is public, ensuring validator accountability, but individual delegation tokens remain private, providing flexibility for delegators to trade them like any other token.
🗳️ Private Governance
@penumbrazone supports private, on-chain governance with delegated voting. Users can propose votes anonymously by escrowing bonded stake.
Voting is conducted via encrypted proofs of stake ownership, with votes decrypted only at the aggregate level by the validator set.
This ensures that individual voting preferences remain confidential while maintaining the integrity of the governance process.
🔄 Private DEX
@penumbrazone's ZSwap allows for private asset swaps within a single batch per block.
Input notes are publicly burned, and output notes are privately minted, ensuring transaction privacy (see visual from earlier).
Users can also create anonymous concentrated liquidity positions, revealing only the amount and bounds of liquidity without linking to any identity.
This setup allows users to approximate trading functions without exposing their specific market views.
💰 Fundraising
@penumbrazone's innovative approach has garnered significant interest and investment, including a $4.75 million seed round led by @dragonflyvc, with participation from other strategic investors.
🪂 Airdrop
The $UM airdrop was designed to decentralize the network by enabling contributors and interchain users to pre-stake their tokens ahead of the network’s genesis.
Claimants that pre-staked their tokens will hold liquid staking tokens ($delUM) in their accounts at genesis.
This process empowers the community to choose validators, promoting a decentralized and robust network from the start.
NFT holders from @CelestineSloths and @badkidsart were also eligible to claim!
🛣️ The Road Ahead
Currently, @penumbrazone is in stage 0 of mainnet and Prop0 is live. If this proposal passes, the network will pass from phase 0 to phase 1.
Stage 1 of the network launch will be enabled through governance, ratifying the chain and allowing IBC connections. However, transfers and the DEX will remain disabled.
The final stage of mainnet will also enabled through governance and will finally enable full functionality, which includes IBC transfers and turning on the DEX.
That's also when the airdrop tokens become tradable (in case you are a sloth or a bad kid lol).
🧠 Conclusion
@penumbrazone's innovative approach to integrating privacy with proof-of-stake, along with its private transaction, staking, governance, and DEX capabilities, positions it as a pioneering network within the @Cosmos ecosystem and beyond.
By prioritizing user privacy while remaining flexible and maintaining high security standards, Penumbra offers a robust and versatile solution that is unique in the market.
While privacy-focused protocols often face increased risk arising from potential regulatory intervention, I do strongly believe that privacy-preserving technologies are crucial in Web3.
Most people would like to keep their financial activities private. @penumbrazone provides the framework to do so, while still giving users the option to disclose certain pieces of information for compliance reasons if they choose to do so.
DYOR anon.
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