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.
On February 13th, 2020, Enigma launched their main net which rebranded to Secret Network after a community vote held on May 16th. This may have been partially due to the bad press Enigma had received around that time; they were hit with charges by the SEC in February over their 2017 ICO.
Although Secret Network is technically a continuation of Enigma, Enigma MPC, the company which initially launched Secret Network, is now just one of many parties involved with the project. Moreover, Enigma’s former Head of Growth and Marketing, Tor Bair, is technically the founder of Secret Network.
Tor completed his MBA at MIT with Can Kisagun which is how he became involved in Enigma. Prior to his post-graduate studies, Tor was a professional options trader. He also worked as an intern at Spotify and was a data scientist at Snapchat before going full time with Enigma in 2017.
Tor’s experience at Snapchat was one of his primary motivations to work in privacy preserving technologies. In an interview he noted that companies like Snapchat have little to no incentive to properly handle user data or preserve privacy. Tor has consequently been quite outspoken about Secret Network and believes it to be the solution to the privacy/transparency dilemma in cryptocurrency.
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 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).
TEEs are used in many devices including smartphones and video game consoles, and act like a “black box” wherein it is possible to compute encrypted data.
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 Ethereum Bridge
Secret Network’s Secret Ethereum Bridge is a two-way asset wrapping protocol similar to Ren. The way it works is that you lock tokens on one blockchain to mint an equivalent amount on the other blockchain. The only Ethereum assets supported by the Secret Ethereum Bridge for the time being are noted below.
These assets can be turned into secretAAVE, secretLINK, secretETH etc. on the Secret Network blockchain and used in Secret Contracts. Since the Secret Ethereum Bridge was only recently released, Secret Network is giving away 2 million SCRT tokens to users who move their Ethereum assets to Secret Network using the bridge. This is called ‘bridge mining’.
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 50 validators on the Secret Network. As such, to be a validator you must stake enough SCRT to rank among those top 50.
Delegators also only need to stake 1 SCRT token to participate. Both validators and delegators have an unstaking period of 21 days, though delegators can freely move their stake to another validator at any time. Staking rewards on Secret Network are currently 30% per year for validators, and around 22% for delegators.
To incentivize good behavior from validators and good judgement from delegators, the Secret Network has two types of slashing: soft slashing and hard slashing. Soft slashing occurs when a validator is offline for more than 10 minutes and results in a 1% loss in stake for both validators and delegators. A validator is also put in ‘jail’ and must manually rejoin the network.
Hard slashing occurs when a validator double signs a block and results in a 5% loss in stake for both validators and delegators. This would not be all that hard were it not for the fact that a validator is also ‘jailed forever’ – permanently booted from the network. This is called getting ‘tombstoned’.
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.
The Secret Foundation is a non-profit registered in the state of Illinois. It is directed by Secret Network founder Tor Blair and was initially funded by Enigma MPC. The Secret Foundation is now funded through the Foundation Tax which is 15% of all staking rewards on the Secret Network.
The Secret Foundation’s primary tasks are managing the Secret Network’s community, creating documentation for the project, developing the network, and implementing any changes voted on by the community, and driving adoption.
The Secret Foundation achieves these goals with the help of the various community-run Secret Network Committees. These committees meet on a weekly basis and are allocated 2% of all staking rewards on the Secret Network for funding (Community Tax). There are currently 5 Secret Network Committees: Development, Infrastructure, Governance, Education, and Awareness.
SCRT is the native coin of the Secret Network blockchain. It is used to for staking and governance on the Secret Network. SCRT has a theoretical initial supply of 150 million SCRT (more on this in a moment).
SCRT has an inflation rate of anywhere between 10-25% per year depending on what percentage of SCRT is being staked on the Secret Network (more stake, less inflation). This is to incentivize participation.
Secret Network SCRT ICO
There was no ICO for Secret Network’s SCRT token. Instead, holders of Enigma’s ERC-20 token, ENG, were able to send their ENG to a burn contract to mint an equivalent amount of SCRT.
This began shortly after the Secret Network main-net launched in February. The ability to burn ENG to mint SCRT will remain until the end of 2020, possibly later.
Given that the ENG token has a maximum supply of 150 million, this is the theoretical initial supply for SCRT. However, only about 62 million ENG have been burned so far and this number has remained more or less the same for the last few months. This corresponds to an “actual” initial supply of 62 million for the SCRT token.
SCRT Price Analysis
Although SCRT has been available since February, it did not begin trading until mid-September when it was listed on Binance. SCRT took a gradual plunge during its first two months of trading, falling from 70 cents USD to a low of 25 cents in early November.
Since November, SCRT has seen an impressive rally to over 70 cents and is now sitting at around 60 cents USD. Given that the Secret Network is only just starting to release its core technologies, SCRT could see some positive price action in the coming months (not financial advice).
Where to get SCRT cryptocurrency
If you are looking to get your hands on some SCRT, your best bet is Binance. Unfortunately, the trading volume is quite low, and the order books are not very deep.
You can instead buy ENG tokens and burn them for SCRT, though the trading volume for ENG is very low and it is not listed on any reputable exchanges.
SCRT cryptocurrency wallets
If you are looking for a place to store your SCRT, you currently have three options. The first is the Ledger Nano S and Ledger Nano X hardware wallets. The second is Math Wallet which is available for desktop and mobile.
Finally, you have the Keplr wallet, which is also used for staking on the Secret Network.
Secret Network Roadmap
Secret Network put out a roadmap when its main net launched in February. This included 3 milestones: enabling smart contracts, making those smart contracts work within the TEE environment, and adding encryption to all smart contracts to turn them into Secret Contracts.
These three milestones were completed by mid-June, and the Secret Network has yet to produce a new roadmap. That said, interviews with Secret Network founder Tor Bair reveal that the Secret Network is hyper-focused on becoming interoperable with cryptocurrency blockchains and wants to be “the privacy hub” for the entire blockchain ecosystem.
The Secret Ethereum Bridge is the first of these initiatives and was released on December 15th. Going forward, it is likely that the Secret Network community will vote on which blockchain will be supported next. These and any other upcoming changes can be seen using Puzzle, Secret Network’s multi-purpose blockchain explorer.
Our Take on Secret Network
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.
The brilliance of Secret Network is that its SCRT token is completely transparent whereas any actions involving Secret tokens or Secret Contracts are completely private. It is now possible to turn to regulators and say, “you can see how much money I put in and how much money I take out, but what I do with that money inside that network is none of your business”.
This degree of transparency should be enough to satisfy regulators and allows businesses to preserve their privacy as well. This has been the main selling point of Secret Network from the outset, and it is a value proposition that cannot be understated.
The Secret Network has also put in the work when it comes to development. It has a functioning product and an engaged community. This is no doubt thanks to the brilliance of Tor Bair whose specialty is quite literally community growth and marketing, something which is necessary for a project to succeed.
Although the tokenomics of SCRT are not entirely ideal, what Secret Network is looking to accomplish here goes far beyond price action. They have arguably created the template for the future of cryptocurrency privacy and transparency. As they continue to build bridges to other blockchains, they may just become the standard in this regard.
To finish off this article, enjoy this amazing quote from the Secret Network website FAQs. It is a useful one to keep in mind when someone asks you why privacy is so important if you have nothing to hide.
“A secret is something that you don’t want to share with everyone, but still want to share with people you choose to trust. A secret is something that you want to keep protected – not because it’s something bad, but because it’s something valuable.”
Featured Image via Shutterstock
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.