What is Secret Network?
Secret Network is an open-source network that protects data for users of decentralised applications. It is the result of the collective effort of its community after over twenty developers launched a new blockchain subsequent to the SEC case against Enigma MPC for an unregistered initial coin offering.
In a world where privacy is scarce, some cryptocurrencies have looked to provide individuals with some privacy, however this largely revolves around the ability to make private payments (on platforms such as Monero and Zcash). However, Secret Network has taken this one step further and developed a platform that allows “secret” smart contracts making the platform the first layer-one blockchain to enable general purpose private computation. This could enable a number of additional applications that can’t be built anywhere else in the blockchain space and potentially bring us one step closer to polling/voting using the blockchain (an MIT paper noted the public nature of the blockchain as one of the stumbling blocks before this could happen).
All transactions on Secret Network are made inside Trusted Execution Environments, more specifically they use Intel SGX. These are a set of extensions to the Intel architecture that aims to provide integrity and confidentiality guarantees to security sensitive computation performed on a computer.
The core feature of Secret Network is the ability to convert a coin or token into its wrapped privacy equivalent. Users are able to mint sSCRT by utilising the Keplr wallet (in exchange for an equivalent amount of SCRT). It should be noted that SCRT itself is not a privacy coin but swapping it to its SNIP-20 equivalent, sSCRT, will convert it into a private token that can thereafter be used for whatever the individual requires.
SNIP-20 tokens are tokens that mimic the characteristics of the token it is paired with, but with the added benefit of ensuring that any transaction and all rolling balances are forever kept encrypted.
Secret Network has developed two bridges that allow a select number of coins across the Ethereum (ERC-20) and Binance Smart Chain (BEP-20). It is expected that upon integration of inter-blockchain communication, this will be extended further to include the Cosmos ecosystem.
Secret Bridges enable coins and tokens from other ecosystems to be transferred to the Secret Network as their SNIP-20 equivalent. Bridge operators watch the chain for new events and propose a transaction once found. This triggers an on-chain event to either mint sETH (or other Secret Tokens) on Secret Network, or unlock ETH (or other Secret Tokens) from the lock contract on Ethereum.
Subsequent to the creation of the Ethereum bridge, a bridge mining event was launched which allowed holders of ERC-20 assets to lock their ETH and ERC-20s assets on the bridge. This provided holders an opportunity to earn 20-40% APY on their assets without risk of impermanent loss. The programme is expected to continue into 2Q21.
SecretSwap is an automated market maker (AMM) that allows SNIP-20 tokens to be traded. The developers state that the Uniswap competitor carried lower costs and higher user security. SecretSwap is restricted both by the number of bridges that are developed and the number of coins or tokens supported by the bridge that are enabled. This means that SecretSwap currently has a smaller offering but is expected to increase rapidly over time which may result in a more user friendly Decentralised Exchange to Uniswap.
In February 2021, Secret Network saw their next major expansion with the launch of Secret Auctions. The auction house represented another blockchain first in creating a platform where bidders cannot see if there are competing bids and sellers can only know if there have been any bids during the auction. Subsequent to the auction closing, the only information revealed is the winning bid. The developers see the primary use for Secret Auctions as being an Over-the-Counter trading market, but also see it as a platform for NFT sales, ICOs and partial split winner auctions. Note that the model mentioned above is a preset configuration but sellers are able to tailor this to their own needs.
Who is Enigma MPC and what happened to Enigma Coin?
Enigma MPC is a blockchain startup created in 2015 with the goal of improving the way data is shared, aggregated and monetised through the use of privacy preserving computation technologies. The team was built with a number of experts in the field from MIT. They created Enigma Protocol, a method to securely share data across silos. In May 2017, Enigma MPC began to shift its business model to market the Enigma Protocol to various industries. In order to raise money for this development, Enigma Protocol offered and sold ENG Tokens through a two-phase initial coin offering.
The two phased ICO saw a total of 75m tokens sold to almost 6,000 investors for a total of $45m.
The US Securities & Exchange Commission viewed the ICO as the sale of securities for three main reasons:
- Enigma MPC marketed the ICO as a mechanism to generate funding for its business;
- Enigma Token derived its value from the success of Enigma MPC and therefore long-term growth in the business will translate into growth in the value of a token. This however is confusing as the intrinsic value of any cryptocurrency (including Bitcoin which the SEC has stated is not a security) is derived from the success of the underlying technology; and
- Enigma MPC launched an Alpha version of its application which had no use for the Enigma token.
Enigma MPC disputed this stating that the Enigma token carries no ownership rights, no dividend rights and no right to engage with the business. They later settled with the SEC resulting in:
- The rights to refund for any investor no longer willing to hold the Enigma Token;
- A requirement to register its tokens as securities with the SEC;
- File periodic reports to the agency; and
- Pay a further $500,000 as a penalty.
Subsequent to the SEC lawsuit, the Enigma Mainnet rebranded and transitioned into Secret Network. There was a community proposal made to support holders of the Enigma token which allowed for a decentralised token swap of ENG to SCRT opening from 27 June 2020. This was kept open until 1 January 2021, the date that was agreed by the Secret Network community. Note that as a result of the SEC lawsuit, Enigma MPC were not allowed to make their stance on this clear.
Over the six month period, 114m Enigma Tokens were burned in swaps to nearly 2,000 addresses (including swaps by Enigma MPC and Binance). As you may expect, there are groups of people who may have not been aware of this event (even though exchanges were notified and social media channels were presenting this information) which resulted in these people failing to convert their tokens. This has created strong resentment and the source of substantial anger towards Secret Network.
