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Privacy is one of the most important and, unfortunately, the most neglected right of any person. This disregard for someone’s privacy is widespread in the technology industry. It hampers users’ experience and confidence in the technology.
In a centralized ecosystem such as Google and Facebook, a user does not have a say. But, in a decentralized blockchain-based ecosystem, there are few user-centric privacy solutions.
Blockchain technology has transformed substantially in the last decade. From a simple and effective Digital Currency Network such as Bitcoin, we have stepped up to smart contract-based networks such as Ethereum, Polkadot, Solana, etc. This changed the whole narrative of what this technology could possibly do.
The Immutability and Transparency of smart contract-based Decentralized Applications (DApps) provided value to the applications and the underlying network. However, most of the smart contracts are focused on transparency which in some or the other way miss out on the user’s need to maintain privacy.
Secret Network can be a possible solution to these privacy concerns.
What is Secret Network?
Secret Network is a blockchain network that provides a wide range of privacy-preserving tools and applications.
It is a Layer-1 Blockchain Network built with Cosmos SDK (Software Development Kit). The block time of the network is 6 seconds with a TPS of 25. However, as and when needed, this TPS can be increased up to 10,000.
The network uses Delegated Proof of Stake (PoS) consensus mechanism integrated with the Byzantine Fault Tolerance (BFT) algorithm. This improves the security of the network and saves it from bad players and compromised nodes.
Further, privacy on the network is achieved on two fronts:
First is the Software where Secret Network uses privacy-based smart contracts called Secret Contracts, which secures private data from the public eyes. Although the network is open-source, the specific contract information is kept confidential.
The second is the Hardware. Any node on the network is required to have a specific computer configuration. This builds a Trusted Execution Environment or TEE for the information. This means that while processing information, even the node operator cannot see this information.
TEEs are like a black box that can process information within an enclosed and secure environment. They are used in everything, such as smartphones, tablets, and setup boxes
Thus, the system ensures the privacy of data at the Input, Processing, and Output stage.
Further, the Secret Network uses Cosmos IBC (InterBlockchain Communication Protocol) and is highly interoperable with other blockchain networks. Finally, the network has an in-house token called SCRT which is used for governance and payment of the network’s gas fee.
Secret Network enables a developer to have programmable privacy. This means that an application can either be:
- Completely closed and private,
- A portion of information can be kept confidential, or
- It can be completely open-source and public.
What is the Background of Secret Network and its Founder?
The Secret Network team initially launched a project called Enigma back in 2017. Enigma was aimed at bringing Layer 2 private computation solution to Ethereum.
The project had an ICO (Initial Coin Offering) in 2017, and ENG tokens were issued to the participants. However, SEC (Securities Exchange Commission) imposed a penalty of $500,000 for not registering the ICO under the Securities Act. On 19 February 2020, SEC settled these charges.
In the same week, on 13 February 2020, the network’s mainnet was launched. By May 2020, the project was rebranded as Secret Network. Enigma MPC (the company behind Enigma Protocol) is now one of the several development groups behind the Secret Network.
A new organization called Secret Foundation was formed. Secret Foundation works on Building, scaling, and promoting the Secret Network.
In June 2020, the migration process was initiated, and ENG tokens were swapped with SCRT tokens. In September 2020, the project launched its Secret Contracts with which developers could build Decentralized Applications (DApps) called Secret Applications on the network.
Tor Bair – Twitter
CEO and Founder, Secret Foundation
Tor is the CEO and Founder of the Secret Foundation and is the primary face of the Secret Network project.
He is based in Chicago, US, and has a Bachelor’s Degree in economics and an MBA from MIT. Prior to Secret Network, for almost three years, Tor served as the Head of Growth and Marketing for Enigma MPC. Before Enigma, his work profile was diverse, which included Options Trading and Data Analytics.
Now, let us understand how Secret Network can be used differently than any other Layer 1 Blockchain Network.
What are the Use Cases of the Secret Network?
