Messari: What gaps does Secret Network, which provides USD 400 million in ecological support, fill?
Original author: Rasheed Saleuddin
Original title: "Shhhhh Its a Secret (Network)"
Original compilation: Hu Tao, chain catcher
"The inevitable end of the encryption industry It is the greatest decentralization and the greatest privacy." - Naval Ravikant
Cryptocurrencies are redefining the next evolutionary dynamics of finance and application creation . It introduces a bottom-up approach to building new financial infrastructure, allowing users to police network activity and help determine the direction of each project. Unlike the systems that govern our finance and capital formation today, the users themselves hold the power.
Public blockchains such as Bitcoin and Ethereum operate according to these standards. Bitcoin was created in part as a check on central bankers who are prone to mismanage the money supply and abuse their enormous power. Ethereum unlocks the ability to create globally accessible programmable applications that can be governed by a community of token holders and open source contributors. These models set the stage for achieving the first part of Naval's thesis on encryption: maximum decentralization.
However, while Bitcoin and Ethereum are good at distributing power to the majority, their current default public design may not be Naval's second outcome — - Maximum Privacy - Complete solutions available now or soon.
In the modern age of surveillance capitalism and state-level surveillance, this lack of user privacy stands out. The transparency of Bitcoin and Ethereum may only exacerbate these existing concerns. They enable end-to-end monitoring of every financial transaction per wallet, while complementary solutions such as mixers face liquidity and availability challenges that may limit the level of privacy they can provide.
Privacy coins like Monero and Zcash have sprung up to address these issues. They use complex cryptography to obfuscate transaction details, thereby protecting user privacy and increasing security. However, since smart contracts are not currently supported, the needs of DeFi users cannot be met, resulting in a gap in the market.
Secret Network aims to fill this gap. It was one of the first blockchains to support programmable smart contracts with privacy by default, launching on the Secret mainnet in September 2020. Secret will face hurdles trying to build a user base, such as overcoming common user concerns about sacrificing convenience for privacy. However, private smart contracts also bring significant usability advantages and unlock important new use cases. As privacy moves from a nice feature to a must for users of complex Web3 applications, Secret Network could become one of the leaders in private computing.
Privacy in encryption
Privacy on the blockchain is far from guaranteed. Transactions are pseudonymous at best, hacking and ransomware attackers often realize this at their expense. In short, cryptocurrencies are a horrible shadow bank, which seems Still out of the reach of the US political elite. This is usually a positive, at least from a law enforcement or tax standpoint.
However, there are legitimate personal privacy and security issues in daily activities, which cannot be easily solved by the most popular public chains.
Investment flows on the blockchain are relatively easy to track. Blockchain analysis providers like Chainalysis specialize in analyzing movements or crypto transactions for exchanges and regulators. Sites like Nansen allow retail users to track crypto The wallet of the most prominent investors, tracking their every deposit, token transaction and NFT purchase.
Source: Twitter
Investors, borrowers and savers all deserve the confidentiality of a regulated TradFi institution. For example, consider the information needed to share credit scores. But privacy solutions in the crypto space haven't kept pace with app development and user growth.
In addition to its importance to DeFi, privacy is also critical to a functional Web3, which focuses on decentralizing and privatizing user data. We really want Facebook< /a>, TikTok or Spotify know all about us?
Source: Wall Street Journal< blockquote style="text-align: center;">
Do we want all of our personal data to be easily available to the hackers centralized centralized databases, and have our identities or funds stolen?
Should every cup of coffee we buy or every Uber we take be public? Once two people transact on the blockchain, they know each other's public keys, and The accounts associated with that person can be tracked from that point forward. The radical transparency afforded by public distributed ledgers could be a significant barrier to the mass adoption of encrypted payments—and a huge security risk.
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Enter Secret Network
Through privacy coins such as ZCash and Monero or Ethereum DApps such as Tornado Cash, the flow of encrypted assets can be confused to a certain extent. However, as mentioned earlier, privacy coins cannot meet the need for anonymity or security in this new financial environment. They are great for private transactions or storing wealth, but nothing more.
In order for the privacy network to attract users in the DeFi era, its privacy function must also be extended to the application layer.
Secret Network is the first to launch One of the privacy-centric smart contract platforms. It uses the Cosmos SDK and Tendermint BFT is a Layer 1 blockchain built on a Delegated Proof of Consensus protocol.
Like other Tendermint-based chains, Secret Network has a block time of about 6 seconds and can handle thousands of transactions per second. The chain currently supports 50 active validators, Each node has an average of 167 principals.
