Secret Network: Backed for Web3 Financial Privacy

The Need for Financial Privacy in Blockchain Technology

In the conventional financial landscape, complete transparency of all financial dealings isn't the norm. Individuals and organizations maintain control over who has access to their financial information, and under what conditions – such as credit history or banking transactions. However, the blockchain environment often lacks this crucial financial privacy.

This deficiency has unfortunately facilitated exploitative practices, notably “front-running,” where malicious actors capitalize on publicly visible transactions. A fundamental infrastructure upgrade is therefore necessary to address this issue; without it, the potential of “DeFi” (decentralized finance) will remain unrealized.

Significant Investment in the Secret Network

Notably, several prominent blockchain financing organizations have collectively invested $11.5 million into SCRT, the native cryptocurrency of the Secret Network blockchain. This investment round was spearheaded by Arrington Capital and Blocktower Capital, with additional participation from Spartan Group and Skynet Trading.

Previously, Secret had secured investments from Outlier Ventures, Fenbushi Capital, Hashed, the Secret Foundation, and Enigma MPC, alongside node operators like Figment and Staked.

Tor Bair, founder of Secret Foundation, stated that the inclusion of these experienced partners signifies a pivotal moment for the Secret Network, as it focuses on expanding and bolstering its rapidly growing application layer.

Secret Network: A Pioneer in Privacy

Originally known as Enigma, Secret Network rebranded through a governance vote in the summer of 2020. It asserts its position as the first blockchain platform prioritizing privacy in its smart contracts.

Throughout 2021, the Secret Network ecosystem has seen the launch of several native applications, including SecretSwap, a privacy-protected, cross-chain AMM designed to resist front-running. Development of Secret NFTs is also underway.

Why Privacy Matters for DeFi Adoption

Why is this development important? Why should the industry pay attention? The answer lies in the fact that widespread adoption of DeFi is unlikely without robust privacy features.

Without transactional privacy, the traditional financial system is unlikely to engage with crypto and blockchain technology beyond monitoring Bitcoin’s price fluctuations.

Secret Network isn’t alone in addressing this challenge. Projects like Phala (built on Polkadot), Oasis, and Aleo (recently funded by Andreessen Horowitz) are also competing in the “application privacy” space for Web3.

Programmable Privacy vs. Privacy Coins

These projects share a common goal: to replicate the financial privacy expected within the traditional financial system, which currently remains absent in the blockchain world.

However, this approach differs significantly from privacy coins like Monero and Zcash. These are coins themselves, whereas the aforementioned projects focus on what is termed “programmable privacy.”

Bair explained that transactional privacy simply obscures basic transaction details, offering a limited form of privacy. In contrast, smart contract privacy – or “programmable privacy” – is far more powerful, enabling developers to create complex, decentralized, and permissionless applications while simultaneously protecting data privacy, with significant implications for Web3 security and usability.

Protecting Against Front-Running

Front-running is often defined as exploiting knowledge of an impending transaction to gain an advantage. Bair asserts that Secret Network inherently protects against this, as all interactions with smart contracts are encrypted and inaccessible even to network validators, making all DeFi applications built on the network front-running resistant by default.

Competition and Future Prospects

Despite this, Secret Network faces competition from numerous privacy projects on platforms like Ethereum, such as Automata. As a standalone blockchain, Secret requires a thriving developer community to succeed, a challenge that Ethereum and Polkadot, with their established ecosystems, have a head start in addressing.

However, Ethereum and Polkadot are public by default, and Secret’s dedicated focus on privacy could position it as a key player in this evolving landscape.

Bair emphasized that programmable privacy is essential for users and developers to maintain control within the DeFi world. Without it, DeFi’s growth will be limited to speculative activities. Secret Network aims to serve as the foundation for new DeFi applications that prioritize user protection and enable secure participation from traditional institutions.

A Collaborative Vision for Data Privacy

Furthermore, the decentralized nature of blockchain fosters a less “winner-take-all” environment than the internet dominated by large tech platforms. Bair stated that Secret Network envisions becoming a data privacy hub for all public blockchains, prioritizing collaboration over competition, as evidenced by its existing bridge with Ethereum, which currently holds over $100 million in locked assets.

Secret Network claims to be among the first blockchains to introduce privacy-preserving smart contracts, launching them on mainnet in September 2020. This ensures that all decentralized applications built on the network benefit from data privacy by default. The blockchain is built on Cosmos SDK/Tendermint, providing independent consensus, on-chain governance, and features like slashing and delegation. It is secured by the native coin Secret (SCRT), used for staking, transaction fees, computation, and governance.

Industry Support and Perspectives

Michael Arrington, founder of Arrington Capital, commented: “Secret is the first blockchain ecosystem to prioritize privacy. Financial privacy is critical to individual freedom, and Arrington Capital has long been committed to financial privacy and censorship resistance.”

Jamie Burke, founder of Outlier Ventures, added: “Privacy will be essential to the security and adoption of Web3, from DeFi to NFTs and beyond. Secret Network brings new and unique privacy functionality to the space, and as a result we believe it will be foundational to the next generation of successful Web3 applications.”

Monty Munford, Chief Evangelist and Core Contributor to Sienna Network, stated: “Of all the networks in all the world, we chose Secret because it was a yes-yes-yes brainer. They understand privacy and we understand DeFi; it’s a match made in heaven.”