As already discussed, Secret Network has privacy-preserving smart contracts called Secret Contracts. These contracts can be used to develop many useful Decentralized Applications.
Following are some use cases that already exist.
- Secret Tokens and Bridges
Secret Tokens are SNIP 20 standard tokens created with the network’s Smart-Contract called Secret Contracts. Similar to ERC-20 tokens (Ethereum Token Standard), these tokens are programmable. Additionally, Secret Tokens are also private, similar to Monero (XMR).
In a Secret Token transaction, data such as recipient details, amount transferred, and wallet balances are kept secret. Further, a user gets a viewing key that can be shared with third parties for regulatory compliance purposes.
Secret Tokens have several use cases. For example, you can trade, save and invest these tokens on Secret Finance. Or, you can mint Secret NFTs.
This means that ETH can be converted into sETH and can be used on the network. This can be done with the help of Secret Network Bridges. Through these bridges, a user can create a private version of their assets.
However, the cross-chain process is not entirely private. For example, Ethereum is an open-source and public network. This means that when you bridge ETH from Ethereum to Secret Network, the transaction details will be available on the Ethereum Network.
Further, minting and burning of these secret tokens (sETH, sBTC, sLINK) is a public transaction and will be visible on the Secret Network.
You can read more about Secret Tokens here.
Just to avoid confusion, please note that SCRT (in-house token of the Secret Network) is not a Secret Token.
|Public Tokens||Secret Tokens|
- Secret Finance
Secret Finance is a Privacy-Focused version of Decentralised Finance (DeFi). DeFi applications built on the Secret Network (Secret Apps) keep the users’ data encrypted throughout the input, processing, and output stage.
This privacy is not available in other public blockchains such as Ethereum, Polygon, etc. Anyone who has your wallet address can have access to your previous transaction history, wallet balances, and account activity.
In addition to this, there are other problems such as Front Running, which we will discuss in a short while.
Secret Apps solve this with programmable privacy. This means that by default, this data is private. However, you can choose to share this data with any third party.
(If you are new to DeFi, then you can learn more about this with CoinSutra DeFi Beginner’s Guide.)
We can understand this better with the projects that are built on the network.
- Shade Protocol
Shade Protocol is a platform building a consortium of DeFi applications. For this, Shade has developed a privacy-based algorithmic stablecoin called SILK.
SILK will be used as a standard currency across the Shade Protocol DeFi Ecosystem. This is something similar to Terra Network – UST ecosystem.
You can read more about SILK here.
Front Running is a widespread problem in crypto trades in which miners and high-frequency traders exploit regular traders.
High-Frequency Traders can outrun a regular trader and pick up cheap deals and offer the same to these traders at an increased price. The practice of front running is illegal in almost all the security markets except crypto, which isn’t regulated.
What is Front Running
As you may already know, normally there is a time gap between the initiation and processing of a transaction. A transaction is placed in a queue and is processed based on the gas fee you offer. High priorities are given to high gas fee transactions.
Anyone who has information on this queued transaction and pays a higher gas fee than you can outrun you. This means that his transaction will be processed before you even if he has placed an order after you.
Therefore, you will get a token at a higher price than you expected. You can read more about Front Running here.
SecretSwap is a crypto exchange that is built on the Secret Network. This means that inputs of a transaction on SecretSwap are encrypted and thus cannot be front-run by an adversary. Further, the exchange provides cross-chain liquidity between Secret, Ethereum, BNB Chain, Monero.
You can read more about SecretSwap here.
- Secret Auctions
Secret Auctions is an auction platform where you can sell or bid for a crypto token. As a seller, you can place your assets for an auction, and as a prospective buyer, you can bid for these assets through a sealed confidential bid.
Therefore, buyers and OTC (over-the-counter) platforms are not aware of the bids being offered to the seller. This way, they cannot collude together and it allows a seller to get the best price for his assets.
You can check out Secret Auctions here.
- Secret NFTs
Secret NFTs allow private ownership of NFTs and ensure that assets and transactions details are not exposed to the public.
