As the web3 space develops, regular users, pioneers, and institutions are learning more about the system, discovering its strengths and weaknesses. A disadvantage that increasingly affects the operation and even the meaning of blockchains is non-anonymity and privacy. Currently, the vast majority of blockchains run public ledgers. This means anyone can check exactly what each wallet or address is worth, who or what it interacts with, and exactly when the interaction occurred. The Secret Network blockchain was designed with these issues in mind.
History and Fundraising
Secret Network is one of the first privacy-focused smart contract platforms. It is a level 1 blockchain built using the Cosmos SDK and Tendermint BFT, a proof-of-stake consensus protocol.
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Secret has its roots in an MIT project called Enigma, which raised $45 million in a 2017 ICO to build privacy technology for public blockchains. The Enigma community launched Secret Network as an independent primary blockchain based on Enigma research and technology. Additionally, Spartan Group, Hashed, Fenbushi Capital, Arrington XRP Capital, Outlier Ventures, Skynet Trading, BlockTower Capital, and ICONIUM invested $11.5 million in the project as strategic investors in a seed round in spring 2021.
On January 19, 2022, as part of its plans, Secret Network announced $400 million in ecosystem funding, with investors including HashKey, CoinFund, and DeFiance Capital. In a way, the project hopes to position itself as a key pillar of Web3 and a center for data privacy.
technology and uniqueness
To continue talking about a project as significant to the blockchain ecosystem as Secret Network, we need to start with the basics.
The Secret Network is a decentralized computer network, which the developers themselves call “secret nodes,” that uses privacy hardware and software techniques to provide secure computing. In simple terms, it is a blockchain platform that solves one of the longest-standing problems in the blockchain space – the lack of user privacy. The Secret Network provides scalable, permissionless smart contracts, private by default, enabling new use cases for blockchains not possible in public systems. It provides a level of anonymity that users did not have before; this way, they can only share information when they choose.
The Secret Network is built using the Cosmos Software Development Kit (SDK) to provide interoperable privacy for the entire Cosmos ecosystem. The protocol uses Intel Software Guard Extensions (Intel SGX), which separates the protocol code into trusted and untrusted parts. Secure “enclaves” of Trusted Execution Environment (TEE) components execute trusted code. TEEs are used in many devices, including smartphones and game consoles, and act as a “black box” for processing crypto data.
Secret Network TEE maintains the integrity of any level of encryption, which ensures that transaction data remains secure and confidential at runtime, even for validators. The only way to view crypto information is to use access control mechanisms such as view keys or query permissions. End users have full control over these keys, which gives them access to private transaction details so they can share them with others, such as tax authorities, if required. A decentralized network of computers hosting a secret network achieves consensus (Delegated Proof of Stake – Byzantine Fault Tolerance) without access to the data being processed.
Secret Network applications use a variety of unique smart contracts. The project calls them “secret contracts,” which are a Rust-based implementation of the CosmWasm library and provide computation with private metadata. This provides unique use cases for secret networks that are simply not possible on other blockchains.
Figure 1: Computational comparison. Source: https://forum.scrt.network/t/education-infographic-library/5837/3
Unlike contracts used on Ethereum, these secret contracts can accept cryptographic inputs and produce cryptographic outputs while avoiding revealing the state of each contract (its internal database). Secret contracts have many real-world applications, including client-side storage and transfer of crypto currency data, NFTs with private content and ownership, lending protocols with private collateral information, and any application that requires true randomness on-chain.
Figure 2: Differences in online privacy. Source: https://messari.io/report/shhhhh-it-s-asecret-network?referrer=asset:secret-network
Wrapping ERC-20, BEP-20 or Monero tokens requires connecting to Secret via a bridge smart contract. For example, Monero (XMR) can be deposited on Secret in exchange for sXMR. Users can transfer funds in the opposite direction (back to Monero) by burning sXMR tokens to unlock XMR.
However, for networks other than Monero, bridging is not completely anonymous. In fact, bridged transmissions can be tracked even while maintaining privacy on the Secret Network.
