Author: Russian DeFi. Compiled by: Cointime.com QDD

The rapid development of digital technologies over the past few decades has also brought new data privacy and security issues. Now most of what individuals and organizations do is in the public domain.

The data, patterns, preferences and activities of individuals and organizations are monitored, stored and used by third parties. Many new business models rely on collecting, organizing and reselling our personal information. More than 81% of users believe that the risks of companies collecting their data outweigh the benefits.

In a world where our every online activity is tracked, privacy is more important than ever.

  • When we share personal information online, we put ourselves at risk for identity theft, fraud, and other crimes.

  • By protecting our information, we can protect ourselves from these threats. In addition to protecting personal data, privacy also enables us to express ourselves freely on the Internet.

  • We can express our beliefs and opinions without fear of being judged or persecuted. We have the freedom of privacy so we can be ourselves.

Without privacy, we will live in a world where we are constantly under surveillance and our every move is tracked. We will not be able to express ourselves or be ourselves. A free society requires privacy.

Privacy is of paramount importance in financial and crypto transactions

In the crypto space, fraud, theft, or hacking could lead to catastrophic consequences. Financial privacy is necessary for a number of reasons.

First, it enables people to keep their financial affairs private if they wish. This can be useful for personal privacy or for business reasons (for example, preventing competitors from learning about a company's financial situation).

Second, it can help prevent fraud and financial crime. It is more difficult for criminals to obtain and use people's financial information if it is kept confidential. Finally, financial privacy can contribute to economic stability. If people are confident that their financial information will not be shared without their consent, they are more likely to participate in financial activities such as investing and borrowing.

These privacy issues are interrelated. While private financial information protects many important freedoms, traditional banking service providers are often better able to enforce banking regulations, such as those imposed by the U.S. Securities and Exchange Commission (SEC).

Additionally, the decentralized nature of blockchain systems can lead to some user experience issues, even beyond the possibility of hacking and cyber threats. If a cryptographic private key is lost, it almost always results in the loss of all funds in a particular wallet. A cryptocurrency private key is a secret set of numbers that enables a user to use cryptocurrency. The private key is used to sign transactions and provide mathematical proof that the transaction originated from the owner of the cryptocurrency.

Blockchain is the answer

The need for internet data protection is increasing rapidly. By 2024, annual privacy and data protection budgets will exceed $2 million.

Blockchain is a digital database system that records all transactions on a peer-to-peer network. Personal information can be stored in a decentralized manner using this technology, which means that no single institution has full access and control over the information and transactions. These transactions will be conducted directly between end users (senders and receivers).

Blockchain is paving the way for online privacy through its decentralized nature and security features.

Blockchain technology returns ownership of information to the user, making it secure and private. Because there is a level of transparency and complete control, users feel more secure and trustful.

Blockchain and Privacy

Here are some of the ways blockchain protects user data and privacy:

  • Decentralized Identity (DID)

According to blockchain proponents, personal identity should be fully controlled by the individual. They should have complete control over how every aspect of their identity is communicated to others over the internet.

Decentralized identity based on blockchain networks is a method of managing personal online identity. It enables people to create digital identities and break away from dependence on a single service provider. Usernames and passwords, search history, social security numbers, purchase history, and other factors all make up a person's digital identity.

  • Authentication and encryption

Because of the blockchain system, it is extremely difficult to tamper with information on the network. Users can store files or file metadata on the blockchain. Users can use this technology to ensure that their files have not been modified. Since the blockchain is decentralized, users can cross-check file signatures and status on all devices to ensure that the file has not been changed. If any changes are recorded, the signature will be invalid. Users can use blockchain to independently guarantee the authenticity of information.

  • 51% Attack

To change the records and information stored in a blockchain network, a hacker must control 51% of the blockchain. However, gaining this control requires a hacker to invest a lot of money in financial and other resources. These people can try to add blocks to the blockchain network by using computers to solve various complex mathematical problems, a process called "proof of work." If a hacker successfully adds a block, they can access the data stored in the blockchain.