Traditionally, NFTs have metadata that is visible to the general public. In addition to this public metadata, Secret NFTs also have private metadata whose access is only available to the token holder.
This opens a number of use cases for these NFTs. For example, a creator can display a low-quality image on the marketplace and keep a high-quality image of his art in the private metadata. This will keep the rarity of the art intact. Thus, any rare functionality of an NFT can be maintained and preserved through the private metadata.
Further, this gives a creator complete access control of the content. Like he can offer a watermarked image or video on the marketplace so that the buyer gets an idea of what he is buying. And the high-quality version of the image is only available once you buy the Secret NFT.
You can learn more about Non-Fungible Tokens with CoinSutra NFT Beginner’s Guide.
Thus, the use case of Secret NFTs can be as follows:
- Enables sealed bid auctions of NFTs
- Keeps an NFT collector anonymous
- Art Galleries can restrict viewership to maintain the rarity of the art
You can read more about Secret NFTs here.
Secret Network Usage Statistics
Since the last year, there has been substantial growth in the number of wallet addresses used on the network.
Further, there is an average of 15,000 daily transactions on the network.
Now, let us understand the various components the Secret Network is built of.
Components of Secret Network
Components of the Secret Network are as follows:
- Blockchain Network
Secret Network is a Layer-1 blockchain network built on Cosmos SDK (Software Development Kit). The network has a Delegated Proof of Stake (DPoS) consensus mechanism integrated with Tendermint’s Byzantine Fault-Tolerance algorithm.
This mechanism allows a theoretical maximum TPS (Transaction Per Second) to be approximately 10,000. The network currently has a block time of 6 seconds and a TPS of 25. This will be gradually increased simultaneously with the network adoption. Further Byzantine Fault Tolerance algorithm enables identification of bad or corrupted nodes and ensures better safety.
Every computer node on the network is required to have a specific configuration in order to create a TEE (Trusted Execution Environment). For this, there are particular Intel CPUs that have built-in Software Guard Extensions (SGX).
TEE is a safe box where these transactions are processed. It ensures Data Confidentiality, Data Integrity, and Code Integrity. This means that even a node validator does not have access to the user’s private information. Currently, there are 70 nodes on the network.
Finally, the Secret Network is completely Interoperable with other blockchain networks as it uses Secret Bridges and Cosmos InterBlockchain Communication protocol (IBC).
Please note that Secret Network is open source and the public by default, and only user’s information has privacy in the ecosystem.
- Secret Contracts
The next important component of the network is Secret Contracts. These are smart contracts that have an additional feature of programmable privacy.
Secret Contracts can be used to build various privacy-focused Decentralised Applications (DApps). The current use cases such as Secret Tokens, Secret Finance Apps, or Secret NFT platforms are all built with the help of Secret Contracts.
Secret Contract encrypts the input data. TEE ensures privacy of data at the processing stage, and output is decrypted by the contract to the end-user only. Hence, ensuring complete privacy of user’s data from start to end.
- SCRT Token
The last component of the Secret Network is the in-house token SCRT. The token serves as the backbone of the whole ecosystem.
Please note that SCRT is not a Privacy Token. Further, the token can be used for
- Transactions – i.e., for exchange with crypto tokens on the network
- Gas Fee
|Maximum Supply (Source)||NA|
|Total Supply||212.352 Million|
|Circulating Supply||166.738 Million(79% of Total Supply)|
|Token Value||$ 6.27|
|Market Cap||$ 1.05 Billion|
|24 Hour Volume||$ 26.6 Million|
SCRT Comparison with market competitors
|Network Name||Secret Network||Monero||Ethereum||Cosmos||Terra||Solana|
|Token Price ($)||$ 6.27||$ 178.74||$ 3,012||$ 31.12||$ 93.95||$ 105|
|Market Cap||$ 1.05 Million||$ 3.2 Billion||$ 360 Billion||$ 8.9 Billion||$ 35 Billion||$ 33.9 Billion|
|Total Supply||212 Million||18 Million||119 Million||NA||787 Million||511 Million|
|Circulating Supply||166 Million||18 Million||119 Million||286 Million||374.5 Million||320 Million|
Similar to almost all layer one network tokens, SCRT does not have a Maximum Supply. This means that other measures need to be taken in order to control inflation. The current inflation rate is 15% per annum which is on the higher side.
