Since its creation, cryptocurrency has had a difficult task: balancing transparency and privacy. Once upon a time this balancing act was easy – transactions were publicly viewable but the people behind the addresses making those transactions were anonymous.
Today, there are dozens of firms which specialize in analyzing these transactions. Some governments are even on the cusp of making it mandatory to tie your personal identity to your crypto wallet. This degree of regulatory overreach has been rightfully seen as unacceptable by many in the crypto space.
However, the fact of the matter is that some degree of oversight is necessary if large institutions and the public are going to fully embrace cryptocurrencies. With privacy coins like Monero at one extreme and fully compliant cryptos like Stellar at the other, Secret Network is a cryptocurrency project that seems to have found the middle ground everyone has been looking for.
A brief history of Secret Network
Secret Network has its roots in another cryptocurrency project called Enigma. Enigma was founded in 2014 by MIT graduates Can Kisagun and Guy Zyskind. Enigma was a layer-2 scaling solution for Ethereum which added privacy to smart contracts.
Guy Zyskind was a research assistant in the MIT Media Lab prior to founding the Secret Network. He was the author of all the Secret whitepapers (which have over 2,500 academic citations) and remains as the CEO of SCRT Labs.
Can Kisagun has extensive experience in the business sector, having founded several companies of his own before co-founding the Secret Network.
What is Secret Network?
Secret Network is the first cryptocurrency blockchain to offer completely private smart contracts. This means that all smart contract inputs and outputs are completely encrypted. Transactions made on Secret Smart Contracts cannot even be viewed by the nodes running the Secret Network blockchain.
That said, Secret Network’s native SCRT coin is not a privacy coin. All transactions made in SCRT are publicly viewable just like those on Bitcoin or Ethereum. By contrast, Secret tokens issued on the Secret Network preserve privacy by default like Monero.
Secret Network believes that this balance of transparency and privacy is what is required for cryptocurrency to achieve mainstream adoption. It also unlocks multiple use-cases for cryptocurrency that were previous unavailable due to their transparent blockchains which could reveal sensitive information.
How does Secret Network work?
Secret Network was built using the Cosmos SDK. As such, it uses the Tendermint Byzantine Fault Tolerant consensus mechanism – delegated proof of stake.
Like Cosmos, Secret Network has a block time of 6-7 seconds and can process close to 10,000 transactions per second.
Secret Contracts
Secret Contracts are privacy preserving smart contracts built on the Secret Network. These are coded in Rust and compiled using WASM. All Secret Contract transactions are made inside Trusted Execution Environments (TEEs).
Secret Tokens
Secret tokens on the Secret Network can be made using the SNIP-20 standard. As you may have guessed, this token standard is like Ethereum’s ERC-20 token standard except that all Secret tokens have their privacy preserved by default (balances and transactions). Secret tokens are used in Secret Contracts.
Secret token holders will have access to something called a Viewing Key which can be given to third parties to prove ownership of their secret tokens if necessary. This is to make it possible to comply with regulators if need be. The first Secret token is secretSCRT (recall SCRT is public by default).
Secret Network Staking
Staking on the Secret Network can be done in two ways: as a validator or as a delegator. Validators on the Secret Network only need to stake 1 SCRT token to participate. However, there is currently a limit of 70 validators on the Secret Network. As such, to be a validator you must stake enough SCRT to rank among those top 70.
Secret Network Governance
Everything about the Secret Network can be changed through community vote wherein 1 SCRT equals 1 vote. Each voting period lasts 2 weeks and occurs in two stages: proposal and voting. To table a proposal, 1000 SCRT worth of votes must be locked during the first week of voting.
For that proposal to pass, more than 33.4% of all SCRT must participate and at least 50% must vote in favor during the second week. Delegators can choose to vote differently than the validator they are staking on but will vote in the same way as the validator by default. All SCRT in vetoed votes are burned.
Secret NFTs
Secret users can create and issue NFTs. NFTs (non-fungible tokens) are unique to other cryptocurrencies in that they can represent a singular asset. Notably, there are millions of NFTs in the market today. They represent real estate to digital art and everything in between.
Secret NFTs are private and blockchain verifiable. The added level of privacy also makes Secret NFTs ideal for use as restricted access tokens. Content creators can distribute these tokens and then host private events, concerts, gatherings, and giveaways. This flexibility enables creators to connect with their fans on another level.
VERDICT
Secret Network may just be one of the most important projects in the cryptocurrency space. This is because they have developed a protocol that has found that balance between transparency and privacy. To understand the significance of this, we must take a step back and consider the bigger picture.
If you want to preserve your privacy in the cryptocurrency space, how do you do it? Using a privacy coin like Monero and others which hide transaction histories and balances by choice or by default. Almost every other cryptocurrency has a completely public record of all transactions and balances.
The problem is that this privacy extreme is not ideal since transparency is necessary to get regulators and institutions on board. However, those same institutions and regulators are not too keen on entirely public blockchains either because they too want to be able to maintain some degree of privacy.