Balancing privacy and transparency is a difficult task in the DeFi and cryptocurrency space. Transparency and accountability are necessary for large institutions and everyday investors to accept this new decentralized mechanism. On the other hand, tying users’ identities to their digital wallets, as proposed by the US government, goes against the core idea of ​​cryptocurrency. Secret Network is trying to find a balance between the two.

Secret Network is a DeFi privacy protocol that allows DApps built on the platform to use encrypted data without publicly displaying it to anyone. The project is an extension of Enigma, a second-layer scaling solution for Ethereum founded in 2014.

What is Secret Network

Secret Network is a decentralized node network that provides secure and anonymous computing through privacy-preserving technology. Most smart contract-based DeFi protocols run on public blockchains such as Ethereum.

However, there are several private DeFi platforms in the Secret Network crypto ecosystem that benefit from Secret Network's privacy features, such as the trusted execution environment. The platform includes many tools and services, such as private smart contracts, Secret Network staking, and the Secret Network bridge. In addition, the Secret Token Bridge enables users to convert their native SCRT tokens into interoperable SCRT tokens that can be used on multiple blockchain networks.

History of Secret Network

The Secret Network team is led by a group of experienced developers and entrepreneurs, including Ethan Heilman (co-founder of Telepath Labs and lead developer of Enigma) and Tor Bair (Growth Advisor for NEAR Protocol). Pantera Capital, HASHED, Fenbushi Capital, and Electric Capital are well-known investors supporting the project.

Secret Network is based on another cryptocurrency project called Enigma. Can Kisagun and Guy Zyskind are MIT graduates who founded Enigma in 2014. Enigma is an Ethereum second-layer scaling solution that adds privacy to smart contracts.

Prior to founding Secret Network, Guy Zyskind worked as a research assistant at MIT. He wrote all of the Secret Network white papers (which have received over 2,500 academic citations) and is still the CEO of SCRT Labs.

Kisagun founded several companies prior to his partnership with Secret Network.

The Enigma mainnet went live on February 13, 2020, and was renamed Secret Network on May 16 following a community vote. This was likely in part due to the negative press Enigma was receiving at the time; they were charged by the SEC in February 2017 for their 2017 ICO. The mainnet went live in September 2020.

The Secret Network team believes that privacy is a fundamental human right and is essential to the success of blockchain technology. The project is committed to providing a privacy-focused platform that enables developers to create applications that respect and protect user privacy. Secret Network is open source and anyone who shares the team's vision can contribute to it.

Although Secret Network is technically a continuation of the Enigma project, Enigma MPC (the core development company known as SCRT Labs) is now just a participant in it.

Tor Bair is a key member of Secret Network. He joined the Enigma team after completing his MBA at MIT. Tor was a professional options trader before starting graduate studies. He also worked as an intern at Spotify and as a data scientist at Snapchat before joining Enigma full-time in 2017.

How does Secret Network work?

Secret Network was created using the Cosmos SDK. Therefore, it uses the Tendermint Byzantine Fault Tolerant consensus mechanism - Delegated Proof of Stake.

It is based on a distributed network of nodes that compute smart contracts built on the Secret Network. To prevent prying eyes, these nodes use a trusted execution environment (TEE), which is similar to a black box.

This is similar to how smartphone processors use TEEs to handle sensitive data like fingerprints, but this time it’s blockchain nodes. The network calls its smart contracts “secret contracts” because they are designed to protect the privacy of the data contained within them. Nodes participating in the network must stake SCRT (“Secret”) tokens, which are also used to pay fees and transfer value.

A block is created and appended every 6 seconds, with a soft limit of 22 transactions per second. According to the Secret Network team, the network can theoretically handle 10,000 TPS.

Secret Network technology consists of four main components:

1. Node

2. Secret Contracts

3. Trusted Execution Environment

4. Access Control

1) Node:

The Secret Network consists of a group of nodes that process and validate transactions. Every 6 seconds, these transactions are packaged into a "block" and added to the blockchain that contains all previous blocks since the start of the network.