- One can think of the Secret Network’s design as a marriage between Ethereum’s permissionless smart contracts, a default private design like Monero, and the scalability and interoperability of the Cosmos ecosystem.
- The Secret Network hides transaction data from validators and blockchain analysis tools (such as block explorers), preventing validators from reordering transactions or performing MEV attacks — so transaction metadata on the Secret Network is private by default.
- The nature of the Secret Network also means that all Dapps benefit from being resistant to MEV attacks due to the crypto mempool and chain state, protecting users from front-running transactions.
Besides SCRT Labs, another entity contributing to the network is the Secret Foundation, a private organization focused on many aspects including marketing, branding, community, social presence, accessibility, and most importantly the ecosystem growth of. Their mission is to drive the global adoption of open source privacy technologies. The team consists of multiple full-time employees and contractors from all corners of the decentralized web, who focus on general marketing, content, design, media, external relations, and more. The Secret Foundation also helps manage important communication channels such as the Secret Network website, Discord, Telegram and Twitter.
Another contributing entity is the Secret Agency, a community DAO funded by the Secret Foundation that focuses on supporting the international community, attending global events and organizing grassroots local events, supporting network-wide educational content, sustainable community engagement and learning experience, and a media presence that generates social communities, and supports KOLs and other contributors to do so.
To introduce you to the ecosystem, you need to understand the second most important component behind the technology itself that makes it work: the Secret Coin (SCRT).
SCRT is the native token of the Secret Network ecosystem, so it can be used to pay transaction and calculation fees, stake with validators to secure the underlying network and earn inflation rewards, view key generation, mint NFTs, AMM swaps, participate in community governance, etc.
Given that coins are public assets on the chain, interactions that require gas payments will appear as on-chain interactions. While the design of secret tokens allows such transactions to have private metadata, the interactions themselves are publicly verifiable on the network.
“Secret Network’s inflation parameter is dynamic, as long as SCRT’s interest rate ratio, the current inflation rate is 15%, and no interest rate remains below 66%. If the bond interest rate exceeds 66%, inflation will gradually fall to 7%. Secret’s current annual interest rate Network is about 23%, which is higher than the annual inflation rate. If users pledge SCRT, they will get about 5-7% actual profit. If users do not pledge, they will be diluted. These token economies Science contributes to creating a sustainable environment for SCRT tokens and the network of all participants” – Secret Network Documentation.
It is also important to mention some price statistics of the SCRT token:
Figure 3: SCRT price statistics. Source: https ://coinmarketcap.com/currencies/secret/ Figure 4: SCRT price statistics. Source: https://coinmarketcap.com/currencies/secret/
Let’s briefly mention token economics. The team’s share relative to other token allocations is quite large, but the project has not been affected by it in the development of the entire project and the entire ecosystem. It’s unlikely to happen now. Meanwhile, the rest of the distribution is logical and high-quality. Given the recent introduction of inflation controls, the effectiveness of tokenomics has only increased (more details can be found here: https://scrt.network/blog/secret-network-tokenomics-and-ecosystem- pool).
Now, let’s talk about the projects involved in the Secret Network ecosystem. A key development strategy involves connecting to other networks with existing user bases and liquidity pools. With the right incentive structure, Secret Network can participate in activities generated by other blockchains. All of this can be achieved without spending additional resources to create a new economy from scratch. The project launched its first bridge on December 15, 2020, establishing the necessary connection to Ethereum.
Since then, it has deployed bridges to Binance Smart Chain (about 10% of assets in the secret network go through BSC) and Monero and many other Cosmos SDK chains via the IBC protocol.
Secret Network chose the Cosmos SDK platform because of its interoperability. The Cosmos SDK allows developers to add new functionality through plug-and-play modules.
Secret has invested significant resources in growing its ecosystem of applications and products. The project and its community have established a $20 million SCRT grant program to help fund the creation of applications on the web. It also completed an integration with Band Protocol, an essential DeFi building block for providing price feeds for exchanges and DeFi applications such as lending and derivatives protocols.
