Privacy-Preserving DeFi Stack on Polkadot

Recently Rarestone Capital has invested into Manta Network alongside Polychain, Hypersphere, Three Arrows Capital, Multicoin Capital, Advanced Blockchain AG and more.

Manta Network is our bet to best solve the lack of privacy and user experience constraints we currently experience in DeFi.

Key Highlights

Manta’s founding team comprises many cryptocurrency veterans, professors, and scholars whose experience includes Harvard, MIT, Algorand, and other institutions.

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Several strategic partnerships established including Equilibrium, Reef Finance, and Tidal Finance. Equilibrium will bring in its technical expertise to advise Manta on an open standard for fungible tokens with the potential for privacy-preservation leveraging zero-knowledge-proof technology. Reef Finance will assist Manta with deepening liquidity on its DEX product, MantaSwap. The Tidal platform will be used to provide cover for Manta’s liquidity providers.


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The crypto industry’s top-tier funds will support Manta Network in securing its parachain slot in the upcoming parachain auctions once Polkadot is live. Additionally, Manta’s backers will help Manta by deploying capital that serves to bootstrap supply-side liquidity once the decentralised exchange launches.

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The Web3 Foundation and Parity are working closely alongside the Manta team to ensure development targets are met and the right connections to potential partners and influential individuals in the space are made. Manta received a grant from the Web3 Foundation in Q4 2020.

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Manta Network is developing a cross-chain — privacy-preserving — protocol for the entire DeFi stack on Polkadot. In the near term, Manta users will be able to easily convert their existing tokens 1:1 into synthetic clones that are private and untraceable in nature. Users will then be able to — at speed — transact or exchange their tokens in a privacy-preserving fashion via Manta’s inbuilt payment protocol and decentralised exchange, MantaSwap.

Manta’s mission is to establish itself as the privacy token standard across the industry. As a standard, Manta will essentially offer higher-level protocols and applications the plug and play privacy technology necessary to abstract away the complexity involved with achieving anonymity at scale.


Three overarching systemic constraints prevent layer 2 protocols running on blockchain computing platforms — namely Ethereum — reaching their full potential.

These are:

  1. Privacy: Ethereum transactions are easy to trace given the public nature of the ledger and transaction history. Although users do not usually input personal information when using public blockchains like Ethereum, analytics firms like Chainalysis have been able to develop sophisticated tracking solutions for enforcement agencies that utilize data freely available on the public blockchain.
  2. Scalability: Ethereum is limited by transaction fees and transaction speeds, unable to cater to real-world volumes without consequences.
  3. Interoperability: It is yet to be possible to have seamless cross-blockchain transfers of any type of data or assets.

In the context of Decentralised Finance (DeFi), these three constraints lead to a myriad of problems for both demand-side and supply-side participants coalescing around these DeFi protocols:

Manta Network — Target Market

Demand-side: DeFi users / token holders

  • Front-running: the public nature of blockchain data combined with slow block-times expose allows bad actors (front runners) to enter a trade on decentralised exchanges to capitalize on the knowledge of a large pending transaction that will influence the price of the underlying crypto-asset.
  • Liquidity fragmentation: Investors who are also looking to enter crypto, but are turned away by shallow order books or liquidity pools and the fragmentation of liquidity due to the lack of interoperability between layer 1 crypto-assets and lacklustre UX/UI.
  • Inefficiency: trading or transacting via DeFi protocols on Ethereum is slow and at times very expensive, ultimately shutting out underserved portions of the market.

Supply-side: Liquidity Providers (LPs)

  • Operating expenses: liquidity providers are required to pay, at times, extortionately high amounts of gas to process their transactions, which ultimately reduces their profits.

Manta Network — Value Propositions

  • Frontrunning resilience: transaction obfuscation delivered through Manta’s privacy-preserving technology combined with high-speed block-times prevent bad actors to enter trades based on pending-trade data.
  • Anti-surveillance: the privacy-preserving properties of the tokens transacted and traded across the Manta Network prevents unwanted third-parties from surveilling a user’s activity.
  • Deeper liquidity pools: leveraging Polkadots parachain interoperability and cross-chain bridges, Manta will be able to access greater quantities of liquidity.
  • Profitability: lower transaction fees than Ethereum lower barriers to entry for new users and widen profit margins for liquidity providers.
  • Usability: faster transaction speeds coupled with more economical transaction fees lower barriers to entry for the wider target market groups.