Validators are rewarded with SCRT tokens every time a new block is created as a reward for securing the network. There can be a maximum of 80 validators, but this number will grow as the network becomes more decentralized.

2）Secret Contracts：

While many blockchains use smart contracts to run applications, Secret Network uses Secret Contracts, which are more privacy-focused.

Secret Contracts can do everything that smart contracts can do, with a few extra features. The specifics are very technical, but in short, they allow encrypted transactions to be made, meaning no one can see the specific details of the transaction.

This enables all sorts of exciting services that couldn’t exist on the blockchain before, such as a lending protocol that can’t see your collateral, NFTs with private content/ownership, etc. They also prevent MEV, a significant problem that has plagued blockchain users in recent years.

3) Trusted Execution Environment (TEE):

A Trusted Execution Environment is a specific area within a CPU processor that is used to store data that cannot be accessed by any other part of the system.

There are various types of TEEs, but for consistency, Secret uses the SGX version of a specific Intel processor as a feature. Think of a TEE as having a single owner of a master key that can read anyone's private data.

The TEE unlocks the data, reads it, and locks it before sending it back to the visible network. To ensure maximum security and privacy, this is the only place where the contents of the Secret Contracts can be seen (decrypted).

This is also where the "consensus seed" can be found. The public and private keys are derived from the consensus seed, which is a string of random numbers that serves as the ultimate password for the network. No one else can see it because each validating node has it in its TEE.

But if all computations are done in a zone where no one can see, how can people access their account information? You can see it because your private key is uniquely associated with your account, unlike the consensus seed.

Every time you sign a transaction, you sign it with your private key, proving that you own it, and the network recognizes this and therefore allows you to view your account information.

4) Access Control:

Going a step further, another feature that sets Secret apart from many blockchains is access control, which is telling the network who can see your account data and what parts they can see.

Permissions and view keys are the two most important components of access control.

  • View the key:

View keys are a custom solution built into Secret Contracts that allow the network to cryptographically authenticate its users. In other words, anyone who accesses an account's view key can view its contents.

This is different from a private key, which enables the owner to view and manipulate account data. Secret improves on public blockchain infrastructure by allowing anyone to look up anyone else's address and see everything they do.

When you create a Secret Network account, you become the sole owner of your view key. However, you can share your view key within the network, allowing other entities to view your account without having any control over it - satisfying the concept of programmable privacy.

  • license:

To reduce the burden on the network, permissions were created as an alternative to viewing keys.

They are the same as view keys, allowing another party to view your account information for varying periods of time. A view key is a one-time transaction where you grant another party access to your account, and they retain that access until you change the key. Permissions, however, only grant access for a single session and are therefore more short-lived.

The main benefit of permissions is that they do not generate transactions, so the network does not need to store any additional data when a permission is granted. Permissions also do not require the one-time fee that must be paid when sharing a viewing key, as there is no transaction involved.

The Secret Network has no centralized authority or control point, making it more resistant to attack and censorship. Since it uses a proof-of-stake consensus algorithm that uses less proof-of-work, it is able to achieve faster transaction processing.

Because of Secret Network's unique approach to privacy, it can provide security and transparency at the same time. In other words, users can be confident that their data cannot be stolen or tampered with, while their calculations can be audited. As a result, Secret Network attracts developers who want to build applications that require sensitive data but still maintain transparency and security.

Additional Facts:

  • The design of Secret Network can be seen as a hybrid of Ethereum’s permissionless smart contracts, Monero’s default privacy design, and the scalability and interoperability of the Cosmos ecosystem.

  • Secret Network prevents validators from reordering transactions or conducting MEV attacks by hiding transaction data from validators and blockchain analysis tools (such as block explorers). Therefore, transaction metadata on Secret Network is private by default.

  • Thanks to the encrypted mempool and chain state, all DApps on Secret Network benefit from resistance to MEV attacks, preventing users from being front-runner on their transactions.

What can you do with Secret Network?

