- The Tornado Cash drama has sparked questions over how much a developer can contribute to a protocol before being responsible for its misuse.
- On-chain confidentiality is paramount, especially since there remains a lack of clear guidance around developers and their open-source codes.
- This guide provides an overview of some existing and upcoming privacy chains that Web3 developers can consider building on.
Nobody wants to get locked up in prison for writing a few lines of code. But that’s exactly what happened to developer Alexey Pertsev, who has been suspected of facilitating money laundering through the Ethereum dapp Tornado Cash. The drama has triggered backlash around the world. Critics say that a developer does not have control over their code and how it’s used by people.
While there could be more to the story than is currently known, the situation has raised a debate over on-chain privacy. Arresting someone over writing code sets a dangerous precedent. Pertsev’s arrest can be seen as a threat to open-source software since developers would effectively be held responsible for how their code is used without their control.
A key benefit of blockchain technology is its openness, but it is not a one-size-fits-all solution for data security and privacy. In some cases, total transparency is not always necessary (this opinion article by @GeneralRinaker fleshes out some key ideas).
In this guide, we assess some existing and upcoming solutions that Web3 developers can use while retaining some level of on-chain confidentiality.
1. Aztec Network
Aztec is the first privacy L2 platform on Ethereum, using zero-knowledge (ZK) rollup technology. Smart contracts running on Aztec keep your assets hidden from outsiders. This means that users can make transactions, stake, and earn in an entirely private process. They can also benefit from cheap transaction fees.
- Chain: Ethereum
- Status: Live
- Underlying technology: PLONK, a zk-SNARK standard that builds a two-layer system for processing transactions.
- Architecture: SNARKs inside SNARKs. The first layer, known as the privacy circuit, validates a single private transaction while keeping the sender, recipient, and amounts all hidden. The second layer, known as the rollup circuit, bundles those transactions into a batch and updates the database with the new encrypted information.
- Github: https://github.com/AztecProtocol
Key Use Cases
Aztec allows users to interact with L1 DeFi applications inside a private L2 via Aztec Connect, a privacy bridge. Dapps on L1 can integrate the Aztec Connect SDK into their protocol to capitalise on private transactions. zk.money is a case in point. As Aztec’s main product, it allows users to make private transactions in ETH and DAI with around 255,000 transactions at time of writing.
The team is currently working on adding custom smart contract capabilities to their network. The contracts will be written in Noir, a Rust-base language specific to the Aztec network. The project is now in testnet and slated to be done by the end of 2022.
Aztec can privatise all ERC-20 assets, making it a vital use case for Ethereum. Given that Ethereum is already very active, privatising existing assets is much more useful than creating a separate privacy-specific blockchain. This could make Aztec an indispensable privacy layer for the world’s most popular blockchain.
Another privacy L2 solution on Ethereum is Obscuro. It is designed to keep all transactions and state of contracts encrypted and hidden while addressing maximal extractable value (MEV) issues. Obscuro also claims to be in the “sweet spot between Optimistic and ZK rollups”. That is, the platform is said to leverage the benefits of both rollup-based solutions.
- Chain: Ethereum
- Status: Testnet
- Underlying technology: Intel SGX technology is used to run the EVM in a hardware-based Trusted Execution Environments (TEE). It is essentially a black box found in CPUs where you can execute fully confidential computation.
- Architecture: There are two types of nodes in the Obscuro network. Firstly, Aggregators are responsible for validating encrypted transactions, rolling them up, and sending them back to Ethereum. Verifiers work similarly, but are hardware-based and function outside of the Aggregator network. Having these two types could help make the entire platform more secure and decentralised.
- Github: https://github.com/obscuronet
Key Use Cases
Since Obscuro remains at testnet stage, there are no actual products yet to cover. However, the platform has provided a number of possible use cases, including DeFi privacy and more strategy-based Web3 gaming.
More importantly, though, Obscuro is one of the few privacy solutions that allow developers to build private smart contracts with Solidity. If you are reading this, you probably would know that it is a language familiar to most Web3 developers. Note that the other solutions mentioned in this article are mainly Rust-based.
The launch of the mainnet is slated to happen in 2023.
Being Solidity-based opens Obscuro up to many possibilities. A developer could potentially redeploy their mainnet contracts on the platform with minimal changes. This ability is expounded by the fact that most core ecosystem applications are adaptable from other EVM-based chains. Though, it remains to be seen the extent of changes that need to be made to adapt existing contracts.
3. Secret Network
As one of the OGs in this space, Secret Network claims to be the first L1 with privacy-preserving smart contracts – live since September 2020. It is built with the Cosmos Tendermint SDK with smart contracts written in Rust using the CosmWasm toolkit.
- Chain: Cosmos IBC, Ethereum, Binance Smart Chain (BSC) & Monero Bridge
- Status: Live
- Underlying technology: Similar to Obscuro, Secret Network performs computations in a TEE using Intel SGX. The protocol’s code is separated into two parts: trusted (sensitive data) and untrusted (rest of the code).
- Architecture: Currently, a coordinated group of maximum 50 validators secures the network using the Tendermint consensus engine, a BFT-based proof-of-stake mechanism. They help verify transactions and propose blocks to the chain by staking SCRT (the native token), earning rewards in the process. Delegations are given out by non-validators.