The aforementioned $400 million Secret Network fundraiser is split into two important parts:
- A new $225 million ecosystem fund comprised of contributions from over 25 existing ecosystem investors and partners to expand Secret Network’s application layer (including DeFi and NFTs), network infrastructure, and tools.
- A $175 million accelerator pool funded by SCRT to provide non-dilutive capital, grants, and ecosystem incentives to rapidly scale user adoption.
News of the investment comes after the launch of the long-awaited Tarantino NFT auction. The series includes seven rare NFTs released by Quentin Tarantino on Secret Network and has been featured in The New York Times, Wall Street Journal and CNBC. These secret NFTs contain never-before-seen chapters from the original Pulp Fiction handwritten script, as well as exclusive commentary from the award-winning director and writer.
In addition to the $225 million Secret Ecosystem Fund, the $175 million accelerator pool will be used to support key growth initiatives in Secret DeFi, NFTs, Gaming and Metaverse, as well as other important application verticals on the Secret Network. These initiatives will target the core network metrics mentioned above, especially active usage, subscriber base and TVL.
Figure 5: Ecosystem of Secret Network. Source: https://docs.scrt.network/secretnetwork-documentation/secret-network-overview
Secret has carved out a niche market and is on its way to growth in areas like DeFi, NFTs, gaming/virtual worlds, and access control. It has over $1.3 billion in historical transaction volume on secretive DEXes like SecretSwap and Sienna Network, thousands of active faucets, and NFT creators on platforms like Stashh. It has also seen successful funding rounds for stealthy applications such as Sienna Network, Altermail, and Shade Protocol. The Ecosystem Fund will help fund the next generation of superstar projects in the Secret ecosystem while strengthening support for existing projects and developers.
You should also keep in mind the partner ecosystem that Secret Network has developed, which includes a large number of top funds and other organizations:
Figure 6: Secret Network’s partnerships. Source: https://scrt.network/ecosystem/partners
After peaking at $100 million in November 2021, TVL will fall to a level of $3.6-6 billion. This continues until May 2022, with the collapse of Terra, the trend drops to the $12-18 million level and continues.
Now, TVL fluctuates from $8 to $12 million across channels. There is a strong correlation with Bitcoin. Sienna Network and SecretSwap accounted for a large share (over 70%), but this was offset by the diversity of ideas for ecological projects. In fact, almost all of the most common and recognized blockchain ideas exist: DeFi, NFTs, DAOs, Communications, Documentation, Game-Fi, Bridges, etc.
Figure 7: TVL of Secret Network. Source: https://defillama.com/chain/Secret
Specifically speaking of NFTs, Secret Network’s privacy attributes can be extended to multiple types of tokens, including NFTs. In April 2021, the recipients of the first web community grant submitted a proposal to implement the secret NFT standard (SNIP-721) on the mainnet. Secret NFTs have the same characteristics as ERC-721 Ethereum tokens, but offer three new features: the ability to hide ownership of NFTs, privacy of metadata fields (how NFT signatures relate to offline data), and controlling access to connected content .
Figure 8: NFT comparison. Source: https://forum.scrt.network/t/education-infographic-library/5837/3
Secret Network’s privacy settings allow users to store NFTs out of public view. The last two features could include new use cases for NFTs (game elements with hidden abilities or art embedded with secret links), allowing artists or marketplaces to customize access to their products, which could be important for exclusive events or the entertainment industry.
Let’s take a quick look at the activity on the network: the number of daily transactions for almost all of 2022 fluctuates on average from 8,000 to 22,000 transactions per day. The noticeable gap between mid-May to early July (which happens to be when the cryptocurrency market is “cold”) and late September to now shows that the token still doesn’t have enough strength to recover.