Secret Network can be used for decentralized applications that require privacy that other blockchain networks cannot provide. It handles sensitive information that users and organizations may not be willing to share by using a trusted execution environment and separating private data from the public and node operators.

The network’s operators have proposed a number of potential use cases, including privacy-preserving credit scoring and lending applications, privacy-preserving machine learning capabilities, and improved capabilities for securely sharing and monetizing data. Overall, Secret Network could be helpful to any dapp that handles sensitive data.

Secret and Sienna Tokens

The native token of Secret Network is SCRT. Similar to Monero (XMR), Dash (DASH) and other privacy coins, recipients, balances, and transaction amounts can all be encrypted. Secret Network's programmable privacy ensures anonymity and confidentiality. Those who hold SCRT must create a viewing key to show their balance to third parties.

SCRT is used to pay for the use of Secret Network applications and on-chain governance, and acts as a currency. Users must "stake" SCRT tokens to become secret nodes and contribute to the security of the network. Tokens are also required to participate in network governance and vote on proposals that determine the future of the network.

Secret Token enables you to turn any coin or blockchain token into private. It's like putting an invisibility cloak on your tokens. When you convert ETH, BNB, or COMP to Secret Token, for example, both the token balance and the sending/receiving wallet addresses are encrypted. This keeps your data from appearing on the public ledger, allowing you to store and transfer cryptocurrencies privately.

An example of a Secret Token:

Imagine a company that decides to keep its assets in cryptocurrency. They will want to keep a portion of these funds in a stablecoin like USDC to reduce risk.

  • A company that decides to keep its assets in USDC can keep them in a separate savings account in the form of secret tokens (sUSDC) in a private wallet. It can keep some funds to pay employees and contractors, sponsor events, and purchase merchandise.

  • Since sUSDC stores a portion of the company's assets, their balances and activities are not visible on the blockchain. Therefore, malicious actors cannot see the company's "total wealth."

  • However, the company can convert its sUSDC to "regular" USDC at any time. In addition, if the company is audited, it can provide its sUSDC viewing key to the auditor to confirm its funds.

Sienna Token

SIENNA is another token on Secret Network. It is the native token of the Sienna platform, a DeFi exchange and protocol that provides low-fee private transactions, lending, and borrowing. SIENNA tokens can store value and vote on future proposals on the Sienna platform.

Sienna also has an ERC20 version called wrapped SIENNA (wSIENNA) that lives on Ethereum and is compatible with Secret Network's Ethereum bridge. Users can lock their SIENNA tokens on the bridge and mint wSIENNA to more easily use their tokens in the Ethereum ecosystem. If you want your SIENNA tokens back, return them to the bridge and Secret Network will return them.

The total supply of SIENNA tokens is limited to 10 million.

The Difference Between Secret Network and Privacy Coins

Secret Network isn’t the only project tackling blockchain privacy issues.

Privacy coins, such as ZCash and Monero, hide transaction information from the general public. When you use a privacy coin, transaction participants can access data that is not visible on the public ledger.

However, privacy coins are very different from Secret Network. Although privacy coins provide privacy protection, they only apply to cryptocurrency transactions.

What people can do on Secret Network goes far beyond buying cryptocurrencies. Private versions of NFT markets, DEXs, and some games are already available on Secret Network. It is likely that many existing dApps will soon appear on private versions of Secret Network. In addition, since Secret Network is built on the Cosmos blockchain, some important DeFi players like Binance and Terra are also based on Cosmos, which makes it easier and more convenient for developers to use and interact with its technology.

In addition to privacy coins, there are other projects that address privacy issues on the blockchain. For example, Automata is an off-chain solution that allows participants to vote without revealing their identities. Polkadot is a network layer 0 protocol that provides a Layer 1 platform for communicating on the same network while maintaining privacy, while Phala is a decentralized cloud computing protocol focused on privacy.

While other projects have addressed blockchain privacy in various ways, Secret Network is the only blockchain that is private by default.