Secret originated as an MIT project called Enigma, which raised $45 million in a 2017 ICO for public Blockchain builds privacy technology. Secret Network is an independent Layer 1 blockchain launched by the Enigma community based on Enigma's research and technology. The community also facilitated the swap between Enigma’s legacy ENG ERC-20 token and Secret’s native mainnet SCRT. Private smart contracts with encrypted inputs, outputs, and state have been running on mainnet since the network hard forked to secret-2 on September 15, 2020. This enabled early DeFi applications such as “secret tokens,” which are Secret native tokens or private versions of assets bridged from other chains.
Secret Network uses Intel Software Guard Extensions (Intel SGX), which divides the protocol code into trusted and untrusted parts. Trusted Execution A secure "enclave" component of an environment (TEE) executes trusted code. TEEs are used in many devices, including smartphones and video game consoles, and act as a "black box" for computing encrypted data.
Source: Secret Network
Secret Network TEE maintains the integrity of any encryption layer, thereby ensuring that transaction data remains secure and private during execution, even to validators. The only way to view encrypted information is through a set of "view keys". End users have full control over these keys, which gives them access to private transaction details so they can share them with other users or professionals such as tax authorities.
Secret Ecosystem
Secret Cross-Chain Bridge
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One of Secret Network's main growth strategies is to connect to other networks with existing user bases and liquidity pools. With the right incentive structure, Secret Network can share the activity generated by other blockchains without expending excessive resources to build a new economy from scratch. The project launched its first bridge on December 15, 2020, establishing the necessary connection to Ethereum.
Since then, it has also deployed bridges with BSC, Monero, and is developing access to Astar Network (a potential Polkadot parachain, formerly known as the Plasm Network), and communication gateway Towards the fast-growing Terra ecosystem bridge.
Interoperability is also the core reason why Secret Network chose to build on the Cosmos SDK framework. The Cosmos SDK allows developers to add new functionality through plug-and-play modules. One of these modules implements the Inter-Blockchain Communication (IBC) protocol, allowing the network to communicate with other IBC-enabled chains. The community of SCRT token holders has expressed support for Secret Network's adoption of IBC, and the project is already live at Supernova upgrade.
Wrapping ERC-20 and BEP-20 tokens or Monero requires bridging the Secret by locking a two-way smart contract. For example, Monero (XMR) can be deposited into a Secret in exchange for xXMR. Users can transfer funds in the opposite direction (back to Monero) by burning xXMR tokens to unlock native XMR on Monero. However, for chains other than Monero, bridges are not actually completely anonymous, and bridge transfers can be tracked on the local chain even though privacy is maintained on the Secret Network.
Secret DeFi
Bridging the existing chain is a key step. There is no denying that cryptocurrencies are a multi-chain universe at this point. Innovation does not happen in isolation. But Tier 1 also needs a reason to get noticed in the first place and stay engaged. This reason may be a common goal or ethos of community members, such as the need to protect privacy, but it is usually an incentivized DeFi ecosystem that locks in activity. Secret now supports a decentralized exchange (SecretSwap), the governance token of Secret’s DeFi sector (SEFI), and a peer-to-peer “auction” marketplace that forms the foundation of the on-chain app ecosystem.
The Secret Network application utilizes a unique type of smart contract that the project calls a "Secret Contract". Unlike contracts used on Ethereum, these Secret contracts can accept encrypted inputs and produce encrypted outputs while avoiding revealing the state of each contract (its internal database). In terms of marketing, Secret Network packages the smart contract execution of Ethereum, the transaction privacy of Monero, and the interoperability provided by the Cosmos SDK chain.
Source: Secret Network
While transaction privacy is a simple consequence of smart contracts with built-in secrecy, due to their encrypted state, Secret contracts have a minimum miner extractable value (MEV) benefit.
MEV is the center of much attention and intrigue within Ethereum due to its security and user experience implications. Since Ethereum is completely transparent, miners can see incoming transactions and can change the order of transactions or submit competing transactions in favor of miners. In contrast, the secretive nature of the Secret Network hides transaction data from validators, except from blockchain analysis tools such as block explorers, preventing validators from reordering transactions or performing front-running attacks.
It is worth noting that Secret Network's native SCRT token is not a privacy coin. All SCRT transactions are public, similar to BTC or ETH. Like most new Layer 1s, SCRT serves as the core governance and staking token of the network. Its main functions include voting on protocol changes, paying gas fees, and staking (as validators or delegators) to help secure the chain. The secretive part of the Secret Network lies in its ability to hide the transaction history and state changes of tokens and contracts running on the network.
Secret NFT
Secret Network’s privacy attributes can be extended to multiple token types, Including NFTs. April 2021 Recipients of the network's first community grant on mainnet published a reference implementation of the Secret NFT standard (SNIP-721). Like its fungible counterparts, Secret NFTs inherit the same privacy characteristics when transmitted or processed by the Secret contract.
