Potential Incentive Models

Potential Incentive Models

LP Incentives via ZK Claim Drops • Relayer Bonding & Uptime Verification (Future Module)

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SnarkSide’s design treats cryptographic computation as a market. Every action—matching, proving, funding, liquidation—is performed by off-chain actors operating in encrypted domains. These actors must be incentivized, verified, and rewarded without relying on transparency or static identities.

This section outlines two key incentive models designed to maintain liveness, liquidity, and protocol integrity in SnarkSide’s fully-private ZK architecture:

• 1. LP Incentives via ZK Claim Drops

• 2. Relayer Bonding + Uptime Verification

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1. LP Incentives via ZK Claim Drops

In transparent AMMs, LPs are rewarded via on-chain transfers or event logs tied to position metadata. In SnarkSide’s Oblivion Pool, LP deposits are encrypted, shielded, and unlinkable. Therefore, LP rewards must be:

• Private (not traceable to wallet or position)

• Verifiable (provably earned based on liquidity parameters)

• Non-interactive (no signature required, optional passive claim)

Design Overview:

• Each LP deposit generates a Merkle-leaf receipt with:

  • Encrypted stake ID

  • Commitment to locked amount + timestamp

  • Funding rate exposure factor

  • Nullifier for uniqueness

• The protocol computes epoch-based yield trees based on:

  • Aggregate vAMM skew

  • Per-LP exposure time

  • Participation window

• LPs can claim rewards using a ZK claim proof, attesting that:

  • They are the owner of an eligible commitment

  • The commitment was part of the Merkle root published on-chain

  • The nullifier has not yet been used

Claim Flow:

1. LP holds note: (amount, salt, time, vault_id)
2. Protocol posts epoch root: MerkleRoot(epoch_N)
3. LP generates proof:
   - Included in epoch
   - Valid stake parameters
   - Nullifier unused
4. LP submits: proof + nullifier
5. Protocol verifies and sends $SNSD to shielded address

Benefits:

• No address leakage

• No timing correlation

• Off-chain aggregation with on-chain ZK audit trail

• No Sybil abuse (commitments are unique)

Future versions may support delegated claim routing or yield vault auto-rollups, enabling compounding strategies inside encrypted LP structures.

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2. Relayer Bonding + Uptime Verification (Planned)

SnarkSide’s off-chain relayers are responsible for:

• Aggregating encrypted trade intents

• Performing intent matching

• Initiating proof generation

• Submitting matched batches to settlement layer

This work is critical infrastructure, and while currently permissionless, long-term decentralization requires a proof-of-liveness model with Sybil resistance and slashing mechanisms.

Proposed Model:

• Bonded Registration: Each relayer must stake a minimum amount of $SNSD to be indexed by the intent network. Bond is held in a Merkle-controlled vault.

• Activity Windowing: Relayers are required to post activity heartbeats during discrete epochs. A zero-knowledge uptime proof is submitted periodically:

Prove:
- You signed X matched intents within epoch N
- Those matches were submitted via valid SNARK batch
- Your relayer ID was linked to at least Y% of total volume

• Reward Scaling: Rewards are distributed proportionally via ZK claim drops based on:

  • Volume matched

  • Latency performance

  • Proof accuracy (no batch rejection)

• Slashing Conditions:

  • Failure to submit uptime proof

  • Proof mismatch or invalid batch construction

  • Double submission of conflicting intents

  • Chain reorg proof avoidance (future circuit)

Future Enhancements:

• zkPoW (Proof-of-Work) for relayer election

• Intent gossip propagation scoring

• Encrypted DKG for proving task allocation

This architecture builds toward a decentralized proving & matching mesh, in which relayers must earn their inclusion cryptographically rather than reputationally.

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Summary

Actor	Incentive Mechanism	Enforcement Method
LPs	ZK claim drop from Oblivion Pool epochs	Merkle root + ZK proof
Relayers	$SNSD emission via bonded uptime proof	Activity zkPoW + slashing

SnarkSide replaces visibility-based trust with math-enforced participation. Incentives are routed through the ZK layer, not the social one—ensuring the protocol stays invisible, composable, and permissionless even as it scales.