🤔 What is Secret Network?
Secret network is a blockchain that supports smart contracts that are private. It was built using Cosmos SDK.
Users have choice to reveal private information like account balance, addresses etc when using apps built on Secret network.
In simple words:
💡 What role does SCRT token play ?
SCRT is the native cryptocurrency of Secret network. It is used for:
- Transaction fee: Users pay SCRT tokens as transactions fees to include their transactions on the Secret network blockchain.
- Delegation: Users can delegate their tokens with validators to participate in the process of validating blocks.
- Validator rewards: Validators receive SCRT tokens as rewards for building blocks.
- Governance: SCRT token holders propose and vote on updates to the Secret network.
📝 Origin of Secret network
- The team launched Enigma, second-layer private computation solution to Ethereum.
- The team was fined $45 million by SEC for selling unregistered securities.
- Feb: The Secret Network main net launched on Feb. 13, 2020.
- May: The project was rebranded to Secret Network.
- June: Creation of the Secret Foundation.
- Sep: Network successfully hard forked and upgraded the protocol from “secret-1” to “secret-2”. This upgrade enabled Secret Contracts (smart contracts with privacy by default).
- Oct: Binance became the first major exchange to list SCRT.
- Mar: SecretSwap, first major Defi application, launched on Mar. 31, 2021.
- Secret Network reached fifty active validators.
- The Secret Ethereum Bridge launched on Dec. 15, 2021.
- 2007-2011: BSc in electrical engineering and computer science from Tel Aviv University, Israel.
- 2014-2016: MS in blockchain technology from MIT, Cambridge.
- 2009-2012: Software engineer at SAP.
- 2012: Cofounded CityOwls(sentiment-analysis of physical venues) and Tamkix( location-based real-time couponing system that allows businesses to attract nearby clients)
- 2012-2014: CTO at Athena Wisdom
- 2015: Instructor at MIT.
- 2016: Founded Secret labs.
😌 What problems does it solve ?
- All other blockchains are public: Anyone can view public blockchains to see how much value was transacted, sender’s and receiver’s address. Imagine you buy a cup of coffee using bitcoin. The coffee shop can now see how much balance you have and your complete transaction history.
- There are tools available on the internet like Chainalysis that can be used to trace any transactions.
Most of the early Bitcoin adopters/developers were aware of its limitation.
- Unlike private cryptocurrencies like Monero, Secret network gives users choice:
- Whether to share their information or not.
- Whom to share information with.
- Secret network has bridges to most of the popular blockchains. These blockchains can use Secret network to execute code that developers do not want to share on the open public blockchain.
- Owners of NFTs on Secret network(Secret NFT) have the choice with whom to share the NFT, unlike other blockchains where everyone has access to NFT which is on open public blockchain.
- Front running trades: Miners on public blockchains can see incoming transactions waiting to be executed on the blockchain. The miners can use this information to front-run a large trade that is expected to push the price upward. Front running is illegal in traditional finance but very common in crypto.
Programmable privacy in Defi solves the problem of front-running. Since orders are never visible on the mempool, no attacker or malicious miner can front-run orders and profit at users’ expense.
- No trusted third party: Users do not have to trust Secret network team. The code is open source, anyone can see and verify how the code works.
- Diverse use cases: Secret Network will conceivably impact every domain impacted by blockchain:
- Wills and inheritance
- Gambling etc
🤖How does it work ?
Secret Token (SNIP-20) Standard
SNIP-20, is a specification for private fungible tokens based on CosmWasm on the Secret Network. The name and design are loosely based on Ethereum’s ERC-20 & ERC-777 standards, and a superset of CosmWasm’s CW-20.
All transactions (including the recipient and the amount transferred) and rolling balances of secret tokens are kept encrypted, ensuring both anonymity and confidentiality.
Individuals can generate a “viewing key” in order to reveal these values, and choose to share this with third parties for compliance.
Viewing Keys” are used to validate identity of someone who queries a specific account. They can be generated to allow third parties, including other contracts, to view an individual’s balance.
These will be particularly important in the current environment to enable individuals to provide relevant data to auditors, wallets and explorers when users opt-in to share this information
Trusted Execution Environments
Just as smart contracts are a trusted neutral party for transactions, in a similar fashion, a Trusted Execution Environment is a neutral party in the form of hardware for secure and private computations.
TEEs is hardware that is located in an isolated area on the main processor of a device separate from the main operating system. It ensures that data is stored, processed, and protected in a trusted environment that cannot be tampered with.
Using a process of remote attestation, new nodes that are registered on the Secret Network are able to verify the validity of their hardware and TEE.
Intel’s Software Guard Extensions (SGX) is a set of security-related instruction codes that are built into certain Intel CPUs that enable TEEs.
The Secret Network leverages SGX as a TEE. If needed, the protocol can use other TEEs with room for potential future implementations such as secure multi-party computations (MPC).
The consensus seed is stored inside the TEE of each validator node, allowing for encrypted inputs to be decrypted and computed across within a safe and secure hardware environment.
Delegated proof of stake
Secret network uses delegated proof of stake consensus mechanism.
Currently, it has 50 validators(team plans to increase number of validators in the future). These validators are selected by SCRT token holders by voting.
