Secret Network: Unleashing the Power of Privacy!

The Secret Network is a fast, cheap, and interoperable blockchain designed for apps, games, and NFTs, with privacy being its primary focus.

Secret Network’s origin can be found as far back as 2014 when founder Guy Zyskind had a crypto project named Enigma, designed as an Ethereum scaling solution that added privacy to smart contracts.

Eventually, this led to the birth of the Secret Network in 2020, after a community vote to rebrand was passed.

The Secret Network was built using the Cosmos SDK, with its transactions confirmed by Tendermint’s consensus mechanism, and is the first blockchain designed with customizable privacy in mind.

By giving the blockchain users complete control over their privacy, they can choose who to share that data with and under the terms in which it is shared.

According to their website, if you take Ethereum’s smart contracts, add Monero’s privacy by default, and Cosmos’ scalability and interoperability, you will get the Secret Network.

Let’s start with the basics. As we’ve covered previously, any blockchain built using the Cosmos SDK and has IBC enabled can automatically communicate with each other.

To give a quick breakdown, the Cosmos Software Development Kit, or SDK, is a developer kit with pre-built engines that accept any programming language.

Within this SDK, you will find Tendermint, the modified Proof-of-Stake consensus mechanism which verifies the blockchains transactions.

On the other hand, we have the Inter-Blockchain Communication protocol, or IBC, which, when enabled, allows data to be sent between any other platform with IBC also enabled.

So, now we know why Secret compares itself to Cosmos regarding scalability and interoperability, but what makes it different from Ethereum and Monero?

To recap, Ethereum pioneered the smart contract. In its simplest terms, this electronic agreement executes automatically once the pre-agreed requirements have been met.

Once written and placed on the blockchain, the benefit is that it becomes immutable and uncheatable. But we are going to explain smart contracts in a future article!

Although the smart contracts pioneered on Ethereum are great, they do not allow for privacy which can be a problem, especially in the world of DeFi.

However, it is these privacy settings that distinguish Secret Network from Ethereum, allowing users to choose their level of visibility regarding their transaction history.

How Secret Network prevents market manipulation.

When everything is on a public blockchain, it can become easier for market manipulation to occur.

Secret Network helps prevent front-running, another word for when an individual trades with insider information, by having transactions private by default.

This prevents large investors from studying the market and manipulating it through large quantities of buying and selling.

You might ask why a large investor would do that, so let’s break it down as it appeared to happen regularly during the 2021 price rally.

Without getting into the specifics, a large investor could notice many individuals have taken out loans against the value of a specific cryptocurrency.

If that cryptocurrency begins to lose value, lenders can issue a margin call, where they sell the asset to ensure the borrower does not default on their debt.

So, for example, say you’re a long-term investor of Bitcoin and believe in the long-term potential, but you also happen to be a market manipulator. What you could do would be to sell lots of your Bitcoin at a specific time when there are a lot of loans close to liquidation.

This causes margin calls, and lots of the cryptocurrency begins to flood the market and lower the price.

Thus, a cycle of panic forces more people to sell out in fear of being stung by falling prices themselves.

After the panic begins to subside, the whale returns and buys back all the tokens they sold plus many more with the profits they made at the discounted price.

While you may think private transactions by default sounds like Monero, the difference here is that Monero’s transactions can never be de-anonymised.

In contrast, Secret Network allows you to change visibility or to change visibility specifically for certain individuals.

Most likely, this would be for tax-related reasons, which is why Secret Network also hopes to avoid the stricter regulations faced by companies like Monero.

Like most Cosmos SDK blockchains, the tokens are mainly used to secure the Proof-of-Stake network, pay transaction fees, vote in the governance protocols and earn rewards through staking.

Looking at the tokenomics, we see that $SCRT is a dynamic, living network with an initial supply cap of 150 million $SCRT tokens.

However, due to the inflation mechanics set by how much is staked to the network, this number will increase by an estimated 7-15% each year.

Due to this mechanic, it is hard to determine the initial distribution percentage precisely.

As best as we can determine, less than 20% of the initial supply was kept by Enigma, the company behind Secret Network, which includes all affiliate companies.

Additionally, any coins given to team members, including shareholders, advisors, and employees, were locked up in vesting schedules ranging from 2-4 years.

This prevents large quantities of $SCRT tokens from being dumped onto the network at once, leading to a destabilising or deflating price for the remaining investors.

Lastly, as this blockchain has recently received a $400 million development fund, I believe it is likely that as time progresses, we will see more apps, crypto games, NFT projects, and other products appear on the Secret Network.