- Github: https://github.com/scrtlabs
Key Use Cases
Secret Network looks to be a robust ecosystem, currently boasting more than 20 dapps and over 100 developers. Being a Cosmos Tendermint SDK project, the chain is interoperable with the rest of the Cosmos ecosystem. This is especially true after the implementation of the Inter Blockchain Communication Protocol (IBC). Essentially, it allows the entire Cosmos IBC ecosystem to be equipped with privacy capabilities.
Since there is sufficient documentation and tooling surrounding the Cosmos development frameworks, Secret Network is relatively accessible to Web3 developers.
Research and development on Secret 2.0 is now taking place. Developers are exploring key improvements, including using fully homomorphic encryption (FHE) and hardening the existing network.
The team has clearly made efforts in developing the network. There is a growing ecosystem of functioning products as well as strong community engagement.
More importantly, total privacy is not always ideal since some level of transparency is needed to convince regulators and institutions. Secret Network appears to have found a balance. The SCRT token is entirely transparent, but activities involving the platform’s tokens and contracts are completely private. Such value proposition should not be disregarded.
Built upon the latest developments in ZK cryptography, Aleo is touted to be the first decentralised, open-source protocol that allows both private and programmable applications. Users can enable third parties, including smart contracts, to verify data without needing to reveal any information. Though, they can choose to disclose some information at different layers of the transaction. This could be useful for composable dapps to interact and build on top of each other, creating more expansive ecosystems.
- Chain: Aleo
- Status: Testnet
- Underlying technology: The platform is run by the Proof of Succinct Work (PoSW) consensus, meaning it generates ZK proofs for the transactions in each block. It is derived from Bitcoin’s SHA-based algorithm. However, instead of arbitrary hash function, the underlying computation is a proof of knowledge – notably, Proof of Work. Essentially, it allows users to verify state with minimal computational power and processing.
- Architecture: Aleo combines Ethereum’s programmability and account model with Zcash’s shielded transaction design in order to achieve full-fledged on-chain privacy.
- Github: https://github.com/AleoHQ
Key Use Cases
Aleo offers a domain-specific language (DSL) for private smart contracts called Leo. Inspired by Rust, Leo is built for writing private applications and compiling to ZK circuits in a simple and instinctive manner. Despite being a proprietary language, developer docs for Leo are clear, well-organised, and comprehensive.
Other developer tools offered include Aleo Studio, Aleo Package Manager, and Aleo Explorer.
Aleo Testnet 3 is being gradually released in three phases. This month, validators (those with 1 million Aleo credits) can start producing blocks and earn rewards. The team will also switch to a new hybrid consensus architecture called AleoBFT to stop block production from becoming too centralised.
The pace of development has been impressive. There is already a full programming language and development studio on top of the live testnet. Aleo has also promised to create more products and services that will help developers build an ecosystem around the decentralised web. This could help establish a vibrant builder experience on the platform.
5. Aleph Zero
Finally, the relatively new kid on the block – Aleph Zero. Built on Polkadot’s Substrate technology, it is based on an original peer-reviewed consensus protocol. Aleph Zero claims to provide instant finality and speed as well as high scalability and security. Once fully launched, the network’s privacy framework can eventually be used on all major chains.
- Chain: Substrate, Ethereum, Polkadot
- Status: Testnet
- Underlying Technology: The network uses a unique approach to private smart contracts, combining both ZK proofs and secure multi-party computation (sMPC). ZK-SNARKs are used to exchange a secure and secret key between users. On the other hand, sMPCs help protect data through multiple computers. These computers are not allowed to access the stored data unless there is a unanimous consensus.
- Architecture: Aleph Zero’s custom algorithm combines a variation of the Proof of Stake (Pos) consensus with the Directed Acyclic Graph (DAG) technology. For the PoS aspect, a rotating group of validators verifies the state of the blockchain. DAG is incorporated as an intermediary data structure, allowing for faster transaction speed, finality, and higher throughput. This essentially reduces the transaction fees.
- Github: https://github.com/aleph-zero-foundation
Key Use Cases
One of the first products built on top of Aleph Zero is Common, a decentralised exchange (DEX) that comes with a dedicated wallet. It is also a decentralised Dark Pool designed to eliminate front-running. Front-running happens when a transaction is placed in a queue with insider knowledge of a future transaction that will affect its price, typically to the advantage of the former.
Aleph Zero is working on an in-house, multichain privacy solution called Liminal. It will offer the same innovative security measures based on the combination of ZK-SNARKS and sMPC. The added benefit is that through the use of bridges, Liminal can support transactions between Aleph Zero and other chains, like Ethereum, Near, Cosmos, and BSC. This means that developers can write a smart contract on any of these chains while keeping a private state of their contract on Aleph Zero.
Substrate itself has a growing developer community and interoperable system – a key factor that could contribute to Aleph Zero’s success. The executive team itself is experienced and there have been strong partnerships made. As for the protocol itself, it is easy to interface with. This could potentially help onboard more users and businesses.
Regardless of approach and design, privacy blockchains all share the view that privacy should be a choice. The solutions that we have covered above are potentially interesting options for developers, especially those well-versed with EVM and Cosmos technologies.
The benefit of competing solutions is that it helps drive innovation. As blockchain adoption continues to grow, we could see more new privacy-centric projects as well as improvements on existing frameworks.
Ultimately, Web3 developers should have the choice to retain some degree of privacy. This will help empower them to write codes that push boundaries and meaningfully drive blockchain innovation.
About Arcane Labs
Arcane Labs is the research-driven arm of Arcane Group. The team is focused on providing cutting-edge insights into the Web3 space.