Polkadot is layer zero protocol that aims to connect various blockchains, with Manta aspiring to be one of them. Manta’s stack contains several protocols including its own low-latency blockchain, a decentralized private payment protocol and a decentralized private token exchange protocol.

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Description automatically generatedManta’s Privacy-Preserving DeFi Stack

Layer 0 — Polkadot Relay Chain

To overcome the constraints outlined above, Manta has chosen to develop its project as a Polkadot parachain.

The Relay Chain is the central chain of Polkadot — it aims to connect various Polkadot-compatible blockchains, serving to enforce consensus and enable interoperability. These blockchains are jointly validated on Polkadot, facilitating a shared security model where all blockchains contribute and benefit from the same level of soundness.

Manta aims to leverage the Polkadot’s Relay Chain for security, achieve native interoperability for liquidity aggregation and the scalability necessary to satisfy mass-market user experience requirements.

Layer 1 — The Manta Blockchain (Parachain)

The Manta Parachain will be built using the Substrate framework. Substrate enables the fast run-time necessary for Manta to achieve complete end-to-end anonymity using zk-SNARK. By using a WASM-based runtime, Substrate can support compiling native Rust code, making it more efficient than running on top of Ethereum Virtual Machines (EVMs).

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At a high level, Polkodot’s shared security model means that the Manta parachain connected to the Polkadot Relay Chain will benefit from the economic security provided by the Relay Chain validators.

While not strictly necessary for security purposes, Manta’s native token will have some functionality at the parachain-level. Manta depends on Polkadot’s Proof-of-Stake scheme to select the validator set to handle validation and finalization.

Layer 2 — The Decentralized Anonymous Payment (DAP) protocol

The DAP protocol is the layer that enables users to swap their Polkadot, Parachain and wrapped tokens with their corresponding private tokens.

Minting a private token is trustless and there are no private keys involved. The locking is secured by the consensus protocol of the parachain in which the base asset originates from. Once locked, the contract communicates through the Polkadot Relay chain to Manta’s DAP where the privacy tokens will be minted in response.

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Description automatically generatedUser A minting private version of Polkadot’s native token ($pDOT) and User B redeeming the base asset ($DOT)

Once privatized, users will be able to transact privately and benefit from programmable privacy for their tokens.

Layer 2 —The Decentralized Anonymous Exchange (DAX) protocol

The Decentralized Anonymous Exchange (DAX) protocol is based on AMM and zk-SNARK. Users can anonymously trade private versions of tokens on the platform. The price formation method of the decentralized private token exchange protocol is consistent with the mainstream AMM.


Description automatically generated with medium confidenceTrader exchanging his/her private DOT tokens ($pDOT) for private wrapped BTC (pBTC). The image also illustrates the LP earning fees for provisioning liquidity to the pool $pDOT<>$pwBTC pool.

Network Economics — $MA

Note — Manta’s token economics are subject to change and the following description is based on Rarestone’s basic understanding. Further details are expected to be publicly shared from the founding team in the near future.

Layer 1

Collators are full nodes on both a parachain and the Relay Chain. They collect parachain transactions and produce state transition proofs for the validators on the Relay Chain.

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Description automatically generatedRarestone’s assumption on how the layer 1 tokenomics will play once launched

Layer 2 – Smart Contract

Manta captures a fee (as a percentage of the transaction value) from its network when users:

  1. Mint private coins
  2. Redeem base coins from private coins
  3. Swap tokens via the decentralised exchange

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Description automatically generatedSystem economics – fees accumulated in the Manta Redeem Pool

The fees taken by the protocol (denominated in either $DOT or $MA) are injected into a Redeem Pool.

$MA holders can redeem the assets held in the Redeem Pool at the redeem value (Redeem value = Total value of redeem pool/Total value of $MA token holding) anytime. A percentage of $MA tokens will be automatically burned as soon as the tokens in the pool are redeemed.

Token Value Accrual Thesis

Based on our analysis, we believe that the $MA token can capture value due to the following features:

  • Staking: tokens that are integral to PoS systems present capital asset-like properties, given that they grant holders rights to cash flows in the form of transaction fees and inflation rewards.
  • Token burn: the token burn model proposes deflationary — value-accruing properties — similar to share buybacks.
  • Governance: As Manta progressively decentralizes, $MA token holders will be granted the power to vote on critical matters in connection to exchange fees, trading pairs, dividends and more.