Except from the end of September to the present, the annual average gas level also fluctuates around the level of 1.2-2.6B. Last month’s trend was frustrating, but the weirdest thing is that after the latest Shockwave Delta update rolled out, things went really well (significant speed improvements for high-traffic network events like NFT minting, addition of cross-network accounts, updated CosmWasm status Synchronize, prepare the network to update Shockwave Delta to CosmWasm v1), there is no reason for this trend other than a general pullback in the market.
Figure 9: Secret Network’s internal activities. Source: https://secretanalytics.xyz/
The real euphoria is the cumulative number of new addresses in the network: while the broad parabolic growth phase is over, and the returns to address growth have diminished over time since April, this trend is characteristic of most blockchains giant network. This means that secret networks are entering a new evolutionary stage.
Figure 10: Secret Network’s Cumulative New Addresses. Source: https://secretanalytics.xyz/
Who is behind all these achievements?
SCRT Labs is the driving force and core development team behind Secret Network. These are the people who made a huge contribution to one of the first private networks in the world to enter the blockchain giant stage: Athena Wisdom, HWzone, KeyTango, OTORIO, IVC Research Center, Deutsche Telekom, Check Point Software Technologies, Puzzle Projects LTD, Socially, Aristo Games, OnTheMob, TeenK, TBWA and more. Many team members have held various senior positions in the Israel Defense Forces. The team also has excellent academic experience, having studied at prestigious institutions such as the MIT Media Lab and Tel Aviv University.
Figure 11: SCRT lab team. Source: https://www.scrtlabs.com/
looking to the future
Going forward, we expect Secret Network to continue developing its software and ecosystem, as well as overall network expansion.
Secret Network has developed many projects, many of which will be added as web3 users become more and more acute about securitization issues. Although the whole idea of blockchain is independent of the institutional world, more and more cryptocurrency companies are trying to connect themselves to it. This is because this can attract web2 and web3 users and investors. However, this comes at the cost of privacy and security, which blockchain technology was created for.
Secret Network can solve this problem. Most of its plans for the third and fourth quarters of 2022 have been completed. Also, given the already large number of projects on the web and will only continue to grow, only a few are advertised and recognized. This shows that the performance of the entire ecosystem can be improved. In this case, attracting customers from web2 (where this problem is worst) is a good solution.
“As the Secret Network, and Web3 itself, evolve, it’s time to think more deeply about our vision for privacy and how to ensure we remain at the forefront of R&D. We never want to get stuck in local maxima; instead, we want to always be active in production.” The market leader in privacy solutions for Web3. We are always looking to drive our solutions to be more secure, performant, faster and less costly – especially as adoption increases with massive innovations in DeFi, data management and the Metaverse improvement.”
Guy Zyskind, CEO and Founder
Although Secret Network is confidently progressing along the expected development path and achieving the set goals, some important updates and news are coming, which cannot be ignored:
- 3x Scalability of All Contracts with Wasm3 – SCRT Labs
- Upgradability of secret contracts – SCRT Labs
- Privacy-as-a-Service Use Cases in Voting and Randomness – SCRT Labs
- Bushi third-person shooter Q1 2023
- The Shade protocol stableswap, the stablecoin Silk, and ordinary DEX will all be released at the beginning of the first quarter of 2023.
- Secret Dao Tool Q1 2023
- Blizzard Financial Balancer, such as DEX Q4 2022
- Secret University Development Platform Q4 2022
All things considered, we should recognize the relevance of solutions like the Secret Web. Due to globalization, the recent trend towards the institutionalization of cryptocurrencies, and the strong reliance on the US market, the issue of secrecy of any asset, be it information or money, has become increasingly important.
More than that, however, Secret Network is a controlled securitization that involves managing the degree of privacy of your information. Furthermore, its ecosystem consists of many different applications related to its main idea. The only problem with the Secret Network ecosystem is the lack of publicity for the various attractive and promising projects that are already available to common users of web2 and web3.
The niche market occupied by the protocol is still developing, and Secret has already achieved a leading position. A large ecosystem fund and grant system will allow the app to grow further.
Information source: Compiled by 0x Information from MPOST.Copyright belongs to the author Cryptomeria Capital, without permission, may not be reproduced