Secret Network Governance

Everything on Secret Network requires community voting, and 1 SCRT equals 1 vote. Each voting cycle lasts two weeks and is divided into two stages: proposal and voting. In the first week of voting, 1,000 SCRT votes must be locked to make a proposal.

In order to pass, more than 33.4% of all SCRT members must participate in the vote, and at least 50% of votes must be in favor in the second week. Delegators can disagree with the validators they stake, but will vote the same way by default. All vetoed SCRT votes are destroyed.

Secret Network Staking

Secret Network uses a delegated proof-of-stake consensus mechanism to validate transactions and process computations. Validators, who are "secret nodes," must maintain constant uptime to receive block rewards. SCRT holders can participate in Secret Network staking by running a secret node or delegating their SCRT to other nodes. Secret Network staking allows SCRT token holders to help support the network and earn a 25% to 30% return on their investment.

Secret Network Ecosystem

Secret has established itself in areas such as DeFi, NFTs, gaming/metaverse, and access control. For example, it has seen over $1.3 billion in trading volume on Secret DEXs like SecretSwap and Sienna Network, with thousands of active faucets and NFT creators on platforms like Stashh. It has also raised funds for secret application projects such as Sienna Network, Altermail, and Shade Protocol. The Ecosystem Fund will help fund the next generation of outstanding projects in the Secret ecosystem while strengthening support for existing projects and developers.

  • Secret Network Bridge

The Secret Network bridge connects the Secret Network with other blockchain networks. With the Secret Network bridge, these networks can create versions of the SCRT token that are relevant to a specific network. Secret Network bridge assets can be used in Secret Network DeFi applications, giving the SCRT token cross-chain utility. The Secret bridge also uses a "3-to-5 multi-signature authorization process" that eliminates any points of failure while making compromise difficult.

The Secret Network bridge supports the conversion of private Ethereum ERC-20 and Binance Smart Chain BEP-20 SCRT tokens. Monero is now available on the mainnet and has integrated IBC. More blockchain networks will be supported in the future. Therefore, Secret Network hopes to become the "cross-chain privacy center for all blockchains."

  • SecretSwap and Secret Finance Token (SEFI)

SecretSwap is a cross-chain private automated market maker and liquidity protocol based on Secret Network. Users can exchange SNIP-20 tokens on the SecretSwap platform using encrypted inputs and outputs. Therefore, SecretSwap transactions are secure and not vulnerable to front-running attacks.

To reduce fees, the protocol uses cross-chain liquidity from Ethereum, Binance Smart Chain, and Monero bridges. In addition, SecretSwap does not use an order book and is not controlled by a single entity. In addition, SecretSwap provides higher privacy protection than many AMMs, shielding users from value extraction.

The SEFI token is the governance token of the SecretSwap platform. The SEFI token is a non-inflationary asset with a total supply of 1 billion. Those who hold SEFI tokens are eligible for rewards. In addition, holders can vote on the SEFI fund.

  • Secret NFTs

The main difference between traditional NFTs and Secret NFTs remains the emphasis on anonymity. Secret metadata includes unlocking hidden elements that increase the uniqueness (and possibly scarcity) of NFTs, providing private ownership for individuals who don’t want the whole world to know what they own, and access control, allowing creators to create a view-only version of an NFT with a watermark or thumbnail before purchase, rather than receiving the full version after purchase.

This level of security attracted Quentin Tarantino, who used Secret Network to launch his Pulp Fiction NFT project. Over the years, the film has amassed enough of a cult following to drive up the price of the NFT, especially because the contents of the NFT can only be viewed by the NFT owner. It’s like you have the key to a mysterious box and only you can see what’s inside. Think about buying a piece of public art and telling everyone about it. These Secret NFTs are for those who value privacy and don’t seek bragging rights.

  • Secret Dapps

Secret Network provides a number of decentralized applications that can protect and encrypt user sensitive data.

The Secret Network developer ecosystem began significant work developing secret contracts and applications from scratch in 2021. Many of these developers created groundbreaking standards (SNIP-20s, SNIP-721s) as a foundation for increasing dApps and tooling.