The validators are responsible for mining and validating new blocks. SCRT holders can also stake their tokens with validators to earn a portion of block reward.
The more SCRT bonded to any given validator, the greater the likelihood said node will be selected for block proposal.
Secret Bridges connect Secret Network with other blockchain networks to allow users from various ecosystems to create privacy-preserving versions of their asset.
Once assets cross the Secret Bridge as Secret Tokens, they can be used across Secret Defi applications which are natively private by default and are multichain interoperable.
Secret network already allows a number of tokens across Ethereum and Binance Smart Chain to be moved and swapped privately across chains. New bridges will give the same access and functionality to other blockchain networks.
🏛️ Governance model
Secret Network allows any SCRT staker (validators or delegators) to submit protocol improvement proposals and vote on them to determine their outcome. Voting power is proportional to the amount of SCRT a staker has bonded to the network.
The process for submitting and voting on a proposal is as follows:
- Deposits: For a proposal to be considered for voting, a minimum deposit of 1000 SCRT must be deposited within one week from when the proposal was submitted. Any SCRT holder may contribute to this deposit to support proposals, meaning the party submitting the proposal doesn’t necessarily need to provide the deposit itself. The deposit is required as spam protection. If the proposal does not reach the minimum deposit threshold, deposits are refunded. If the proposal is approved or if it’s rejected but not vetoed, deposits will automatically be refunded to their respective depositor. When a proposal is vetoed with a supermajority, deposits will be burned.
- Voting: When the minimum deposit for a particular proposal is reached, the 1-week voting period begins. During this period, SCRT holders are able to cast their vote on that proposal. As mentioned, there are four voting options: Yes, No, NoWithVeto, and Abstain. Note that
- Only staked tokens can participate in governance.
- Voting power is measured in terms of stake. The amount of SCRT staked determines influence on the decision.
- Delegators inherit the vote of the validators they are delegated to unless they cast their own vote, which will overwrite validator decisions.
- Tallying: Whether a proposal is accepted depends on the result of the coin voting by SCRT holders. For a proposal to be considered accepted
- It must reach a quorum (more than 33.4% of the total staked tokens at the end of the voting period need to have participated in the vote).
- Pass an approval threshold (more than 50% of the tokens that participated in the vote (after excluding Abstain votes) voted in favor of the proposal).
- Not be vetoed (fewer than 33.4% of the tokens that participated in the vote (after excluding Abstain votes) vetoed the decision.
- Implementation: An accepted proposal is really nothing without being implemented as part of the software that is run by validators in the network. If a proposal is just offering direction (“signaling”), developers can bake it into a hard fork proposal and pass it to the validators to update the network.
🤑 How much money does the project have for future development ?
- The project raised $11.5 million in 2021.
- Founders and project hold 41.4% of the initial SCRT token supply(161,993,000).
- The annual approximate ROI for Secret Network staking ranges between 22% to 27% depending on the validator of choice.
- 2% of the staking reward goes to the Secret network treasury.
- Sustainable model: Most crypto projects raise huge amounts of money one time, at the start of the project during initial coin offering. They do not have any recurring source of income to fund their treasury. Secret network team has long-term vision and a way to fund it.
- No competition: There is no other blockchain project that has programmable privacy.
- Switching cost: It will be very difficult for apps built on Secret network to migrate to other blockchain solutions with their community and ecosystem.
- Network effects:
- New apps can use the functionality of existing apps to build new features.
- More apps will attract more users. As more users interact with apps, new apps will decide to build on Secret network.
- Number of Secret network developers will increase as more users and apps join the ecosystem. As more developers learn to code on Secret network: more apps will be built.
😨 Risks and challenges
- Centralized: Secret network uses delegated proof of stake and has only 50 block validators.
- Illegal activities: It is possible that tokens built on secret network are used for illegal activities like funding terrorism and tax evasion etc.
Initial supply of 160 million SCRT tokens was distributed as follows:
It will be released as follows:
Secret Network’s target issuance or inflation rate is around 15% of the total supply. The inflation rate decreases when more than 67% of the supply is staked and rises when less than 67% of the supply is staked.
Token’s price increases due to demand pressure.
Demand pressure on SCRT will come from:
- Governance: Users will acquire SCRT tokens to participate in the governance process.
- Transaction fees: Users will acquire and pay SCRT tokens to include their transactions in Secret network.
- Staking: Users will also acquire SCRT tokens to participate in the process of block validation.
- Speculators: They will acquire SCRT tokens for future price appreciation.
🧐 Indicators to watch out for
- Number of stakers are growing:
- Users are growing:
- Transaction volume is growing:
- Gas usage:
- Volume on secret swap is growing:
- Value is flowing into Secret network from other blockchains:
- Transaction volume is growing:
- Twitter account is growing:
Crypto users are disclosing their personal information on open blockchains that they would have never done in the traditional world.
Similarly, developers are using centralized solutions like servers to hide snd store private information.
Secret network aims to solve the issue. It is also bridging to other blockchains so that they can also use privacy when needed.
Secret network is a relevant project with two shortcomings:
- Inflation – Can be overcome by staking.
- Centralization – Team is planning to increase number of validators in the future.
😊 Do further research
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