Here is how Pente privacy groups operate in Paladin:

• Storage: Each Pente privacy group is essentially a smart contract deployed on the blockchain. Unlike Layer 2 solutions, there's no "rollup" involved; each transaction in a Pente group directly corresponds to a transaction on the parent blockchain, maintaining both privacy and anonymity. The blockchain's data doesn't reveal who is transacting or maintaining the group.
• Scalability: There's no inherent limit to the number of Pente groups. They're not stored in memory on nodes when inactive, meaning there's no overhead to the Paladin network regardless of the number of groups. Thousands can be active at once, and millions could have existed historically since these groups can be short-lived, possibly for just one business transaction. For reference, see the Paladin architecture documentation: Introduction to Pente