Advantages of Secret Network

Here are the most notable advantages of Secret Network:

  • Enhanced privacy and security. Secret Network uses "secret contracts" to enable users to keep their data private and secure while benefiting from the decentralized nature of the network.

  • Increased scalability and flexibility. Due to Secret Network’s unique architecture, smart contracts are more flexible and scalable than other platforms, making them suitable for a variety of applications.

  • Improved usability. Thanks to its readable programming language, Secret Network is more friendly to developers and end users.

  • Lower costs. Due to its efficient design, Secret Network requires less computing power and energy than other blockchain platforms, thereby reducing costs for users.

  • Thriving community. The Secret Network community is rapidly expanding and is already very active, with many projects and initiatives underway.

Secret Ecosystem Funding and Grants

On January 19, 2022, Secret Network announced $400 million in ecosystem funding, including a $225 million ecosystem fund, a $175 million accelerator pool, and new investments from DeFiance Capital, Alameda Research, CoinFund, HashKey, and others.

This announcement continues Shockwave’s growth plan to establish Secret Network as a hub for Web3 data privacy.

DeFiance Capital, Alameda Research, CoinFund, HashKey, Hashed, Arrington Capital, Dragonfly Capital Partners, Fenbushi Capital, Skyvision Capital, Blocktower Capital, Terraform Labs, Hartmann Ventures, NGC Ventures, Figment, Arkstream Capital, Shima Capital, Magnus Capital, Bison Fund, Momentum6, Arca, Iconium, Huobi Ventures, Kucoin Labs, and Skynet Trading led the Ecosystem Fund.

Secret invites developers worldwide to join their mission to create the next generation of Secret apps that protect and empower the freedom of millions of global users. They promise to provide help and guidance at all stages.

Secret Network Partners

From Foundation to Nonprofit

The Secret Network community voted unanimously to transform the Foundation into a non-profit organization.

On February 10, 2023, the Secret Network’s community passed a proposal to restructure the Secret Foundation, with the foundation’s founder and CEO Tor Bair pledging his support.

Community members accused Bair of poor financial management and demanded greater transparency. Members also demanded that the foundation become a nonprofit organization governed by a community-elected board of directors.

Bair established the Secret Foundation as a for-profit company and confirmed to Decrypt that he is the sole shareholder.

While Bair has strongly denied any financial wrongdoing, he has expressed support for structural changes to the foundation to achieve "Secret 2.0."

The latest proposal calls for establishing a new foundation as a nonprofit organization that operates transparently and transferring the assets of the old Secret Foundation to the new entity.

Finally, the community voted to appoint an unaffiliated third party as custodian to oversee the transition process.

"I look forward to working with the Secret community on this new path forward, as we work together to address potential challenges and roadblocks, ensuring the current and future strength of the network and its ecosystem," Bair told Decrypt.

Development Roadmap

in conclusion

The Secret Network community is united by a common mission: to advance privacy as a public good and empower people to protect their privacy by providing tools, technology, education, and support.

Projects like Secret Network play an important role in the ecosystem. SCRT introduces some innovations that are not available in traditional privacy coin paradigms such as Zcash and Monero, such as the ability to customize privacy or transparency.

Secret Network is a powerful tool that improves privacy, security, and scalability. It is already used by businesses and governments to protect sensitive information and is becoming the leading blockchain platform for privacy-oriented applications. Due to its encryption and unique architecture, Secret Network is ideal for those seeking a more secure and private alternative to other blockchain platforms.

"As Secret Network grows, and Web3 itself evolves, now is the time to think about the bigger picture of our vision for privacy, and how we can ensure we stay at the forefront of research and development.

We never want to get stuck in a local maximum; instead, we want to always be a leader in the Web3 privacy solutions market, active in production.

We always want to drive our solutions to be more secure, performant, faster, and cheaper - especially as the huge innovations in DeFi, data management, and the Metaverse gain popularity."

—Guy Zyskind, CEO and Founder