Further, we could not find any measures to control this inflation, such as token burning. However, based on our discussion with the Secret Network team, once the network reaches an acceptable adoption level, these options may be explored.
The token has a total supply of 208 Million with a Circulating supply of 164 Million, which is approximately 80% of the total supply. Out of the total supply, 61% is bonded. The market cap of the network is $876 Million, which makes it a Mid Cap project.
Other than this, information on token distribution and allocation is not available. Further, we do not know precisely how the future token emission will be utilized. So, tokenomics is inconclusive.
Where can you buy SCRT Token
You can buy SCRT toke on these Centralized and Decentralized exchanges:
Now let us summarize the pros and cons of the Secret Network.
Benefits of the Secret Network
The benefits of the Secret Networks are as follows:
- Privacy Focused Blockchain Network
There are not many blockchain networks that offer programmable privacy to developers and users.
Secret Contracts ensure the privacy of users’ data, and this helps in building a number of privacy-focused Decentralized Applications on the network.
Further, the viewing key feature allows you to share your data with regulatory authorities.
The network is pretty interoperable with other blockchain networks such as Ethereum, Cosmos, Terra, etc. You can bring your assets from these networks and avail benefits of Secret Networks’ privacy.
The Secret Network is built with Cosmos SDK, which is highly scalable. The potential TPS of the network is 10,000, which is fantastic.
4. Renowned Investors
The project has many renowned investors such as
- Arrington Capital
- KuCoin Labs
- Huobi Capital
- B-Harvest, etc.
- The Secret Network team has a solid social media presence
- The adoption of networks is happening at a healthy pace.
However, there are a few limitations as well.
Limitations of the Secret Network
The limitations of the Secret Network are as follows:
The Byzantine Fault Tolerance algorithm requires each node to process a particular transaction. This means that in comparison to a standard Proof of Stake network, Secret Network takes more time and uses more energy to process a transaction.
This problem will increase as the number of nodes increases on the network. However, the issue has already been identified, and the Secret Network team is working on it.
The Secret Network only has 70 nodes. This makes the network less decentralized. Just for comparison, Bitcoin has more than 10,000 nodes, and Ethereum has more than 300,000 nodes.
More nodes ensure more decentralization which makes a network challenging to dominate and exploit.
- SCRT Tokenomics and Inflation
SCRT does not token does not have any maximum supply. this means that the token would have inflation until there are concrete steps taken to control it.
The current inflation of the SCRT token is around 15% per annum which is on the higher side. Further, there are no strong token burn mechanisms to control the overall circulating supply.
However, currently staking rewards are between 22-25%. This means that if you stake returns will take care of any possible inflation in the token value.
Conclusion: SCRT Analysis
Considering the overall need of the crypto ecosystem, then Secret Network has a powerful use case. By design, the network is Scalable, Private, Secure, and Interoperable.
The privacy that is missing in today’s internet age can be achieved through this project. Hence, the privacy features offered by the network will be immensely useful in the Web3 infrastructure.
Two things that concern us the most are network congestion and SCRT token inflation. However, we think that this can be resolved in the future with better adoption of the network. With better adoption, the use case and need for the SCRT would also increase, which would eventually help in increasing its value.
Therefore, we hold SCRT tokens in our portfolio and think that it can be an excellent investment for the next 2-3 years.
Digi is a seasoned content writer with over two years of experience writing about blockchain and Cryptocurrencies. Digant’s passion for Bitcoin and cryptocurrencies bloomed in late 2019. Crypto’s technological and economic implications are what interest him most.
He is a Chartered Accountant and Lawyer with over 10 years of experience in the FinTech industry. He likes to read, travel and go for long rides on his bullet bike.