LP Participation
LP Participation
Shielded LP Deposits • Earnings Distribution via ZK Merkle Claim
Liquidity provision in SnarkSide's Oblivion Pool is architected for maximum privacy, verifiability, and non-interactivity. Traditional liquidity provider (LP) mechanisms — whether in orderbooks, constant-product AMMs, or vAMMs — suffer from deep visibility problems: capital exposure, fee dilution, frontrunning, and public strategy leakage. SnarkSide eliminates these risks with a shielded LP model, where participation is committed off-chain, validated through zkSNARKs, and entirely obfuscated on-chain.
This section details how LPs join the Oblivion Pool, how their contributions are tracked privately, and how they earn and claim fees or incentives via Merkle-based, zk-verified reward pathways, without ever linking their deposits to their withdrawals.
Shielded LP Deposits
Liquidity providers in SnarkSide do not interact with a visible contract pool. Instead, they submit a shielded LP deposit intent, committed in zero-knowledge, structured as a vault commitment.
LP Commitment Structure:
lp_commitment = Poseidon(
liquidity_amount,
lock_expiry_slot,
LP_salt,
LP_nullifier
)The LP deposit zk circuit proves:
The LP owns the committed funds.
The lock-up period is valid and enforced via time constraints.
The nullifier is unique and unused.
The LP’s margin is moved into the private Oblivion vault tree.
No public addresses are exposed. No event logs disclose the amount or direction. Only the vault Merkle root is updated.
Result:
The LP becomes part of the Oblivion liquidity set, which earns execution fees, spread capture, and funding penalties — all privately tracked.
Liquidity Matching: Passive Inclusion, Active Protection
Unlike traditional AMMs where LP funds are always available, SnarkSide employs intent-aware liquidity routing:
Liquidity is included only in circuits where a trade has been privately matched.
LPs do not suffer from price rebalancing volatility.
Matching is provably fair, but the LP identities and exact contributions are never revealed.
The LP vault participates as a blind capital proxy, governed only by constraints in the zk-matching circuit.
Earnings Accrual
SnarkSide aggregates trading activity and execution spreads into a fee commitment tree:
Each batch of executed trades emits a zkSNARK that:
Validates matched intents and price deltas.
Computes total fees and earnings for LPs.
Commits the results to a Merkle tree of encrypted LP rewards.
The LP reward structure includes:
reward_leaf = Poseidon(
lp_nullifier,
epoch_id,
earnings_amount,
salt
)A new Merkle root is posted for each epoch (e.g. 1h, 4h, 1d).
No LP can claim a reward without producing:
The correct nullifier.
A proof of inclusion in the reward Merkle tree.
A zkSNARK that reveals nothing except: → “I am entitled to X from epoch Y.”
Reward Claim Mechanism (ZK Merkle Claim)
To withdraw earnings, the LP submits:
A ZK proof of inclusion:
MerkleInclusionProof(reward_leaf, reward_root)
A nullifier burn to ensure one-time claim.
An output vault for receiving the earnings privately.
The circuit verifies:
The LP’s reward is in the root.
The nullifier is unused.
The earnings amount is internally consistent.
The new vault is well-formed.
No signature. No wallet link. No event trace.
Security & Fairness Guarantees
Non-interactivity: LPs do not need to monitor blocks or respond to events. All earnings are passive.
Sybil-resistance: Nullifiers are one-time, preventing fake vault splitting or reward manipulation.
Anonymity-preserving: Even large LPs leave no on-chain footprint.
Replay-protected: Claims are single-use, and double-claims are rejected cryptographically.
Optional LP Exit
After lock expiry, LPs may:
Withdraw principal + earnings privately into a new vault.
Convert LP exposure into a tradable NFT commitment (future extension).
Restake or roll into a new LP commitment with compounded rewards.
All of this is executed via zk circuits, without touching visible chain state beyond Merkle root updates.
Summary
SnarkSide redefines LP participation by removing exposure, leakage, and interaction:
Deposits are private.
Earnings are merkleized.
Claims are zk-verified.
No wallet is ever exposed.
This system enables compliant, institutional-scale participation in on-chain markets — with the same anonymity guarantees as the traders they serve. In SnarkSide, capital flows exist, but observation does not.
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