After the hot NFT market, making NFT a priority is a logical move for Secret Network or any new platform. NFT creation and sales have gone parabolic over the past eight months, as seen in the monthly volumes of popular NFT marketplace OpenSea.
While Ethereum has been at the center of NFT activity thus far, its rising Transaction costs may have knocked out a large portion of the cryptocurrency population. Ethereum’s scalability limitations ultimately create excellent opportunities for new low-cost layer 1s to absorb users and use cases that can no longer afford Ethereum fees. The Secret Network would benefit from this situation, but the race to minimize fees is a highly competitive market. Where Secret Network can stand out is the advantage that Secret NFT brings.
Secret NFT has the same characteristics as Ethereum's ERC-721 tokens, while providing Three new features:
(1) hide ownership of rare items, (2) privatize metadata fields (how NFT signatures connect to off-chain data like artwork), and (3) control access to connected content.
The first feature has obvious appeal. As unique and often scarce items, NFTs can be tracked with relative ease using on-chain analysis tools. Secret Network's privacy settings allow users to hold NFTs out of public view. The last two properties may enable new NFT use cases (game items with hidden functions or art embedded with secret links), and allow artists or marketplaces to customize access to their products (important for exclusive events or the adult entertainment industry).
The Secret Network NFT division is currently small. Secret Heroes is the network's first game, according to the project's Latest roadmap update, NFT market is under preparation. Despite the current level of adoption and late arrival, Secret can carve out a piece of the NFT market by offering one of the only privacy-focused solutions for non-fungible products.
Competitive Landscape
Secret's path to full implementation of privacy smart contracts is groundbreaking. It is one of the first networks to support the issuance of tokens with privacy properties and smart contract functions without compromising transaction privacy.
Each of these privacy-focused layer 1s is designed to provide differentiated functionality. Dero intends to support native assets (non-contract-enabled tokens) and smart contracts, but is still in the testnet stage. Haven is A fork of Monero designed to support an ecosystem of tokens pegged to external assets, such as USD-pegged stablecoins. Phala is focused on providing privacy within the Polkadot ecosystem.
Other privacy solutions come in the form of (1) privacy coins, (2) coin mixers, and (3) Ethereum-based protected transaction contracts.
For strictly private transactions and stores of value, Monero and Zcash are well-known privacy coins that use well-researched privacy techniques, but they are in a regulatory gray area . Zcash has made some headway on U.S. exchanges, securing coveted listing spots on Coinbase and Gemini. However, considering some exchanges have delisted XMR in the past due to legal issues, Monero is still beyond the comfort level of most regulators. Both Monero and Zcash are one-trick ponies. They handle private value transfers well, but they currently don't support smart contracts. Privacy without DeFi or Web3 is only part of the answer.
On-chain mixers like Tornado Cash break chains in an asset's transaction history. They make it difficult to match input and output transactions, giving users the same assets in new wallets without transaction baggage. However, coin mixing is an effective but incomplete solution as it provides users with a fresh start, but it does not prevent users from being exposed again. Additionally, mixers require a lot of liquidity to optimize privacy, since transaction inputs must be of the same size, allowing transactions to be matched when the input size is low.
For those who want to retain access to the Ethereum ecosystem, Railgun, Aztec, and Offshift appear to be viable options. However, Aztec is not fully decentralized and the other two involve significant technical challenges keeping it away from mainnet launch.
In its favor, Secret has a first-mover advantage if it can If it continues to regain momentum in the rising market, it has the potential to become a trendsetter in the privacy space. Its early status in the interconnected Cosmos ecosystem could bode well for adoption. As the Ethereum community is well aware, DeFi is highly reflexive. A little momentum in terms of liquidity driven by token incentives can snowball and lead to rapid adoption. The deciding factor will be whether Secret's Supernova upgrade and growing case for on-chain privacy can help the network gain more adoption.
The Future
Secret has invested significant resources in growing its app ecosystem and products. The project and its community have established a grants program with 20 million SCRT to help fund applications built on the network. It also completed an integration with Band Protocol, an essential DeFi building block that provides price feeds for on-chain exchanges and other financial applications such as lending and derivatives protocols.
Secret Network's main value pillar is its name: private computing. Privacy in cryptocurrencies is difficult in terms of technology development, regulatory acceptance, and user adoption. Secret has addressed the first problem and developed a solution to help solve the second when the time comes. However, user adoption of privacy solutions will be a significant hurdle, as users typically value convenience and familiarity over privacy.
Our privacy is under attack - in Web2 for a while, now in encryption. Unless there is a dramatic (perhaps necessary) shift in consumer behavior, things will likely only get worse. Do we value our privacy enough to rebuild the DeFi ecosystem on a privacy-focused layer 1? Are we just taking it lightly, using the privacy network as a supplementary service as needed? Or are we succumbing to the looming threat of state surveillance?
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