Enigma MPC is now a development company that is one of the core contributors to Secret Network.
Who is in Secret Network’s team?
As mentioned above, Enigma MPC is one of the core contributors to Secret Network. Unfortunately, I haven’t been able to find details on other developers outside of Enigma MPC and the Secret Foundation. It should be noted that Secret Network’s genesis was pretty different to how most other platforms are created and it has been a breeding ground for developers with groups including Secret Nodes and Chain of Secrets.
Guy Zyskind is the CEO and co-founder of Enigma MPC. He spent significant time at MIT where he lectured the first engineering class about blockchains and cryptocurrencies. During his time at MIT, he also was a research assistant at MIT Media Lab which is reportedly where Enigma - Secret Network’s predecessor was born. It should be noted that Guy published two papers whilst at MIT both revolving around privacy on the blockchain. Guy was also the CTO of Endor (formally known as Athena Wisdom) which was a MIT spin-off company focused on network analysis research and big data.
Can Kisagun is also a co-founder of Enigma MPC and like Guy, he studied at MIT where he completed a M.B.A. whilst also spending significant times in technology related societies. After completing his studies Can joined McKinsey & Company as a business analyst where he advised clients predominantly in the media and banking sectors. Can was also the co-founder and CEO of Eximchain Network, a failed business looking to operate in the global supply chain industry using blockchain technology (the same space as VeChain and OriginTrail). Eximchain Network ceased operations in November 2020 due to a reported lack of funding. The developers noted that this was due to the rapid decline in value of Ethereum in 2018 which was what their tokens were sold for in their initial token sale.
Tor Bair is the founder of Secret Foundation. He was previously the Head of Growth at Enigma MPC but left the role in Summer 2020 to create a stable platform to establish effective governance to further the development of Secret Network due to the fact that Secret Network has a number of core contributors as opposed to one entity. Note that the foundation was initially funded by a donation from Enigma MPC. Tor completed a M.B.A. studying at MIT like Guy and Can. Tor’s first experience of business growth was working at Snap, Inc. as a growth and revenue data scientist. Tor is also an advisor to a selection of entities including Numerai, Proof of Stake Alliance and OpenFinance Network.
What is Secret Coin (“SCRT”) required for and how is it distributed?
In essence, SCRT could be described as a utility token as its primary usages are:
- Used to pay gas fees when using dApps on Secret Network;
- Can be traded for sSCRT as an on-ramp to SecretSwap;
- Staked to secure the network; and
- Allows holders to vote and participate in governance.
Secret Network is an inflationary network and estimates have been provided by Secret Network which shows the distribution of coins as at 1 January 2021 (the date at which the swap was closed).
It was estimated that there were a total of 170m SCRT in existence of which 17.65% of coins were retained by Enigma MPC and their affiliated companies. 21.18% of coins are allocated towards employees (past, present and future employees) which will include Enigma MPC employees as well as the Secret Foundation’s employees. These coins are normally vested for periods between two and four years.
The majority of the network’s coins are held by the community who hold 44.12% of coins between them. Community coins comprise all swapped Enigma tokens, SCRT coins held by genesis parties and the on-chain community pool. The on-chain community pool has led to several successful initiatives including Puzzle Explorer and the Keplr wallet.
To expand on the community pool, Secret Network has developed a dedicated ecosystem pool that will be able to support larger, longer lasting initiatives. The pool will commence with 20m SCRT coins allocated to them which were a portion of the Enigma tokens held by Enigma MPC.
An important thing to note is that the figures above are accurate as at 1 January 2021 and network inflation (by way of staking returns) and the foundation tax (equal to 15% of network inflation) will consistently increase over the life of Secret Network which will increase the proportion of holdings owned by the community and the foundation relative to Enigma MPC and its team.
Who is Secret Network working with?
Secret Network has had a couple partnerships to date. Building the platform has been a priority and therefore I would expect that we will see an uptake in partnerships soon. These include:
Ocean Protocol: Secret Network aims to support Ocean Protocol transition to a model that allows data publishers to not compromise between convenience and privacy; and
Band Protocol: Band Network has been integrated with Secret Network to bring decentralised and scalable cross-chain oracles to Secret Network. Band Protocol supports unrestricted access to over 150 price feeds.
What does Secret Network have in plan for the future?
Secret Network have already established a number of milestones and made announcements of what people can expect for the future:
Sienna Network: Sienna Network is working with Secret Network to create a privacy-first decentralised finance protocol that enables trustless trading and lending;
Private non-fungible tokens: Finalise SNIP-721 standard allowing for private ownership of NFTs as well as creating SNIP-1155 which is a further NFT related standard;
Bridges: Secret Network is currently working towards building bridges for Bitcoin and Polkadot allowing Secret Tokens of coins and tokens on their ecosystem to be created; and
SecretLaunchPad: Create a crowdfunding mechanism that allows participants on Secret Network to anonymously invest in projects.
Conclusions
Secret Network has been one of the platforms and cryptocurrencies that I have strongly grown in admiration for. Although it is only a small part of my portfolio (less than 5%), the mission of Secret Network, it’s the progress it has made, the developers and the community are all factors that have made me appreciate Secret Network.
Upcoming bridges to Bitcoin and Polkadot will be a significant addition to the platform and the introduction of dApps produced by external parties are just one of the milestones that is being ticked off.
I hope this was an insightful introduction to Secret Network for you and if you have any questions, feel free to ask away and either I or other knowledgeable people shall be able to help you.
Graypaper: https://www.securesecrets.org/pages/Secret_Network_Graypaper_2.0.1_1.pdf