Token Metrics

Not yet available to the public. To be shared by the team in the near future.

Go-to-Market Strategy

Parachain Auction

If a parachain wants to have guaranteed block inclusion at every Relay Chain block, it must acquire a parachain slot. Acquiring a parachain slot does not come cheap — Manta will need to be able to afford the bond required for a parachain lease.

Manta’s founding team has carefully selected VC backers that will serve to support the project winning the upcoming candle auction by bonding their existing $DOT holdings.

Manta’s supporters include Polychain Capital, Hypersphere Ventures, Three Arrows Capital, Defiance Capital, Multicoin Capital, Alameda Research, BTC12 Capital, Genblock Capital, Rarestone Capital, TRG Capital, Origin Capital, Vector Capital, Nakamoto, and AU21.

DAP & DAX – Liquidity Providers (Supply Side)

When bootstrapping the network, Manta intends to execute several strategies to attract and deliver liquidity to the network: 

  1. Manta has set aside some tokens as available for public sale. The team aim to sell a portion of these on the Manta Exchange, which will aim to attract users and initial liquidity.
  2. Manta has chosen strategic VC backers who will help bootstrap liquidity at launch in a bid to kickstart network effects.
  3. Tokens rewards from the “Development funds” portion of the Manta Treasury will be used to further incentivise liquidity providers through “liquidity mining”.
  4. Token rewards from the “Mint Mining” portion of the Manta Treasury will incentivise base asset holders to convert their tokens to the corresponding private tokens.

In the long term, Manta will focus on marketing/branding to attract retail users for additional volume and liquidity. The team also intends to partner with other projects to bring additional multi-chain assets to the platform (e.g., renBTC) as well as DeFi lenders to offer liquidity options to the assets that users commit in Manta exchange.

User Onboarding (Demand Side)

In a bid to ease user onboarding, the Manta team are focusing on third-party wallet compatibility. On the technical side, they make integration easier by using snarkjs ( By doing this, Manta’s users can use web/browser-based wallets (e.g., Metamask) to use Manta.

Bixin wallet has already shown interest in working with Manta on a Polkadot zk-compiled wallet. 


The founding team asked to remain anonymous for the purpose of this research report.


Jack Platts | Managing Partner at Hypersphere

  • Will support Manta through making connections, market positioning and go-to-market strategy
  • Jack has already connected the Manta team with other projects using privacy-preserving technology including Tornado Cash. Tornado shared valuable insights with the team regarding zkSNARKs browser implementation.

Shuyao Kong | Strategy at ConsenSys

  • Shuyao is a prolific writer and influencer in the APAC region.
  • Will support Manta with go-to-market strategy and partnerships.
  • As a senior leader at ConsenSys, Shuyao brings years of experience in supporting projects building on the decentralised IT architectures. Her ConsenSys ties will open the door to many potential partners from the Ethereum ecosystem.

Stage of Maturity

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Note — the Manta team will share a more detailed technical roadmap in the near future.


  • Architectural and cryptographic design completed.
  • The Manta team has submitted to the International Association for Cryptologic Research (IACR) explaining Manta’s architecture. Pending peer review.
  • Building code to launch the prototype

Q1 2021

  • In February  2021, Manta will present to the Web3 Foundation its prototype. The prototype will demonstrate the privacy-preserving transaction process using DAP.
  • Manta Network will launch its test net later in Q1 2021.

Q2 2021

  • Updated test net v2 and v3 go live with additional features to support MantaSwap functionality.
  • Manta will integrate exchange features and initiate DAX protocol testing.

Q3 2021

  • The main-net launch is expected (contingent on code reviews).


Rarestone Capital has recently taken a position in $MA based on the analysis provided in this report. This is meant to disclose any perceived conflict of interest and should not be mistaken as a recommendation to purchase $MA tokens. This overview has been prepared solely for informational purposes and is not to be considered as investment advice. It does not purport to contain all of the information that may be required or desirable to evaluate all of the factors that might be relevant to a potential investor, and any recipient hereof should conduct its own due diligence investigation and analysis to make an independent determination of the suitability and consequences of any action.